10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended March 31, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period __________ to __________

Commission File Number: 001-15393

HEARTLAND FINANCIAL USA, INC.

(Exact name of Registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

42-1405748

(I.R.S. employer identification number)

1398 Central Avenue, Dubuque, Iowa  52001

(Address of principal executive offices)(Zip Code)

(563) 589-2000

(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o

     Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Act.

	Large accelerated filer ¨	Accelerated Filer x
	Non-accelerated filer ¨	Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Securities Exchange Act of 1934). Yes oNo x

Indicate the number of shares outstanding of each of the classes of Registrant's common stock as of the latest practicable date:  As of May 5, 2016, the Registrant had outstanding 24,521,747 shares of common stock, $1.00 par value per share.

HEARTLAND FINANCIAL USA, INC.

Form 10-Q Quarterly Report

Table of Contents

Part I
Item 1.	Financial Statements
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
Part II
Item 1.	Legal Proceedings
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Mine Safety Disclosures
Item 5.	Other Information
Item 6.	Exhibits
	10.1 Form of Performance-Based Restricted Stock Unit Award Agreement One-Year Performance Period under the Heartland Financial USA, Inc. 2012 Long-Term Incentive Plan.
	10.2 Form of Performance-Based Restricted Stock Unit Award Agreement Three-Year Performance Period under the Heartland Financial USA, Inc. 2012 Long-Term Incentive Plan.
	10.3 Form of Time-Based Restricted Stock Unit Award Agreement under the Heartland Financial USA, Inc. 2012 Long-Term Incentive Plan.
	31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
	31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
	32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101 Financial statements formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Changes in Equity, and (vi) the Notes to Consolidated Financial Statements.

PART I

ITEM 1. FINANCIAL STATEMENTS

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data)
	March 31, 2016 (Unaudited)			December 31, 2015
ASSETS
Cash and due from banks	$	124,060		$	237,841
Federal funds sold and other short-term investments	9,168			20,958
Cash and cash equivalents	133,228			258,799
Time deposits in other financial institutions	2,355			2,355
Securities:
Available for sale, at fair value (cost of $1,680,299 at March 31, 2016, and $1,584,703 at December 31, 2015)	1,690,516			1,578,434
Held to maturity, at cost (fair value of $289,446 at March 31, 2016, and $294,513 at December 31, 2015)	271,300			279,117
Other investments, at cost	22,325			21,443
Loans held for sale	76,565			74,783
Loans and leases receivable:
Held to maturity	5,503,005			5,001,486
Allowance for loan and lease losses	(49,738		)	(48,685		)
Loans and leases receivable, net	5,453,267			4,952,801
Premises, furniture and equipment, net	160,899			146,259
Premises, furniture and equipment held for sale	3,889			3,889
Other real estate, net	11,338			11,524
Goodwill	127,699			97,852
Other intangible assets, net	61,420			56,945
Cash surrender value on life insurance	110,834			110,297
Other assets	128,144			100,256
TOTAL ASSETS	$	8,253,779		$	7,694,754
LIABILITIES AND EQUITY
LIABILITIES:
Deposits:
Demand	$	2,079,521		$	1,914,141
Savings	3,702,431			3,367,479
Time	1,142,368			1,124,203
Total deposits	6,924,320			6,405,823
Short-term borrowings	325,741			293,898
Other borrowings	265,760			263,214
Accrued expenses and other liabilities	68,415			68,646
TOTAL LIABILITIES	7,584,236			7,031,581
STOCKHOLDERS' EQUITY:
Series C Senior Non-Cumulative Perpetual Preferred Stock (par value $1 per share; 0 shares and 81,698 shares outstanding at March 31, 2016 and December 31, 2015, respectively)	—			81,698
Series D Senior Non-Cumulative Perpetual Convertible Preferred Stock (par value $1 per share; authorized, issued and outstanding 3,000 shares at March 31, 2016, and 0 shares authorized, issued and outstanding at December 31, 2015)	3,777			—
Common stock (par value $1 per share; 30,000,000 shares authorized at both March 31, 2016, and December 31, 2015; issued 24,519,928 shares at March 31, 2016, and 22,435,693 shares at December 31, 2015)	24,520			22,436
Capital surplus	273,310			216,436
Retained earnings	366,014			348,630
Accumulated other comprehensive income (loss)	1,924			(6,027		)
Treasury stock at cost (65 shares at March 31, 2016, and 0 shares at December 31, 2015)	(2		)	—
TOTAL STOCKHOLDERS' EQUITY	669,543			663,173
TOTAL LIABILITIES AND EQUITY	$	8,253,779		$	7,694,754
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands, except per share data)
	Three Months Ended March 31,
	2016			2015
INTEREST INCOME:
Interest and fees on loans and leases	$	68,425		$	53,049
Interest on securities:
Taxable	8,735			7,132
Nontaxable	3,510			2,916
Interest on federal funds sold	10			1
Interest on interest bearing deposits in other financial institutions	4			4
TOTAL INTEREST INCOME	80,684			63,102
INTEREST EXPENSE:
Interest on deposits	4,173			4,172
Interest on short-term borrowings	329			198
Interest on other borrowings (includes $506 and $564 of interest expense related to derivatives reclassified from accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015, respectively)	3,475			4,802
TOTAL INTEREST EXPENSE	7,977			9,172
NET INTEREST INCOME	72,707			53,930
Provision for loan and lease losses	2,067			1,671
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES	70,640			52,259
NONINTEREST INCOME:
Service charges and fees	7,162			5,404
Loan servicing income	1,268			1,041
Trust fees	3,813			3,631
Brokerage and insurance commissions	1,022			1,087
Securities gains, net (includes $3,756 and $4,353 of net security gains reclassified from accumulated other comprehensive income for the three months ended March 31, 2016 and 2015, respectively)	3,526			4,353
Net gains on sale of loans held for sale	11,065			13,742
Income on bank owned life insurance	522			524
Other noninterest income	1,200			881
TOTAL NONINTEREST INCOME	29,578			30,663
NONINTEREST EXPENSES:
Salaries and employee benefits	41,714			36,638
Occupancy	5,003			4,259
Furniture and equipment	2,113			2,106
Professional fees	7,010			6,044
FDIC insurance assessments	1,168			956
Advertising	1,284			1,181
Intangible assets amortization	1,895			631
Other real estate and loan collection expenses	572			465
Loss on sales/valuations of assets, net	313			353
Other noninterest expenses	9,237			6,981
TOTAL NONINTEREST EXPENSES	70,309			59,614
INCOME BEFORE INCOME TAXES	29,909			23,308
Income taxes (includes $1,212 and $1,413 of income tax expense reclassified from accumulated other comprehensive income for the three months ended March 31, 2016 and 2015, respectively)	9,900			7,599
NET INCOME	20,009			15,709
Preferred dividends	(168		)	(204		)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	19,841		$	15,505
EARNINGS PER COMMON SHARE - BASIC	$	0.84		$	0.77
EARNINGS PER COMMON SHARE - DILUTED	$	0.82		$	0.76
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.10		$	0.10
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Dollars in thousands)
	Three Months Ended March 31,
	2016			2015
NET INCOME	$	20,009		$	15,709
OTHER COMPREHENSIVE INCOME
Securities:
Net change in unrealized gain on securities	20,067			11,478
Reclassification adjustment for net gains realized in net income	(3,756		)	(4,353		)
Net change in non-credit related other than temporary impairment	7			24
Income taxes	(6,524		)	(2,859		)
Other comprehensive income on securities	9,794			4,290
Derivatives used in cash flow hedging relationships:
Net change in unrealized loss on derivatives	(3,423		)	(1,454		)
Reclassification adjustment for net loss on derivatives realized in net income	506			564
Income taxes	1,074			327
Other comprehensive loss on cash flow hedges	(1,843		)	(563		)
Other comprehensive income	7,951			3,727
TOTAL COMPREHENSIVE INCOME	$	27,960		$	19,436
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
	Three Months Ended March 31,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	20,009		$	15,709
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization	7,713			5,747
Provision for loan and lease losses	2,067			1,671
Net amortization of premium on securities	7,846			6,949
Securities gains, net	(3,526		)	(4,353		)
Stock based compensation	1,087			1,139
Write downs and losses on repossessed assets, net	313			353
Loans originated for sale	(227,823		)	(311,140		)
Proceeds on sales of loans held for sale	234,516			287,768
Net gains on sale of loans held for sale	(8,475		)	(11,056		)
Decrease in accrued interest receivable	787			3,234
(Increase) decrease in prepaid expenses	598			(513		)
Increase in accrued interest payable	637			627
Capitalization of servicing rights	(2,590		)	(2,818		)
Other, net	(9,855		)	(11,472		)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES	23,304			(18,155		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of securities available for sale	303,448			289,466
Proceeds from the sale of securities held to maturity	4,057			—
Proceeds from the sale of other investments	2,830			5,489
Proceeds from the maturity of and principal paydowns on securities available for sale	35,379			37,479
Proceeds from the maturity of and principal paydowns on securities held to maturity	3,254			208
Purchase of securities available for sale	(362,764		)	(232,422		)
Purchase of other investments	(226		)	(2,004		)
Net increase in loans and leases	78,502			25,684
Capital expenditures	(898		)	(2,919		)
Net cash and cash equivalents received in acquisition	8,084			7,103
Proceeds from the sale of equipment	—			13
Proceeds on sale of OREO and other repossessed assets	2,384			2,312
NET CASH PROVIDED BY INVESTING ACTIVITIES	74,050			130,409

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED (Unaudited) (Dollars in thousands)
	Three Months Ended March 31,
	2016			2015
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits and savings accounts	1,759			90,075
Net decrease in time deposit accounts	(131,373		)	(25,618		)
Net increase (decrease) in short-term borrowings	1,077			(31,765		)
Proceeds from short term FHLB advances	5,000			60,000
Repayments of short term FHLB advances	(10,000		)	(124,000		)
Proceeds from other borrowings	—			4,000
Repayments of other borrowings	(5,501		)	(44,488		)
Redemption of preferred stock	(81,698		)	—
Purchase of treasury stock	(1,227		)	(1,780		)
Proceeds from issuance of common stock	563			832
Excess tax benefits on exercised stock options	1,100			612
Dividends paid	(2,625		)	(2,261		)
NET CASH USED BY FINANCING ACTIVITIES	(222,925		)	(74,393		)
Net increase (decrease) in cash and cash equivalents	(125,571		)	37,861
Cash and cash equivalents at beginning of year	258,799			73,871
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	133,228		$	111,732
Supplemental disclosures:
Cash paid for income/franchise taxes	$	2,305		$	840
Cash paid for interest	$	7,340		$	8,545
Loans transferred to OREO	$	442		$	2,371
Purchases of securities available for sale, accrued, not paid	$	—		$	5,149
Sales of securities available for sale, accrued, not settled	$	17,189		$	—
Stock consideration granted for acquisition	$	57,433		$	53,052
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (Dollars in thousands, except per share data)
	Heartland Financial USA, Inc. Stockholders' Equity
	Preferred  Stock			Common  Stock		Capital  Surplus		Retained  Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total  Equity
Balance at January 1, 2015	$	81,698		$	18,511	$	95,816	$	298,764		$	1,528		$	—		$	496,317
Comprehensive income								15,709			3,727						19,436
Cash dividends declared:
Series C Preferred, $2.50 per share								(204		)							(204		)
Common, $0.10 per share								(2,057		)							(2,057		)
Purchase of 24,886 shares of common stock														(1,780		)	(1,780		)
Issuance of 2,098,833 shares of common stock				2,075		50,687								1,734			54,496
Stock based compensation						1,139											1,139
Balance at March 31, 2015	$	81,698		$	20,586	$	147,642	$	312,212		$	5,255		$	(46	)	$	567,347
Balance at January 1, 2016	$	81,698		$	22,436	$	216,436	$	348,630		$	(6,027	)	$	—		$	663,173
Comprehensive income								20,009			7,951						27,960
Cash dividends declared:
Series C Preferred, $2.50 per share								(168		)							(168		)
Common, $0.10 per share								(2,457		)							(2,457		)
Redemption of Series C preferred stock	(81,698		)														(81,698		)
Issuance of Series D preferred stock	3,777																3,777
Purchase of 20,070 shares of common stock														(1,227		)	(1,227		)
Issuance of 2,104,305 shares of common stock				2,084		55,787								1,225			59,096
Stock based compensation						1,087											1,087
Balance at March 31, 2016	$	3,777		$	24,520	$	273,310	$	366,014		$	1,924		$	(2	)	$	669,543
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The interim unaudited consolidated financial statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended December 31, 2015, included in the Form 10-K of Heartland Financial USA, Inc. ("Heartland") filed with the Securities and Exchange Commission ("SEC") on March 11, 2016. Accordingly, footnote disclosures which would substantially duplicate the disclosure contained in the audited consolidated financial statements have been omitted.

The financial information of Heartland included herein has been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments), that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the interim period ended March 31, 2016, are not necessarily indicative of the results expected for the year ending December 31, 2016.

Earnings Per Share

Basic earnings per share is determined using net income available to common stockholders and weighted average common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average common shares and assumed incremental common shares issued. Amounts used in the determination of basic and diluted earnings per share for the three months ended March 31, 2016 and 2015, are shown in the table below:

	Three Months Ended March 31, 2016
(Dollars and number of shares in thousands, except per share data)	2016			2015
Net income attributable to Heartland	$	20,009		$	15,709
Preferred dividends	(168		)	(204		)
Net income available to common stockholders	$	19,841		$	15,505
Weighted average common shares outstanding for basic earnings per share	23,657			20,215
Assumed incremental common shares issued upon exercise of stock options and non-vested restricted stock units	460			278
Weighted average common shares for diluted earnings per share	24,117			20,493
Earnings per common share — basic	$	0.84		$	0.77
Earnings per common share — diluted	$	0.82		$	0.76
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	57			—

Stock-Based Compensation

Heartland may grant, through its Nominating and Compensation Committee (the "Compensation Committee"), non-qualified and incentive stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and cash incentive awards, under its 2012 Long-Term Incentive Plan (the "Plan"). The Plan, which was approved by stockholders in May 2012 and replaced Heartland's 2005 Long-Term Incentive Plan with respect to grants after such approval, reserved 162,868 shares of common stock at March 31, 2016, for issuance under future awards that may be granted under the Plan to employees and directors of, and service providers to, Heartland or its subsidiaries.

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, "Compensation-Stock Compensation" requires the measurement of the cost of employee services received in exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the award is based upon its fair value estimated on the date of grant and recognized in the consolidated statements of income over the vesting period of the award. The fair market value of restricted stock and restricted stock units is based on the fair value of the underlying shares of common stock on the date of grant. The fair value of stock options is estimated on the date of grant using the Black-Scholes model.

The amount of tax benefit related to the exercise, vesting, and forfeiture of equity-based awards reflected in additional paid-in-capital, not taxes payable, was $1.1 million and $612,000 during the three months ended March 31, 2016 and 2015, respectively.

Restricted Stock Units

The Plan permits the Compensation Committee to grant restricted stock units ("RSUs"). In the first quarter of 2016, the Compensation Committee granted time-based RSUs with respect to 72,644 shares of common stock, and in the first quarter of 2015, the Compensation Committee granted time-based RSUs with respect to 78,220 shares of common stock to selected officers. The time-based RSUs represent the right, without payment, to receive shares of Heartland common stock at a specified date in the future. The time-based RSUs granted in 2016 vest over three years in equal installments on the first, second and third anniversaries of the grant date. The time-based RSUs granted in 2015 vest over five years in equal installments on the third, fourth, and fifth anniversaries of the grant date. The time-based RSUs will be settled in common stock upon vesting, and will not be entitled to dividends until vested. The time-based RSUs may also vest upon death or disability, upon a change in control or upon a "qualified retirement" (as defined in the RSU agreement). The retiree is required to sign a non-solicitation and non-compete agreement as a condition to vesting.

In addition to the time-based RSUs referenced in the preceding paragraph, the Compensation Committee granted performance-based RSUs with respect to 35,516 shares of common stock in the first quarter of 2016, and 39,075 shares of common stock in the first quarter of 2015. These performance-based RSUs are earned based on satisfaction of performance targets for the fiscal years ended December 31, 2016, and December 31, 2015, respectively, and then fully vest two years after the end of the performance period. For the grants awarded in 2016, the portion of the RSUs earned based on performance vests on December 31, 2018, and for the grants awarded in 2015, the portion of the RSUs earned based on performance vests on December 31, 2017, subject to employment on the respective vesting dates. The performance-based RSUs vest to the extent that they are earned upon death or disability, upon a change in control or upon a "qualified retirement."

The Compensation Committee also granted performance-based RSUs with respect to 11,408 shares of common stock in the first quarter of 2016. These performance-based RSUs will be earned based on satisfaction of performance targets for the three-year performance period ended December 31, 2018. These performance-based RSUs will vest in 2019 after measurement of performance in relation to the performance targets. The performance-based RSUs vest to the extent that they are earned upon death or disability, upon a change in control or upon a "qualified retirement."

The Compensation Committee also grants RSUs under the Plan to directors as part of their compensation, to new management level employees at commencement of employment, and to other employees and service providers as incentives. During the three months ended March 31, 2016, and March 31, 2015, 150 and 300 RSUs, respectively, were granted to directors and new employees.

A summary of the RSUs outstanding as of March 31, 2016 and 2015, and changes during the three months ended March 31, 2016 and 2015, follows:

	2016				2015
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Outstanding at January 1	353,195		$	25.53	396,555		$	21.48
Granted	119,718		29.05		117,595		27.87
Vested	(83,982	)	20.79		(126,847	)	16.66
Forfeited	(2,078	)	27.17		(2,531	)	23.82
Outstanding at March 31	386,853		$	27.53	384,772		$	25.00

Total compensation costs recorded for RSUs were $1.1 million for both three month periods ended March 31, 2016 and 2015. As of March 31, 2016, there were $5.2 million of total unrecognized compensation costs related to the 2005 and 2012 Long-Term Incentive Plans for RSUs which are expected to be recognized through 2019.

Options

Although the Plan provides authority to the Compensation Committee to grant stock options, no options were granted during the first three months of 2016 and 2015. Prior to 2009, options were typically granted annually with an expiration date ten years after the date of grant. Vesting was generally over a five-year service period with equal portions of a grant becoming exercisable at three years, four years, and five years after the date of grant. A summary of the stock options outstanding as of March 31, 2016 and 2015, and changes during the three months ended March 31, 2016 and 2015, follows:

	2016				2015
	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at January 1	125,950		$	24.08	215,851		$	23.85
Granted	—		—		—		—
Exercised	(19,750	)	21.60		(32,400	)	20.85
Forfeited	(1,250	)	21.60		(1,500	)	21.00
Outstanding at March 31	104,950		$	24.58	181,951		$	24.37
Options exercisable at March 31	104,950		$	24.58	181,951		$	24.37

AtMarch 31, 2016, the vested options totaled 104,950 shares with a weighted average exercise price of $24.58 per share and a weighted average remaining contractual life of 1.15 years. The intrinsic value (the difference between the market price and the aggregate exercise price) for the vested options as of March 31, 2016, was $652,000. The intrinsic value for the total of all options exercised during the three months ended March 31, 2016, was $155,000.

The exercise price of stock options granted is established by the Compensation Committee, but the exercise price for the stock options may not be less than the fair market value of the shares on the date that the option is granted or, if greater, the par value of a share of stock. Each option granted is exercisable in full at any time or from time to time, subject to vesting provisions, as determined by the Compensation Committee and as provided in the option agreement, but such time may not exceed ten years from the grant date. Cash received from options exercised was $427,000 for the three months ended March 31, 2016, and $676,000 for the three months ended March 31, 2015.

Total compensation costs recorded for options were $0 for both three month periods ended March 31, 2016 and 2015. There are no unrecorded compensation costs related to options at March 31, 2016. No stock options vested during the three-month periods ended March 31, 2016 and 2015.

Subsequent Events

Heartland had no subsequent events through the filing date of this quarterly report on Form 10-Q with the SEC.

Effect of New Financial Accounting Standards

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The amendment clarifies the principles for recognizing revenue and develops a common revenue standard. The amendment outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” In applying the revenue model to contracts within its scope, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB Codification. The standard also requires significantly expanded disclosures about revenue recognition. The amendment is effective for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early application is not permitted. Heartland intends to adopt the accounting standard during the first quarter of 2018, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In November 2014, the FASB issued ASU 2014-16, "Derivatives and Hedging (Topic 815): Determining Whether a Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity." The amendment clarifies how

current guidance should be interpreted in evaluating the characteristics and risks of a host contract in a hybrid financial instrument issued in the form of a share. One criterion requires evaluating whether the nature of the host contract is more akin to debt or to equity and whether the economic characteristics and risks of the embedded derivative feature are "clearly and closely related" to the host contract. In making that evaluation, an issuer or investor must consider all terms and features in a hybrid financial instrument including the embedded derivative feature that is being evaluated for separate accounting or may consider all terms and features in the hybrid financial instrument except for the embedded derivative feature that is being evaluated for separate accounting. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. Heartland adopted this standard on January 1, 2016, and the adoption of this standard did not have a material impact on its results of operations, financial position, and liquidity.

In January 2015, the FASB issued ASU 2015-01, "Income Statement-Extraordinary and Unusual Items." The amendment eliminates from U.S. GAAP the concept of extraordinary items. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. This amended guidance will prohibit separate disclosure of extraordinary items in the income statement. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Entities may apply the amendment prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. Heartland adopted this standard on January 1, 2016, and the adoption of this standard did not have a material impact on the results of operations, financial position, and liquidity.

In April 2015, the FASB issued ASU 2015-05, "Intangibles-Goodwill and Other-Internal-Use Software." The amendment intends to provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer's accounting for service contracts. As a result, all software licenses within the scope of this guidance will be accounted for consistently with other licenses of intangible assets. This amendment is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Entities can elect to adopt the standard either retrospectively or prospectively to all cloud computing arrangements entered into or materially modified after the adoption date. Early adoption is permitted. Heartland adopted this standard on January 1, 2016 and the adoption did not have a material impact on the results of operations, financial position, and liquidity.

In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments." The amendment eliminates the requirement of Topic 805, Business Combinations, to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. Measurement-period adjustments are calculated as if they were known at the acquisition date, but are recognized in the reporting period in which they are determined. Prior period information is not revised. Additional disclosures are required about the impact on current period income statement line items of adjustments that would have been recognized in prior periods if prior period information had been revised. This amendment is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted if financial statements have not been issued. Heartland adopted this standard effective September 30, 2015. The adoption of this standard did not have a material impact on the results of operations, financial position, and liquidity.

In January 2016, the FASB issued guidance ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities." The amendments in ASU 2016-01 to Subtopic 825-10, Financial Instruments, contain the following elements: (1) requires equity investments to be measured at fair value with changes in fair value recognized in net income; (2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (3) eliminates the requirement for public entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (4) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (5) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (6) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements; (7) clarifies that the entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity's other deferred tax assets. The amendments are effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Except for the early application of the

amendment noted in item (5) above, early adoption of the amendments in this update is not permitted. Heartland intends to adopt the accounting standard in 2018, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." Topic 842 requires a lessee to recognize a lease liability and a right of use asset for each lease, with the exception of short term leases, at the commencement date of the lease and disclose key information about the leasing arrangement. Accounting requirements applied by lessors is largely unchanged. The amendment is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and will be applied on a modified retrospective basis. Heartland intends to adopt the accounting standard in 2019, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718)." The amendments in this ASU simplify several aspects of the accounting for share-based payments, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted for any interim or annual period prior to the effective date. An entity that elects early adoption must adopt all of the amendments in the same period. Heartland intends to adopt this ASU in 2017, as required, and believes the adoption will not have an impact on its results of operations, financial position, and liquidity.

NOTE 2: ACQUISITIONS

CIC Bancshares, Inc.

On February 5, 2016, Heartland completed the acquisition of CIC Bancshares, Inc., parent company of Centennial Bank, headquartered in Denver, Colorado. The purchase price was approximately $76.9 million, which was paid by delivery of 2,003,235 shares of Heartland common stock and cash of $15.7 million. In addition, Heartland issued a new series of convertible preferred stock with a fair value of $3.8 million and assumed convertible notes and subordinated debt totaling approximately $7.9 million. Simultaneous with the closing of the transaction, Centennial Bank merged into Heartland's Summit Bank & Trust, with the resulting institution operating under the name, Centennial Bank and Trust. As of the close date, the transaction included, at fair value, total assets of $772.6 million, total loans of $581.5 million, and total deposits of $648.1 million. The transaction was a tax-free reorganization with respect to the stock consideration received by the stockholders of CIC Bancshares, Inc.

The assets and liabilities of CIC Bancshares, Inc. were recorded on the consolidated balance sheet at estimated fair value on the acquisition date. The following table represents, in thousands, the amounts recorded on the consolidated balance sheet as of February 5, 2016:

	As of February 5, 2016
Fair value of consideration paid:
Common Stock (2,003,235 shares)	$	57,433
Preferred Stock (3,000 shares)	3,777
Cash	15,672
Total consideration paid	76,882
Fair value of assets acquired:
Cash and due from banks	23,756
Securities:
Securities available for sale	92,831
Other securities	3,486
Loans held to maturity	581,477
Premises, furniture and equipment, net	16,450
Other real estate, net	1,934
Other intangible assets, net	6,576
Other assets	16,276
Total assets	742,786
Fair value of liabilities assumed:
Deposits	648,111
Short term borrowings	35,766
Other borrowings	7,924
Other liabilities	3,951
Total liabilities assumed	695,752
Fair value of net assets acquired	47,034
Goodwill resulting from acquisition	$	29,848

Heartland recognized $29.8 million of goodwill in conjunction with the acquisition of CIC Bancshares, Inc., which is calculated as the excess of both the consideration exchanged and the liabilities assumed as compared to the fair value of identifiable assets acquired. Goodwill resulted from the expected operational synergies, enhanced market area, cross-selling opportunities and expanded business lines. See Note 6 for further information on goodwill.

Pro Forma Information (unaudited): The following pro forma information presents the results of operations for the years ended December 31, 2015, and December 31, 2014, as if the CIC Bancshares, Inc. acquisition occurred on January 1, 2014:

(Dollars in thousands, except per share data), unaudited	For the Years Ended
	December 31, 2015		December 31, 2014
Net interest income	$	259,531	$	221,808
Net income available to common shareholders	$	59,491	$	41,004
Basic earnings per share	$	2.63	$	2.00
Diluted earnings per share	$	2.58	$	1.96

The above pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the merged companies that would have been achieved had the acquisition occurred at January 1, 2014, nor are they intended to represent or be indicative of future results of operations. The pro forma results do not include expected operating cost savings as a result of the acquisition. These pro forma results require significant estimates and judgments particularly with respect to valuation and accretion of income associated with the acquired loans.

Heartland incurred $551,000 of pre-tax merger related expenses in 2016 associated with the Centennial Bank acquisition. The merger expenses are reflected on the consolidated statements of income for the applicable period and are reported primarily in the categories of professional fees and other noninterest expenses.

Acquired loans were preliminarily recorded at fair value based on a discounted cash flow valuation methodology that considers, among other things, projected default rates, loss given defaults and recovery rates. No allowance for credit losses was carried over from the acquisition. The balance of nonaccrual loans on the acquisition date was $1.6 million.

Premier Valley Bank

On November 30, 2015, Heartland completed the purchase of Premier Valley Bank in Fresno, California. The purchase price was approximately $95.5 million, which was paid by delivery of 1,758,543 shares of Heartland common stock and cash of $28.5 million. The transaction included, at fair value, total assets of $692.7 million, loans of $389.8 million, and deposits of $622.7 million. Premier Valley Bank continues to operate under its current name and management team as Heartland's tenth, wholly-owned state-chartered bank. The transaction was a tax-free reorganization with respect to the stock consideration received by the stockholders of Premier Valley Bank.

Heartland recognized $41.0 million of goodwill in conjunction with the acquisition of Premier Valley Bank, which is calculated as the excess of both the consideration exchanged and the liabilities assumed as compared to the fair value of identifiable assets acquired. Goodwill resulted from the expected operational synergies, enhanced market area, cross-selling opportunities and expanded business lines. See Note 6 for further information on goodwill.

First Scottsdale Bank, N.A.

On September 11, 2015, Heartland completed the purchase of First Scottsdale Bank, N.A., in Scottsdale, Arizona, in an all cash transaction valued at approximately $17.7 million. Simultaneous with the closing of the transaction, First Scottsdale Bank, N.A., merged into Heartland's Arizona Bank & Trust subsidiary. The transaction included, at fair value, total assets of $81.2 million, loans of $54.7 million, and deposits of $65.9 million on the acquisition date.

Community Bancorporation of New Mexico, Inc.

On August 21, 2015, Heartland acquired Community Bancorporation of New Mexico, Inc., parent company of Community Bank in Santa Fe, New Mexico, in an all cash transaction valued at approximately $11.1 million. Simultaneous with the closing of the transaction, Community Bank merged into Heartland's New Mexico Bank & Trust subsidiary. The transaction included, at fair value, total assets of $166.3 million, loans of $99.5 million, and deposits of $147.4 million on the acquisition date. Also included in this transaction is one bank building with a fair value of $3.4 million that Heartland intends to sell. The bank building is part of the balance of premises, furniture and equipment held for sale on the consolidated balance sheet.

Community Banc-Corp of Sheboygan, Inc.

On January 16, 2015, Heartland completed the acquisition of Community Banc-Corp of Sheboygan, Inc., parent company of Community Bank & Trust in Sheboygan, Wisconsin. Under the terms of the merger agreement for this transaction, the aggregate purchase price was based upon 155% of the December 31, 2014, adjusted tangible book value, as defined in the merger agreement, of Community Banc-Corp of Sheboygan, Inc. The purchase price was approximately $53.1 million, which was paid by delivery of 1,970,720 shares of Heartland common stock. The transaction included, at fair value, total assets of $506.8 million, including loans of $395.0 million, and deposits of $433.9 million. Simultaneous with the close of the transaction, Community Bank & Trust merged into Heartland’s Wisconsin Bank & Trust subsidiary. The transaction was a tax-free reorganization with respect to the stock consideration received by the stockholders of Community Banc-Corp of Sheboygan, Inc.

Heartland recognized goodwill of $18.6 million in conjunction with the acquisition of Community Banc-Corp of Sheboygan, Inc., which is calculated as the excess of both the consideration exchanged and the liabilities assumed as compared to the fair value of identifiable assets acquired. See Note 6 for further information on goodwill.

NOTE 3: SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of March 31, 2016, and December 31, 2015, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2016
U.S. government corporations and agencies	$	6,479	$	140	$	—		$	6,619
Mortgage-backed securities	1,386,707		14,448		(12,468		)	1,388,687
Obligations of states and political subdivisions	273,147		8,008		(152		)	281,003
Corporate debt securities	816		15		(1		)	830
Total debt securities	1,667,149		22,611		(12,621		)	1,677,139
Equity securities	13,150		227		—			13,377
Total	$	1,680,299	$	22,838	$	(12,621	)	$	1,690,516
December 31, 2015
U.S. government corporations and agencies	$	25,847	$	22	$	(103	)	$	25,766
Mortgage-backed securities	1,254,452		9,134		(20,884		)	1,242,702
Obligations of states and political subdivisions	290,522		6,547		(1,087		)	295,982
Corporate debt securities	740		106		—			846
Total debt securities	1,571,561		15,809		(22,074		)	1,565,296
Equity securities	13,142		40		(44		)	13,138
Total	$	1,584,703	$	15,849	$	(22,118	)	$	1,578,434

At March 31, 2016, and December 31, 2015, the amortized cost of the available for sale securities is net of $0 and $237,000 of credit related other-than-temporary impairment ("OTTI"), respectively.

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of March 31, 2016, and December 31, 2015, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2016
Mortgage-backed securities	$	—	$	—	$	—		$	—
Obligations of states and political subdivisions	271,300		18,492		(346		)	289,446
Total	$	271,300	$	18,492	$	(346	)	$	289,446
December 31, 2015
Mortgage-backed securities	$	4,369	$	306	$	—		$	4,675
Obligations of states and political subdivisions	274,748		15,595		(505		)	289,838
Total	$	279,117	$	15,901	$	(505	)	$	294,513

At March 31, 2016, the amortized cost of the held to maturity securities is net of $0 of credit related OTTI and $0 of non-credit related OTTI. At December 31, 2015, the amortized cost of the held to maturity securities was net of $1.5 million of credit related OTTI and $40,000 of non-credit related OTTI.

Approximately 79% of Heartland's mortgage-backed securities are issuances of government-sponsored enterprises.

The amortized cost and estimated fair value of debt securities available for sale at March 31, 2016, by contractual maturity are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	1,265	$	1,273
Due in 1 to 5 years	12,836		13,115
Due in 5 to 10 years	67,214		69,250
Due after 10 years	199,127		204,814
Total debt securities	280,442		288,452
Mortgage-backed securities	1,386,707		1,388,687
Equity securities	13,150		13,377
Total investment securities	$	1,680,299	$	1,690,516

The amortized cost and estimated fair value of debt securities held to maturity at March 31, 2016, by contractual maturity are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	4,266	$	4,336
Due in 1 to 5 years	13,714		14,499
Due in 5 to 10 years	68,786		73,224
Due after 10 years	184,534		197,387
Total debt securities	271,300		289,446
Mortgage-backed securities	—		—
Total investment securities	$	271,300	$	289,446

As of March 31, 2016 and December 31, 2015, securities with a fair value of $811.7 million and $855.8 million, respectively, were pledged to secure public and trust deposits, short-term borrowings and for other purposes as required by law.

Gross gains and losses realized related to the sales of securities available for sale for the three-month period ended March 31, 2016 and 2015, are summarized as follows, in thousands:

	Three Months Ended March 31,
	2016		2015
Proceeds from sales	$	303,448	$	289,466
Gross security gains	4,558		4,622
Gross security losses	682		269

The following tables summarize, in thousands, the amount of unrealized losses, defined as the amount by which cost or amortized cost exceeds fair value, and the related fair value of investments with unrealized losses in Heartland's securities portfolio as of March 31, 2016, and December 31, 2015. The investments were segregated into two categories: those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months. The reference point for determining how long an investment was in an unrealized loss position was March 31, 2015, andDecember 31, 2014, respectively. Securities for which Heartland has taken credit-related OTTI write-downs are categorized as being "less than 12 months" or "12 months or longer" in a continuous loss position based on the point in time that the fair value declined to below the cost basis and not the period of time since the credit-related OTTI write-down.

Securities available for sale	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2016
U.S. government corporations and agencies	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities	517,907		(8,323		)	130,640		(4,145		)	648,547		(12,468		)
Obligations of states and political subdivisions	10,003		(82		)	6,619		(70		)	16,622		(152		)
Corporate debt securities	500		(1		)	—		—			500		(1		)
Total debt securities	528,410		(8,406		)	137,259		(4,215		)	665,669		(12,621		)
Equity securities	—		—			—		—			—		—
Total temporarily impaired securities	$	528,410	$	(8,406	)	$	137,259	$	(4,215	)	$	665,669	$	(12,621	)
December 31, 2015
U.S. government corporations and agencies	$	22,359	$	(103	)	$	—	$	—		$	22,359	$	(103	)
Mortgage-backed securities	724,330		(15,523		)	139,562		(5,361		)	863,892		(20,884		)
Obligations of states and political subdivisions	68,482		(896		)	7,460		(191		)	75,942		(1,087		)
Corporate debt securities	—		—			—		—			—		—
Total debt securities	815,171		(16,522		)	147,022		(5,552		)	962,193		(22,074		)
Equity securities	6,566		(44		)	—		—			6,566		(44		)
Total temporarily impaired securities	$	821,737	$	(16,566	)	$	147,022	$	(5,552	)	$	968,759	$	(22,118	)

Securities held to maturity	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2016
Mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
Obligations of states and political subdivisions	1,363		(18		)	5,717		(328		)	7,080		(346		)
Total temporarily impaired securities	$	1,363	$	(18	)	$	5,717	$	(328	)	$	7,080	$	(346	)
December 31, 2015
Mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
Obligations of states and political subdivisions	3,646		(12		)	18,033		(493		)	21,679		(505		)
Total temporarily impaired securities	$	3,646	$	(12	)	$	18,033	$	(493	)	$	21,679	$	(505	)

Heartland reviews the investment securities portfolio on a quarterly basis to monitor its exposure to OTTI. A determination as to whether a security's decline in fair value is other-than-temporary takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors Heartland may consider in the OTTI analysis include the length of time the security has been in an unrealized loss position, changes in security ratings, financial condition of the issuer, as well as security and industry specific economic conditions. In addition, with regard to debt securities, Heartland may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral. For certain debt securities in unrealized loss positions, Heartland prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

Heartland previously recorded $981,000 of OTTI on three private label mortgage-backed securities in March 2012. The other-than-temporary credit-related losses were $797,000 in the held to maturity category and $184,000 in the available for sale category. During 2015, Heartland recorded additional credit-related OTTI on two of the private label mortgage-backed securities that previously had OTTI credit losses. The underlying collateral on these securities experienced an increased level of defaults and a slowing of voluntary prepayments causing the present value of the forward expected cash flows, using prepayment and default vectors, to be below the amortized cost basis of the securities. Based on Heartland's evaluation, a $769,000 OTTI attributable to credit-related losses was recorded in December 2015. The credit-related OTTI was $716,000, of which $200,000 was reclassified

from previous non-credit related OTTI in the held to maturity category. Credit-related OTTI was $53,000 in the available for sale category.

In the first quarter of 2016, Heartland sold the mortgage-backed securities in the held to maturity portfolio because the credit quality of the securities showed further deterioration, and it was unlikely Heartland would recover the remaining basis of the securities prior to maturity. The significant deterioration of the credit quality of these securities was inconsistent with Heartland's original intent upon purchase and classification of these held to maturity securities. The carrying value of these securities was $4.4 million, and the associated realized gross gains were $89,000, and the realized gross losses were $439,000.

The remaining unrealized losses on Heartland's mortgage-backed securities are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities. The losses are not related to concerns regarding the underlying credit of the issuers or the underlying collateral. It is expected that the securities will not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates or widening market spreads and not credit quality, and because Heartland has the intent and ability to hold these investments until a market price recovery or to maturity and does not believe it will be required to sell the securities before maturity, these investments are not considered other-than-temporarily impaired.

Unrealized losses on Heartland's obligations of states and political subdivisions are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities. Management monitors the published credit ratings of these securities and the stability of the underlying municipalities. Because the decline in fair value is attributable to changes in interest rates or widening market spreads due to insurance company downgrades and not underlying credit quality, and because Heartland has the intent and ability to hold these investments until a market price recovery or to maturity and does not believe it will be required to sell the securities before maturity, these investments are not considered other-than-temporarily impaired.

There were no gross realized gains and $85,000 of gross realized losses on the sale of available for sale securities with OTTI write-downs for the period ended March 31, 2016. Additionally, there were no gross realized gains and $439,000 of gross realized losses on the sale of held to maturity securities with OTTI write-downs for the period ended March 31, 2016. There were no gross realized gains or losses on the sale of available for sale or held to maturity securities with OTTI write-downs for the period ended March 31, 2015.

The following table shows the detail of OTTI write-downs on debt securities included in earnings and the related changes in other accumulated comprehensive income ("AOCI") for the same securities, in thousands:

	Three Months Ended March 31,
	2016			2015
Recorded as part of gross realized losses:
Credit related OTTI	$	—		$	—
Intent to sell OTTI	—			—
Total recorded as part of gross realized losses	—			—
Recorded directly to AOCI for non-credit related impairment:
Residential mortgage backed securities	—			—
Reduction of non-credit related impairment related to security sales	(120		)	—
Accretion of non-credit related impairment	(7		)	(24		)
Total changes to AOCI for non-credit related impairment	(127		)	(24		)
Total OTTI losses (accretion) recorded on debt securities, net	$	(127	)	$	(24	)

Included in other securities at March 31, 2016, and December 31, 2015, were shares of stock in each Federal Home Loan Bank (the "FHLB") of Des Moines, Chicago, Dallas, San Francisco and Topeka at an amortized cost of $15.7 million and $14.3 million, respectively.

NOTE 4: LOANS AND LEASES

Loans and leases as of March 31, 2016, and December 31, 2015, were as follows, in thousands:

	March 31, 2016			December 31, 2015
Loans and leases receivable held to maturity:
Commercial	$	1,295,504		$	1,279,214
Commercial real estate	2,555,268			2,326,360
Agricultural and agricultural real estate	471,271			471,870
Residential real estate	753,666			539,555
Consumer	430,699			386,867
Gross loans and leases receivable held to maturity	5,506,408			5,003,866
Unearned discount	(640		)	(488		)
Deferred loan fees	(2,763		)	(1,892		)
Total net loans and leases receivable held to maturity	5,503,005			5,001,486
Allowance for loan and lease losses	(49,738		)	(48,685		)
Loans and leases receivable, net	$	5,453,267		$	4,952,801

Heartland has certain lending policies and procedures in place that are designed to provide for an acceptable level of credit risk. The board of directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the board with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies, nonperforming loans and potential problem loans. Diversification in the loan portfolio is also a means of managing risk associated with fluctuations in economic conditions.

The commercial and commercial real estate loan portfolio includes a wide range of business loans, including lines of credit for working capital and operational purposes and term loans for the acquisition of equipment and real estate. Although most loans are made on a secured basis, loans may be made on an unsecured basis where warranted by the overall financial condition of the borrower. Terms of commercial business loans generally range from one to five years. Commercial loans and leases are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The collateral that Heartland requires for most of these loans and leases is based upon the discounted market value of the collateral. The primary repayment risks of commercial loans and leases are that the cash flow of the borrowers may be unpredictable, and the collateral securing these loans may fluctuate in value. Heartland seeks to minimize these risks in a variety of ways. The underwriting analysis includes credit verification, analysis of global cash flows, appraisals and a review of the financial condition of the borrower. Personal guarantees are frequently required as a tertiary form of repayment. In addition, when underwriting loans for commercial real estate, careful consideration is given to the property's operating history, future operating projections, current and projected occupancy, location and physical condition. Heartland also utilizes government guaranteed lending through the U.S. Small Business Administration and the U.S. Department of Agriculture's Rural Development Business and Industry Program to assist customers with longer-term funding and to reduce risk.

Agricultural loans, many of which are secured by crops, machinery and real estate, are provided to finance capital improvements and farm operations as well as acquisitions of livestock and machinery. Agricultural loans present unique credit risks relating to adverse weather conditions, loss of livestock due to disease or other factors, declines in market prices for agricultural products and the impact of government regulations. The ultimate repayment of agricultural loans is dependent upon the profitable operation or management of the agricultural entity. In underwriting agricultural loans, lending personnel work closely with their customers to review budgets and cash flow projections for the ensuing crop year. These budgets and cash flow projections are monitored closely during the year and reviewed with the customers at least annually. Lending personnel also work closely with governmental agencies, including the Farm Service Agency, to help agricultural customers obtain credit enhancement products such as loan guarantees or interest assistance.

Heartland originates first-lien, adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a single family residential property. These loans are principally collateralized by owner-occupied properties and are amortized over 10 to 30 years. Heartland typically sells longer-term, low-rate, residential mortgage loans in the secondary market with servicing rights retained. This practice allows Heartland to better manage interest rate risk and liquidity risk. The Heartland bank subsidiaries participate in lending programs sponsored by U.S. government agencies such as Veterans Administration and Federal Home Administration when justified by market conditions. As of March 31, 2016, Heartland had $2.2 million of loans secured by residential real estate property that were in the process of foreclosure.

Consumer lending includes motor vehicle, home improvement, home equity and small personal credit lines. Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than one-to-four-family residential mortgage loans. Consumer loan collections are dependent on the borrower's continuing financial stability, and are therefore more likely to be affected by adverse personal circumstances. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate. Heartland's consumer finance subsidiaries, Citizens Finance Co. and Citizens Finance of Illinois Co., typically lend to borrowers with past credit problems or limited credit histories, and these loans comprise approximately 19% of Heartland's total consumer loan portfolio.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Heartland’s policy is to discontinue the accrual of interest income on any loan or lease when, in the opinion of management, there is a reasonable doubt as to the timely collection of the interest and principal, normally when a loan or lease is 90 days past due. When interest accruals are deemed uncollectible, interest credited to income in the current year is reversed and interest accrued in prior years is charged to the allowance for loan and lease losses. Nonaccrual loans and leases are returned to an accrual status when, in the opinion of management, the financial position of the borrower indicates that there is no longer any reasonable doubt as to the timely payment of interest and principal.

Under Heartland’s credit practices, a loan is impaired when, based on current information and events, it is probable that Heartland will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loan impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except where more practical, impairment is measured at the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent.

The following table shows the balance in the allowance for loan and lease losses at March 31, 2016, and December 31, 2015, and the related loan balances, disaggregated on the basis of impairment methodology, in thousands. Loans evaluated under ASC 310-10-35 include loans on nonaccrual status and troubled debt restructurings, which are individually evaluated for impairment, and other impaired loans deemed to have similar risk characteristics. All other loans are collectively evaluated for impairment under ASC 450-20. Heartland has made no significant changes to the accounting for the allowance for loan and lease losses policy during 2016.

	Allowance For Loan and Lease Losses						Gross Loans and Leases Receivable Held to Maturity
	Ending Balance Under ASC 310-10-35		Ending Balance Under ASC 450-20		Total		Ending Balance Evaluated for Impairment Under ASC 310-10-35		Ending Balance Evaluated for Impairment Under ASC 450-20		Total
March 31, 2016
Commercial	$	984	$	15,390	$	16,374	$	11,018	$	1,284,486	$	1,295,504
Commercial real estate	1,252		19,243		20,495		44,082		2,511,186		2,555,268
Agricultural and agricultural real estate	—		4,028		4,028		13,593		457,678		471,271
Residential real estate	311		1,540		1,851		19,345		734,321		753,666
Consumer	1,247		5,743		6,990		5,963		424,736		430,699
Total	$	3,794	$	45,944	$	49,738	$	94,001	$	5,412,407	$	5,506,408
December 31, 2015
Commercial	$	471	$	15,624	$	16,095	$	6,919	$	1,272,295	$	1,279,214
Commercial real estate	698		18,834		19,532		45,442		2,280,918		2,326,360
Agricultural and agricultural real estate	—		3,887		3,887		4,612		467,258		471,870
Residential real estate	393		1,541		1,934		17,790		521,765		539,555
Consumer	1,206		6,031		7,237		5,458		381,409		386,867
Total	$	2,768	$	45,917	$	48,685	$	80,221	$	4,923,645	$	5,003,866

The following table presents nonaccrual loans, accruing loans past due 90 days or more and troubled debt restructured loans at March 31, 2016, and December 31, 2015, in thousands. There were no nonaccrual leases, accruing leases past due 90 days or more or restructured leases at March 31, 2016, and December 31, 2015.

	March 31, 2016		December 31, 2015
Nonaccrual loans	$	46,316	$	37,874
Nonaccrual troubled debt restructured loans	1,434		1,781
Total nonaccrual loans	$	47,750	$	39,655
Accruing loans past due 90 days or more	$	639	$	—
Performing troubled debt restructured loans	$	10,711	$	11,075

The following table provides information on troubled debt restructured loans that were modified during the three months ended March 31, 2016, and March 31, 2015, dollars in thousands:

	Three Months Ended March 31,
	2016					2015
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial	—	$	—	$	—	—	$	—	$	—
Commercial real estate	—	—		—		1	3,992		3,992
Total commercial and commercial real estate	—	—		—		1	3,992		3,992
Agricultural and agricultural real estate	—	—		—		—	—		—
Residential real estate	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	3,992	$	3,992

The pre-modification and post-modification recorded investment represents amounts as of the date of loan modification. Since the modifications on these loans have been only interest rate concessions and term extensions, not principal reductions, the pre-modification and post-modification recorded investment amounts are the same. At March 31, 2016, there were no commitments to extend credit to any of the borrowers with an existing troubled debt restructuring.

Heartland had no troubled debt restructured loans for which there was a payment default during the three months ended March 31, 2016, and March 31, 2015, that had been modified during the twelve-month period prior to default.

Heartland's internal rating system is a series of grades reflecting management's risk assessment, based on its analysis of the borrower's financial condition. The "pass" category consists of all loans that are not in the "nonpass" category, categorized into a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the pass category is monitored for early identification of credit deterioration. The "nonpass" category consists of special mention, substandard, doubtful and loss loans. The "special mention" rating is attached to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten the borrower's capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. These credits are closely monitored for improvement or deterioration. The "substandard" rating is assigned to loans that are inadequately protected by the current sound net worth and paying capacity of the borrower and may be further at risk due to deterioration in the value of collateral pledged. Well-defined weaknesses jeopardize liquidation of the debt. These loans are still considered collectible; however, a distinct possibility exists that Heartland will sustain some loss if deficiencies are not corrected. Substandard loans may exhibit some or all of the following weaknesses: deteriorating trends, lack of earnings, inadequate debt service capacity, excessive debt and/or lack of liquidity. The "doubtful" rating is assigned to loans where identified weaknesses make collection or liquidation in full, on the basis of existing facts, conditions and values, highly questionable and improbable. These borrowers are usually in default, lack liquidity and capital, as well as resources necessary to remain an operating entity. Specific pending events, such as capital injections, liquidations or perfection of liens on additional collateral, may strengthen the credit, thus deferring classification of the loan as loss until the exact status can be determined. The "loss" rating is assigned to

loans considered uncollectible. As of March 31, 2016, Heartland had $80,000 of loans classified as doubtful and no loans classified as loss. Loans are placed on "nonaccrual" when management does not expect to collect payments of principal and interest in full or when principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection.

The following table presents loans and leases by credit quality indicator at March 31, 2016, and December 31, 2015, in thousands:

	Pass		Nonpass		Total
March 31, 2016
Commercial	$	1,128,858	$	166,646	$	1,295,504
Commercial real estate	2,339,414		215,854		2,555,268
Total commercial and commercial real estate	3,468,272		382,500		3,850,772
Agricultural and agricultural real estate	426,929		44,342		471,271
Residential real estate	725,773		27,893		753,666
Consumer	420,267		10,432		430,699
Total gross loans and leases receivable held to maturity	$	5,041,241	$	465,167	$	5,506,408
December 31, 2015
Commercial	$	1,106,276	$	172,938	$	1,279,214
Commercial real estate	2,107,474		218,886		2,326,360
Total commercial and commercial real estate	3,213,750		391,824		3,605,574
Agricultural and agricultural real estate	435,745		36,125		471,870
Residential real estate	515,195		24,360		539,555
Consumer	377,173		9,694		386,867
Total gross loans and leases receivable held to maturity	$	4,541,863	$	462,003	$	5,003,866

The nonpass category in the table above is comprised of approximately 57% special mention loans and 43% substandard loans as of March 31, 2016. The percent of nonpass loans on nonaccrual status as of March 31, 2016, was 10%. As of December 31, 2015, the nonpass category in the table above was comprised of approximately 68% special mention loans and 32% substandard loans. The percent of nonpass loans on nonaccrual status as of December 31, 2015, was 8%. Loans delinquent 30 to 89 days as a percent of total loans were 0.45% at March 31, 2016, compared to 0.31% at December 31, 2015. Changes in credit risk are monitored on a continuous basis and changes in risk ratings are made when identified. All impaired loans are reviewed at least annually.

The following table sets forth information regarding Heartland's accruing and nonaccrual loans and leases at March 31, 2016, and December 31, 2015, in thousands:

	Accruing Loans and Leases
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual		Total Loans and Leases
March 31, 2016
Commercial	$	1,565	$	396	$	—	$	1,961	$	1,288,064	$	5,479	$	1,295,504
Commercial real estate	3,413		212		89		3,714		2,529,840		21,714		2,555,268
Total commercial and commercial real estate	4,978		608		89		5,675		3,817,904		27,193		3,850,772
Agricultural and agricultural real estate	12,600		423		—		13,023		457,459		789		471,271
Residential real estate	1,753		192		550		2,495		734,977		16,194		753,666
Consumer	3,434		544		—		3,978		423,147		3,574		430,699
Total gross loans and leases receivable held to maturity	$	22,765	$	1,767	$	639	$	25,171	$	5,433,487	$	47,750	$	5,506,408
December 31, 2015
Commercial	$	2,005	$	608	$	—	$	2,613	$	1,273,678	$	2,923	$	1,279,214
Commercial real estate	3,549		2,077		—		5,626		2,302,052		18,682		2,326,360
Total commercial and commercial real estate	5,554		2,685		—		8,239		3,575,730		21,605		3,605,574
Agricultural and agricultural real estate	143		54		—		197		470,455		1,218		471,870
Residential real estate	1,900		115		—		2,015		523,915		13,625		539,555
Consumer	3,964		933		—		4,897		378,763		3,207		386,867
Total gross loans and leases receivable held to maturity	$	11,561	$	3,787	$	—	$	15,348	$	4,948,863	$	39,655	$	5,003,866

The majority of Heartland's impaired loans are those that are nonaccrual or have had their terms restructured in a troubled debt restructuring. The following tables present, by category of loan, impaired loans, the unpaid contractual loan balances at March 31, 2016, and December 31, 2015; the outstanding loan balances recorded on the consolidated balance sheets at March 31, 2016, and December 31, 2015; any related allowance recorded for those loans as of March 31, 2016, and December 31, 2015; the average outstanding loan balances recorded on the consolidated balance sheets during the three months ended March 31, 2016, and year ended December 31, 2015; and the interest income recognized on the impaired loans during the three months ended March 31, 2016, and year ended December 31, 2015, in thousands:

	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
March 31, 2016
Impaired loans with a related allowance:
Commercial	$	4,766	$	4,766	$	984	$	2,137	$	35
Commercial real estate	4,297		4,203		1,252		4,210		25
Total commercial and commercial real estate	9,063		8,969		2,236		6,347		60
Agricultural and agricultural real estate	—		—		—		—		—
Residential real estate	2,868		2,873		311		2,917		4
Consumer	3,258		3,258		1,247		3,208		9
Total impaired loans with a related allowance	$	15,189	$	15,100	$	3,794	$	12,472	$	73
Impaired loans without a related allowance:
Commercial	$	6,277	$	6,252	$	—	$	9,849	$	143
Commercial real estate	43,157		39,879		—		46,872		384
Total commercial and commercial real estate	49,434		46,131		—		56,721		527
Agricultural and agricultural real estate	13,593		13,593		—		7,422		251
Residential real estate	16,610		16,472		—		17,173		32
Consumer	2,706		2,705		—		2,970		9
Total impaired loans without a related allowance	$	82,343	$	78,901	$	—	$	84,286	$	819
Total impaired loans held to maturity:
Commercial	$	11,043	$	11,018	$	984	$	11,986	$	178
Commercial real estate	47,454		44,082		1,252		51,082		409
Total commercial and commercial real estate	58,497		55,100		2,236		63,068		587
Agricultural and agricultural real estate	13,593		13,593		—		7,422		251
Residential real estate	19,478		19,345		311		20,090		36
Consumer	5,964		5,963		1,247		6,178		18
Total impaired loans held to maturity	$	97,532	$	94,001	$	3,794	$	96,758	$	892

	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
December 31, 2015
Impaired loans with a related allowance:
Commercial	$	1,192	$	1,160	$	471	$	524	$	12
Commercial real estate	2,697		2,697		698		2,539		19
Total commercial and commercial real estate	3,889		3,857		1,169		3,063		31
Agricultural and agricultural real estate	—		—		—		2,823		—
Residential real estate	2,210		2,125		393		2,524		16
Consumer	3,111		3,111		1,206		2,877		33
Total impaired loans with a related allowance	$	9,210	$	9,093	$	2,768	$	11,287	$	80
Impaired loans without a related allowance:
Commercial	$	5,784	$	5,759	$	—	$	7,511	$	515
Commercial real estate	46,099		42,745		—		38,444		1,395
Total commercial and commercial real estate	51,883		48,504		—		45,955		1,910
Agricultural and agricultural real estate	4,612		4,612		—		2,287		175
Residential real estate	15,802		15,665		—		10,186		145
Consumer	2,347		2,347		—		2,403		38
Total impaired loans without a related allowance	$	74,644	$	71,128	$	—	$	60,831	$	2,268
Total impaired loans held to maturity:
Commercial	$	6,976	$	6,919	$	471	$	8,035	$	527
Commercial real estate	48,796		45,442		698		40,983		1,414
Total commercial and commercial real estate	55,772		52,361		1,169		49,018		1,941
Agricultural and agricultural real estate	4,612		4,612		—		5,110		175
Residential real estate	18,012		17,790		393		12,710		161
Consumer	5,458		5,458		1,206		5,280		71
Total impaired loans held to maturity	$	83,854	$	80,221	$	2,768	$	72,118	$	2,348

On February 5, 2016, Heartland acquired CIC Bancshares, Inc., parent company of Centennial Bank, in Denver, Colorado. As of February 5, 2016, Centennial Bank had loans of $594.9 million, and the estimated fair value of the loans acquired was $581.5 million.

On November 30, 2015, Heartland acquired Premier Valley Bank in Fresno, California. As of November 30, 2015, Premier Valley Bank had loans of $400.5 million, and the estimated fair value of the loans acquired was $389.8 million.

On September 11, 2015, Heartland acquired First Scottsdale Bank, N.A. in Scottsdale, Arizona. As of September 11, 2015, First Scottsdale Bank, N.A. had loans of $56.5 million, and the estimated fair value of the loans acquired was $54.7 million.

On August 21, 2015, Heartland acquired Community Bancorporation of New Mexico, Inc., parent company of Community Bank of Santa Fe, New Mexico. As of August 21, 2015, Community Bank had loans of $103.7 million, and the estimated fair value of the loans acquired was $99.5 million.

On January 16, 2015, Heartland acquired Community Banc-Corp of Sheboygan, Inc., parent company of Community Bank & Trust in Sheboygan, Wisconsin. As of January 16, 2015, Community Bank & Trust had loans of $413.4 million, and the estimated fair value of the loans acquired was $395.0 million.

The acquisitions of Community Banc-Corp of Sheboygan, Inc., Community Bancorporation of New Mexico, Inc., First Scottsdale Bank, N.A., Premier Valley Bank and CIC Bancshares, Inc. were accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date, but the purchaser cannot carry over the related allowance for loan and lease losses. Purchased loans are accounted for under ASC 310-30, “Loans and Debt Securities with Deteriorated Credit Quality,” when the loans have evidence of credit deterioration since origination, and when at the date of the acquisition, it is probable that Heartland will not

collect all contractually required principal and interest payments. Evidence of credit quality deterioration at the purchase date include statistics such as past due and nonaccrual status. Generally, acquired loans that meet Heartland’s definition for nonaccrual status fall within the scope of ASC 310-30. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference which is included in the carrying value of the loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in cash flows result in a reversal of the provision for loan and lease losses to the extent of prior charges, or a reclassification of the difference from nonaccretable to accretable with a positive impact on future interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

The carrying amount of the acquired loans at March 31, 2016 and December 31, 2015, consisted of purchased impaired and nonimpaired loans as summarized in the following table, in thousands:

	March 31, 2016						December 31, 2015
	Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans		Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans
Commercial	$	2,545	$	184,963	$	187,508	$	—	$	159,393	$	159,393
Commercial real estate	5,997		723,390		729,387		7,716		494,010		501,726
Agricultural and agricultural real estate	—		1,296		1,296		—		2,985		2,985
Residential real estate	715		293,176		293,891		—		85,549		85,549
Consumer loans	—		69,837		69,837		—		33,644		33,644
Total Loans	$	9,257	$	1,272,662	$	1,281,919	$	7,716	$	775,581	$	783,297

Changes in accretable yield on acquired loans with evidence of credit deterioration at the date of acquisition for the three months ended March 31, 2016, and March 31, 2015, were as follows, in thousands:

Balance at December 31, 2015	$	557
Original yield discount, net, at date of acquisitions	19
Accretion	273
Reclassification from nonaccretable difference (1)	(2		)
Balance at March 31, 2016	$	305
(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.

Balance at December 31, 2014	$	—
Original yield discount, net, at date of acquisitions	352
Accretion	—
Reclassification from nonaccretable difference (1)	—
Balance at March 31, 2015	$	352
(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.

On the acquisition dates, the preliminary estimate of the contractually required payments receivable for all loans with evidence of credit deterioration since origination was $21.0 million, and the estimated fair value of the loans was $13.1 million. At March 31, 2016, a majority of these loans were valued based upon the liquidation value of the underlying collateral, because the expected cash flows are primarily based on the liquidation of underlying collateral, and the timing and amount of the cash flows could not be reasonably estimated. At March 31, 2016, there was an allowance for loan and lease losses of $205,000 related to these ASC 310-30 loans.

On the acquisition dates, the preliminary estimate of the contractually required payments receivable for all nonimpaired loans acquired in the acquisitions was $1.55 billion, and the estimated fair value of the loans was $1.51 billion.

NOTE 5: ALLOWANCE FOR LOAN AND LEASE LOSSES

Changes in the allowance for loan and lease losses for the three months ended March 31, 2016, and March 31, 2015, were as follows, in thousands:

	Commercial			Commercial Real Estate			Agricultural		Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2015	$	16,095		$	19,532		$	3,887	$	1,934		$	7,237		$	—	$	48,685
Charge-offs	(98		)	(312		)	—		(37		)	(1,158		)	—		(1,605		)
Recoveries	176			146			3		20			246			—		591
Provision	201			1,129			138		(66		)	665			—		2,067
Balance at March 31, 2016	$	16,374		$	20,495		$	4,028	$	1,851		$	6,990		$	—	$	49,738

	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2014	$	11,909		$	15,898		$	3,295		$	3,741		$	6,606		$	—	$	41,449
Charge-offs	(274		)	(333		)	(276		)	(58		)	(1,063		)	—		(2,004		)
Recoveries	320			126			22			37			233			—		738
Provision	(267		)	944			175			25			794			—		1,671
Balance at March 31, 2015	$	11,688		$	16,635		$	3,216		$	3,745		$	6,570		$	—	$	41,854

Management allocates the allowance for loan and lease losses by pools of risk within each loan portfolio. The allocation of the allowance for loan and lease losses by loan portfolio is made for analytical purposes and is not necessarily indicative of the trend of future loan and lease losses in any particular category. The total allowance for loan and lease losses is available to absorb losses from any segment of the loan portfolio.

NOTE 6: GOODWILL, CORE DEPOSIT PREMIUM AND OTHER INTANGIBLE ASSETS

Heartland had goodwill of $127.7 million at March 31, 2016, and $97.9 million at December 31, 2015. Heartland conducts its annual internal assessment of the goodwill both collectively and at its subsidiaries as of September 30.

Heartland recorded $29.8 million of goodwill in connection with the acquisition of CIC Bancshares, Inc., parent company of Centennial Bank, based in Denver, Colorado on February 5, 2016. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland recognized core deposit intangibles of $6.4 million that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes. In addition, Heartland recognized commercial servicing rights of $190,000.

Heartland recorded $41.0 million of goodwill in connection with the acquisition of Premier Valley Bank, based in Fresno, California on November 30, 2015. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland recognized core deposit intangibles of $8.0 million that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes. In addition, Heartland recognized commercial servicing rights of $616,000.

Heartland recorded $2.5 million of goodwill in connection with the acquisition of First Scottsdale Bank, N.A., based in Scottsdale, Arizona on September 11, 2015. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland also recognized core deposit intangibles of $357,000 that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes.

Heartland recorded $213,000 of goodwill in connection with the acquisition of Community Bancorporation of New Mexico, Inc., parent company of Community Bank in Santa Fe, New Mexico, based in Santa Fe, New Mexico on August 21, 2015. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland also recognized core deposit intangibles of $1.7 million that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes.

Heartland recorded $18.6 million of goodwill in connection with the acquisition of Community Banc-Corp of Sheboygan, Inc., the parent company of Community Bank & Trust, based in Sheboygan, Wisconsin on January 16, 2015. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland recognized core deposit intangibles of $6.0 million that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes. In addition, Heartland recognized commercial servicing rights of $4.3 million.

Goodwill related to the CIC Bancshares, Inc., Premier Valley Bank, First Scottsdale Bank, N.A., Community Bancorporation of New Mexico, Inc. and Community Banc-Corp of Sheboygan, Inc., resulted from expected operational synergies, increased market presence, cross-selling opportunities, and expanded business lines.

Other intangible assets consist of core deposit intangibles, mortgage servicing rights, customer relationship intangible, and commercial servicing rights. The gross carrying amount of other intangible assets and the associated accumulated amortization at March 31, 2016, and December 31, 2015, are presented in the table below, in thousands:

	March 31, 2016						December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	43,504	$	17,345	$	26,159	$	37,118	$	15,460	$	21,658
Mortgage servicing rights	46,818		16,368		30,450		45,744		15,430		30,314
Customer relationship intangible	1,176		825		351		1,177		815		362
Commercial servicing rights	6,071		1,611		4,460		5,685		1,074		4,611
Total	$	97,569	$	36,149	$	61,420	$	89,724	$	32,779	$	56,945

The following table shows the estimated future amortization expense for amortizable intangible assets, in thousands:

	Core Deposit Intangibles		Mortgage Servicing Rights		Customer Relationship Intangible		Commercial Servicing Rights		Total
Nine months ending December 31, 2016	$	3,716	$	6,778	$	31	$	720	$	11,245
Year ending December 31,
2017	4,419		5,918		40		931		11,308
2018	3,909		5,073		39		837		9,858
2019	3,426		4,227		38		638		8,329
2020	2,982		3,382		36		455		6,855
2021	2,463		2,536		35		392		5,426
Thereafter	5,244		2,536		132		487		8,399
Total	$	26,159	$	30,450	$	351	$	4,460	$	61,420

Projections of amortization expense for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of March 31, 2016. Heartland's actual experience may be significantly different depending upon changes in mortgage interest rates and market conditions. Mortgage loans serviced for others were $4.11 billion and $4.06 billion as of March 31, 2016, and December 31, 2015, respectively. Custodial escrow balances maintained in connection with the mortgage loan servicing portfolio were approximately $25.0 million and $19.2 million as of March 31, 2016 and December 31, 2015, respectively. The fair value of Heartland's mortgage servicing rights was estimated at $38.9 million at March 31, 2016, and $40.9 million at December 31, 2015.

Heartland's mortgage servicing rights portfolio is comprised of loans serviced for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Government National Mortgage Association. The servicing rights portfolio is separated into 15- and 30-year tranches.

The fair value of mortgage servicing rights is calculated based upon a discounted cash flow analysis. Cash flow assumptions, including prepayment speeds, servicing costs and escrow earnings are considered in the calculation. The average constant prepayment rate was12.09%and10.65%for theMarch 31, 2016, andDecember 31, 2015, valuations, respectively. The discount rate was9.26%and9.25%for theMarch 31, 2016, andDecember 31, 2015, valuations, respectively. The average capitalization rate for the firstthreemonths of 2016 ranged from88to135basis points compared to the range of65to138basis points for 2015. Fees collected for the servicing of mortgage loans for others were $2.9 million and $2.5 million for the three months ended March 31, 2016, and March 31, 2015, respectively.

The following table summarizes, in thousands, the changes in capitalized mortgage servicing rights for the three months ended March 31, 2016, and March 31, 2015:

	2016			2015
Balance at January 1	$	30,314		$	24,984
Originations	2,395			2,686
Amortization	(2,259		)	(2,175		)
Balance at March 31	$	30,450		$	25,495
Fair value of mortgage servicing rights	$	38,944		$	34,492
Mortgage servicing rights, net to servicing portfolio	0.74		%	0.71		%

Heartland's commercial servicing rights portfolio was initially acquired with the Community Banc-Corp of Sheboygan, Inc. transaction that closed on January 16, 2015. Heartland also acquired commercial servicing rights portfolios with the Premier Valley Bank transaction that closed on November 30, 2015, and the CIC Bancshares, Inc. transaction that closed on February 5, 2016. The commercial servicing portfolio is comprised of loans serviced for the Small Business Administration and United States Department of Agriculture, which totaled $189.9 million. Fees collected for the servicing of commercial loans for others were $80,000 for the period ended March 31, 2016.

The fair value of each commercial servicing rights portfolio is calculated based upon a discounted cash flow analysis. Cash flow assumptions, including prepayment speeds and servicing costs, are considered in the calculation. The range of average constant prepayment rates for the portfolio valuations for the firstthreemonths of 2016was 7.14% to 8.10% compared to 7.33% to 8.10% as of December 31, 2015. The discount rate range was 11.74% to 13.49% for the March 31, 2016, valuations compared to 12.35% to 13.49% for the December 31, 2015, valuations. The capitalization rate for 2016 ranged from 3.10 to 4.45 basis points compared to 1.80 to 4.45 basis points for 2015. The total fair value of Heartland's commercial servicing rights was estimated at $4.9 million as of March 31, 2016.

The following table summarizes, in thousands, the changes in capitalized commercial servicing rights for the three months ended March 31, 2016, and March 31, 2015:

	2016			2015
Balance at January 1	$	4,611		$	—
Purchased commercial servicing rights	190			4,255
Originations	195			132
Amortization	(536		)	(215		)
Balance at March 31	$	4,460		$	4,172
Fair value of commercial servicing rights	$	4,899		$	4,429
Commercial servicing rights, net to servicing portfolio	2.35		%	2.87		%

Mortgage and commercial servicing rights are initially recorded at fair value in net gains on sale of loans held for sale when they are acquired through loan sales. Fair value is based on market prices for comparable servicing contracts, when available, or based on a valuation model that calculates the present value of estimated future net servicing income.

Mortgage and commercial servicing rights are subsequently measured using the amortization method, which requires the asset to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the

underlying loans. Servicing rights are evaluated for impairment based upon the fair value of the assets as compared to the carrying amount. Impairment is recognized through a valuation allowance for specific tranches to the extent that fair value is less than carrying amount. At March 31, 2016, and December 31, 2015, no valuation allowance was required for any of Heartland's servicing rights.

NOTE 7: DERIVATIVE FINANCIAL INSTRUMENTS

Heartland uses derivative financial instruments as part of its interest rate risk management strategy. As part of the strategy, Heartland considers the use of interest rate swaps, caps, floors, collars, and certain interest rate lock commitments and forward sales of securities related to mortgage banking activities. Heartland's current strategy includes the use of interest rate swaps, interest rate lock commitments and forward sales of mortgage securities. In addition, Heartland is facilitating back-to-back loan swaps to assist customers in managing interest rate risk. Heartland's objectives are to add stability to its net interest margin and to manage its exposure to movements in interest rates. The contract or notional amount of a derivative is used to determine, along with the other terms of the derivative, the amounts to be exchanged between the counterparties. Heartland is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. Heartland minimizes this risk by entering into derivative contracts with counterparties that meet Heartland’s credit standards, and the contracts contain collateral provisions protecting the at-risk party. Heartland has not experienced any losses from nonperformance by these counterparties. Heartland monitors counterparty risk in accordance with the provisions of ASC 815.

In addition, interest rate-related derivative instruments generally contain language outlining collateral pledging requirements for each counterparty. Collateral must be posted when the market value exceeds certain threshold limits which are determined by credit ratings of each counterparty. Heartland was required to pledge $7.7 million and $5.3 million of cash as collateral at March 31, 2016, and December 31, 2015, respectively. Heartland's counterparties were required to pledge $0 at March 31, 2016, and $79,000 at December 31, 2015, respectively.

Heartland's derivative and hedging instruments are recorded at fair value on the consolidated balance sheets. See Note 8, “Fair Value,” for additional fair value information and disclosures.

Cash Flow Hedges

Heartland has variable rate funding which creates exposure to variability in interest payments due to changes in interest rates. To manage the interest rate risk related to the variability of interest payments, Heartland has entered into various interest rate swap agreements. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are received or made on Heartland's variable-rate liabilities. For the three months ended March 31, 2016, the change in net unrealized losses on cash flow hedges reflects changes in the fair value of the swaps and reclassification from accumulated other comprehensive income to interest expense totaling $506,000. For the next twelve months, Heartland estimates that cash payments and reclassification from accumulated other comprehensive income to interest expense will total $2.0 million.

Heartland executed an interest rate swap transaction on April 5, 2011, with an effective date of April 20, 2011, and an expiration date of April 20, 2016, to effectively convert $15.0 million of its newly issued variable rate amortizing debt to fixed rate debt. For accounting purposes, this swap transaction is designated as a cash flow hedge of the changes in cash flows attributable to changes in one-month LIBOR, the benchmark interest rate being hedged, associated with the interest payments made on an amount of Heartland's debt principal equal to the then-outstanding swap notional amount. At inception, Heartland asserted that the underlying principal balance would remain outstanding throughout the hedge transaction, making it probable that sufficient LIBOR-based interest payments would exist through the maturity date of the swap.

Heartland entered into five forward starting interest rate swap transactions to effectively convert Heartland Financial Statutory Trust IV, V, and VII, which total $65.0 million, as well as Morrill Statutory Trust I and II, which total $20.0 million, from variable rate subordinated debentures to fixed rate debt. For accounting purposes, these five swap transactions are designated as cash flow hedges of the changes in cash flows attributable to changes in LIBOR, the benchmark interest rate being hedged, associated with the interest payments made on $85.0 million of Heartland's subordinated debentures that reset quarterly on a specified reset date. At inception, Heartland asserted that the underlying principal balance would remain outstanding throughout the hedge transaction, making it probable that sufficient LIBOR-based interest payments would exist through the maturity date of the swaps.

During the first quarter of 2015, Heartland entered into two additional forward starting interest rate swaps. The first forward starting interest rate swap transaction relates to Heartland's $20.0 million Statutory Trust VI, which will convert from a fixed interest rate subordinated debenture to a variable interest rate subordinated debenture. The effective date of the interest rate swap transaction is June 15, 2017, and Heartland Statutory Trust VI will effectively remain at a fixed interest rate. The forward-starting

swap transaction expires on June 15, 2024. The second forward starting interest rate swap is effective on March 1, 2017, and will replace the current interest rate swap related to Heartland Statutory Trust VII upon its expiration on March 1, 2017.

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments designated as cash flow hedges at March 31, 2016, and December 31, 2015, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category	Receive Rate		Weighted Average Pay Rate		Maturity
March 31, 2016
Interest rate swap	$	8,580	$	(14	)	Other Liabilities	3.182	%	5.140	%	04/20/2016
Interest rate swap	25,000		(1,374		)	Other Liabilities	0.642	%	2.255	%	03/17/2021
Interest rate swap	20,000		(507		)	Other Liabilities	0.635	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,891		)	Other Liabilities	0.617	%	3.355	%	01/07/2020
Interest rate swap	10,000		(223		)	Other Liabilities	0.630	%	1.674	%	03/26/2019
Interest rate swap	10,000		(219		)	Other Liabilities	0.642	%	1.658	%	03/18/2019
Interest rate swap (1)	20,000		(1,044		)	Other Liabilities	—	%	2.390	%	06/15/2024
Interest rate swap (2)	20,000		(1,085		)	Other Liabilities	—	%	2.352	%	03/01/2024
December 31, 2015
Interest rate swap	$	8,947	$	(57	)	Other Liabilities	3.152	%	5.140	%	04/20/2016
Interest rate swap	25,000		(713		)	Other Liabilities	0.526	%	2.255	%	03/17/2021
Interest rate swap	20,000		(600		)	Other Liabilities	0.414	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,582		)	Other Liabilities	0.323	%	3.355	%	01/07/2020
Interest rate swap	10,000		(83		)	Other Liabilities	0.603	%	1.674	%	03/26/2019
Interest rate swap	10,000		(83		)	Other Liabilities	0.526	%	1.658	%	03/18/2019
Interest rate swap (1)	20,000		(146		)	Other Liabilities	—	%	2.390	%	06/15/2024
Interest rate swap (2)	20,000		(176		)	Other Liabilities	—	%	2.352	%	03/01/2024
(1) This swap is a forward starting swap with a weighted average pay rate of 2.390% beginning on June 15, 2017. No interest payments are required related to this swap until September 15, 2017.
(2) This swap is a forward starting swap with a weighted average pay rate of 2.352% beginning on March 1, 2017. No interest payments are required on this swap until June 1, 2017.

The table below identifies the gains and losses recognized on Heartland's derivative instruments designated as cash flow hedges for the three months ended March 31, 2016, and March 31, 2015, in thousands:

	Effective Portion							Ineffective Portion
	Recognized in OCI			Reclassified from AOCI into Income				Recognized in Income on Derivatives
	Amount of Gain (Loss)			Category	Amount of Gain (Loss)			Category	Amount of Gain (Loss)
Three Months Ended March 31, 2016
Interest rate swap	$	43		Interest Expense	$	(44	)	Other Income	$	—
Interest rate swap	(661		)	Interest Expense	(109		)	Other Income	—
Interest rate swap	93			Interest Expense	(142		)	Other Income	—
Interest rate swap	(309		)	Interest Expense	(155		)	Other Income	—
Interest rate swap	(140		)	Interest Expense	(27		)	Other Income	—
Interest rate swap	(136		)	Interest Expense	(29		)	Other Income	—
Interest rate swap	(898		)	Interest Expense	—			Other Income	—
Interest rate swap	(909		)	Interest Expense	—			Other Income	—
Three Months Ended March 31, 2015
Interest rate swap	$	39		Interest Expense	$	(57	)	Other Income	$	—
Interest rate swap	(376		)	Interest Expense	(126		)	Other Income	—
Interest rate swap	45			Interest Expense	(151		)	Other Income	—
Interest rate swap	(184		)	Interest Expense	(160		)	Other Income	—
Interest rate swap	(108		)	Interest Expense	(35		)	Other Income	—
Interest rate swap	(106		)	Interest Expense	(35		)	Other Income	—
Interest rate swap	(93		)	Interest Expense	—			Other Income	—
Interest rate swap	(107		)	Interest Expense	—			Other Income	—

Fair Value Hedge

Heartland uses interest rate swaps to convert certain long term fixed rate loans to floating rates to hedge interest rate risk exposure. Heartland uses hedge accounting in accordance with ASC 815, with the unrealized gains and losses, representing the change in fair value of the derivative and the change in fair value of the risk being hedged on the related loan, being recorded in the consolidated statements of income. The ineffective portions of the unrealized gains or losses, if any, are recorded in interest income and interest expense in the consolidated statements of income. Heartland uses statistical regression to assess hedge effectiveness, both at the inception of the hedge as well as on a continual basis. The regression analysis involves regressing the periodic change in fair value of the hedging instrument against the periodic changes in the fair value of the asset being hedged due to changes in the hedge risk.

During the second quarter of 2015, Heartland entered into an interest rate swap, paying a fixed interest rate of 3.40% to the counterparty and receiving a variable interest rate from the same counterparty based on one month LIBOR plus .88% calculated on a notional amount of $13.8 million. In the fourth quarter of 2015, Heartland acquired undesignated interest rate swaps with the Premier Valley Bank transaction. These swaps were classified as undesignated interest rate swaps at December 31, 2015. During the first quarter of 2016, Heartland was able to designate some of these interest rate swaps with long term fixed rate loans and now classifies these interest rate swaps as fair value hedges and uses hedge accounting in accordance with ASC 815. Heartland was required to pledge $6.5 million of cash and securities as collateral as of March 31, 2016.

The table below identifies the notional amount, fair value and balance sheet category of Heartland's fair value hedges at March 31, 2016 and December 31, 2015, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category
March 31, 2016
Fair value hedges	$	41,391	$	(4,053	)	Other Liabilities
December 31, 2015
Fair value hedges	$	13,805	$	(621	)	Other Liabilities

The table below identifies the gains and losses recognized on Heartland's fair value hedges for the three month periods ended March 31, 2016, and March 31, 2015, in thousands:

	Amount of Gain (Loss)			Category
Three Months Ended March 31, 2016
Fair value hedges	$	(1,222	)	Interest Income
Three Months Ended March 31, 2015
Fair value hedges	$	—		Interest Income

Embedded Derivatives

Heartland acquired fixed rate loans with embedded derivatives in the Premier Valley Bank transaction during the fourth quarter of 2015. The loans contain terms that affect the cash flows or value of the loan similar to a derivative instrument, and therefore are considered to contain an embedded derivative. The embedded derivatives are bifurcated from the loans because the terms of the derivative instrument are not clearly and closely related to the loans. The embedded derivatives are recorded at fair value on the consolidated balance sheets as a part of other assets, and changes in the fair value are a component of noninterest income. The table below identifies the notional amount, fair value and balance sheet category of Heartland's embedded derivatives at March 31, 2016 and December 31, 2015, in thousands:

	Notional Amount		Fair Value		Balance Sheet Category	Income Statement Category	Year-to-Date Gain (Loss) Recognized
March 31, 2016
Embedded derivatives	$	14,903	$	1,846	Other assets	Other noninterest income	$	272
December 31, 2015
Embedded derivatives	$	15,020	$	1,574	Other assets	Other noninterest income	$	—

In conjunction with the CIC Bancshares, Inc., transaction on February 5, 2016, Heartland acquired convertible subordinated debt. The subordinated debt has a face value of $2.0 million, and the embedded conversion option allows the holder to convert the debt

to equity in any increment. The conversion option is bifurcated from the debt because the terms of the conversion option are not clearly and closely related to the terms of the debt. The total number of shares to be issued upon conversion is 73,394. The embedded conversion option is reported at fair value on the consolidated balance sheets using the Black-Scholes model. The following table identifies, in thousands, the notional amount, fair value, balance sheet category and income statement category for the change in fair value of the convertible debt option as of March 31, 2016:

	Notional Amount		Fair Value			Balance Sheet Category	Income Statement Category	Year-to-Date Gain (Loss) Recognized
March 31, 2016
Embedded conversion option	$	2,000	$	(422	)	Other Liabilities	Other noninterest income	$	(100	)

Back-To-Back Loan Swaps

During 2015, Heartland began entering into interest rate swap loan relationships with customers to meet their financing needs. Upon entering into these loan swaps, Heartland enters into offsetting positions with counterparties in order to minimize interest rate risk. These back-to-back loan swaps qualify as free standing financial derivatives with the fair values reported in other assets and other liabilities on the consolidated balance sheets. Heartland was required to post $780,000 and $0 as of March 31, 2016 and December 31, 2015, respectively, as collateral related to these back-to-back swaps. Any gains and losses on these back-to-back swaps are recorded in noninterest income on the consolidated statement of income, and for the three months ended March 31, 2016, no gain or loss was recognized. The table below identifies the balance sheet category and fair values of Heartland's derivative instruments designated as loan swaps at March 31, 2016 and December 31, 2015, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category	Weighted Average Receive Rate		Weighted Average Pay Rate
March 31, 2016
Receive fixed-pay floating interest rate swap	$	33,028	$	2,356		Other Assets	4.97	%	3.16	%
Pay fixed-receive floating interest rate swap	33,028		(2,356		)	Other Liabilities	3.16	%	4.97	%
December 31, 2015
Receive fixed-pay floating interest rate swap	15,782		663			Other Assets	5.08	%	3.07	%
Pay fixed-receive floating interest rate swap	15,782		(663		)	Other Liabilities	3.07	%	5.08	%

Other Free Standing Derivatives

Heartland has entered into interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans and mortgage backed securities that are considered derivative instruments. Heartland enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on the commitments to fund the loans as well as on residential mortgage loans available for sale. The fair value of these commitments is recorded on the consolidated balance sheets, with the changes in fair value recorded in the consolidated statements of income as a component of gains on sale of loans held for sale. These derivative contracts are designated as free standing derivative contracts and are not designated against specific assets and liabilities on the consolidated balance sheets or forecasted transactions and therefore do not qualify for hedge accounting treatment.

Heartland acquired undesignated interest rate swaps with the Premier Valley Bank transaction in the fourth quarter of 2015. These swaps were entered into primarily for the benefit of customers seeking to manage their interest rate risk and are not designated against specific assets or liabilities on the consolidated balance sheet or forecasted transactions and therefore do not qualify for hedge accounting in accordance with ASC 815. These swaps are carried at fair value on the consolidated balance sheets as a component of other liabilities, with changes in the fair value recorded as a component of noninterest income.

The table below identifies the balance sheet category and fair values of Heartland's other free standing derivative instruments not designated as hedging instruments at March 31, 2016, and December 31, 2015, in thousands:

	Balance Sheet Category	Notional Amount		Fair Value
March 31, 2016
Interest rate lock commitments (mortgage)	Other Assets	$	153,073	$	6,956
Forward commitments	Other Assets	61,000		343
Forward commitments	Other Liabilities	258,183		(1,623		)
Undesignated interest rate swaps	Other Liabilities	23,005		(2,159		)
December 31, 2015
Interest rate lock commitments (mortgage)	Other Assets	$	99,665	$	3,168
Forward commitments	Other Assets	118,378		523
Forward commitments	Other Liabilities	136,709		(315		)
Undesignated interest rate swaps	Other Liabilities	50,975		(3,677		)

The table below identifies the income statement category of the gains and losses recognized in income on Heartland's other free standing derivative instruments not designated as hedging instruments for the three months ended March 31, 2016, and March 31, 2015, in thousands:

	Income Statement Category	Gain (Loss) Recognized
Three Months Ended March 31, 2016
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	4,727
Forward commitments	Gains on sale of loans held for sale	(1,489		)
Undesignated interest rate swaps	Other noninterest income	(316		)
Three Months Ended March 31, 2015
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	5,544
Forward commitments	Gains on sale of loans held for sale	(125		)
Undesignated interest rate swaps	Other noninterest income	—

NOTE 8: FAIR VALUE

Heartland utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, trading securities and derivatives are recorded in the consolidated balance sheets at fair value on a recurring basis. Additionally, from time to time, Heartland may be required to record at fair value other assets on a nonrecurring basis such as loans held for sale, loans held to maturity and certain other assets including, but not limited to, mortgage servicing rights, commercial servicing rights and other real estate owned. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.

Fair Value Hierarchy

Under ASC 820, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 — Valuation is based upon quoted prices for identical instruments in active markets.

Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, or similar instruments in markets that are not active, and model-based valuation techniques for all significant assumptions are observable in the market.

Level 3 — Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring or non-recurring basis.

Assets

Securities Available for Sale and Held to Maturity

Securities available for sale are recorded at fair value on a recurring basis. Securities held to maturity are generally recorded at cost and are recorded at fair value only to the extent a decline in fair value is determined to be other-than-temporary. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury securities. Level 2 securities include U.S. government and agency securities, mortgage-backed securities and private collateralized mortgage obligations, municipal bonds and corporate debt securities. Level 3 securities consist primarily of Z-TRANCHE mortgage-backed securities and corporate debt securities. On a quarterly basis, a secondary independent pricing service is used for a sample of securities to validate the pricing from Heartland's primary pricing service.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or fair value on an aggregate basis. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, Heartland classifies loans held for sale subjected to nonrecurring fair value adjustments as Level 2.

Loans Held to Maturity

Heartland does not record loans held to maturity at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310. The fair value of impaired loans is measured using one of the following impairment methods: 1) the present value of expected future cash flows discounted at the loan's effective interest rate or 2) the observable market price of the loan or 3) the fair value of the collateral if the loan is collateral dependent. In accordance with ASC 820, impaired loans measured at fair value are classified as nonrecurring Level 3 in the fair value hierarchy.

Premises, furniture and equipment held for sale

Heartland values premises, furniture and equipment held for sale based on third-party appraisals less estimated disposal costs. Heartland considers third party appraisals, as well as independent fair value assessments from realtors or persons involved in selling bank premises, furniture and equipment, in determining the fair value of particular properties. Accordingly, the valuation of premises, furniture and equipment held for sale is subject to significant external and internal judgment. Heartland periodically reviews premises, furniture and equipment held for sale to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. Premises, furniture and equipment held for sale are classified as nonrecurring Level 3 in the fair value hierarchy.

Mortgage Servicing Rights

Mortgage servicing rights assets represent the value associated with servicing residential real estate loans that have been sold to outside investors with servicing retained. Heartland uses the amortization method (i.e., the lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, to determine the carrying value of its mortgage servicing rights. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates, prepayment speeds and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. Mortgage servicing rights are subject to impairment testing. The carrying values of these rights are reviewed quarterly for impairment based upon the calculation of fair value as performed by an outside third party. For purposes of measuring impairment, the rights are stratified into certain risk characteristics including note type and note term. If the valuation model reflects a fair value less than the carrying value, mortgage servicing rights are adjusted to fair value through a valuation allowance. Heartland classifies mortgage servicing rights as nonrecurring with Level 3 measurement inputs.

Commercial Servicing Rights

Commercial servicing rights assets represent the value associated with servicing commercial loans that have been sold to the Small Business Administration and the United States Department of Agriculture with servicing retained by Heartland. Heartland uses the amortization method (i.e., the lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, to determine the carrying value of its commercial servicing rights. The fair value for servicing assets is determined through market prices for comparable servicing contracts, when available, or through a valuation model that calculates the present value of estimated future net servicing income. Inputs utilized include discount rates, prepayment speeds and

delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. Commercial servicing rights are subject to impairment testing, and the carrying values of these rights are reviewed quarterly for impairment based upon the calculation of fair value as performed by an outside third party. If the valuation model reflects a fair value less than the carrying value, commercial servicing rights are adjusted to fair value through a valuation allowance. Heartland classifies commercial servicing rights as nonrecurring with Level 3 measurement inputs.

Derivative Financial Instruments

Heartland's current interest rate risk strategy includes interest rate swaps. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. To comply with the provisions of ASC 820, Heartland incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, Heartland has considered the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although Heartland has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2016, and December 31, 2015, Heartland has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, Heartland has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Interest rate lock commitments

Heartland uses an internal valuation model that relies on internally developed inputs to estimate the fair value of its interest rate lock commitments which is based on unobservable inputs that reflect management's assumptions and specific information about each borrower. Interest rate lock commitments are classified in Level 3 of the fair value hierarchy.

Forward commitments

The fair value of forward commitments are estimated using an internal valuation model, which includes current trade pricing for similar financial instruments in active markets that Heartland has the ability to access and are classified in Level 2 of the fair value hierarchy.

Other Real Estate Owned

Other real estate owned ("OREO") represents property acquired through foreclosures and settlements of loans. Property acquired is carried at the fair value of the property at the time of acquisition (representing the property's cost basis), plus any acquisition costs, or the estimated fair value of the property, less disposal costs. Heartland considers third party appraisals, as well as independent fair value assessments from realtors or persons involved in selling OREO, in determining the fair value of particular properties. Accordingly, the valuation of OREO is subject to significant external and internal judgment. Heartland periodically reviews OREO to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. OREO is classified as nonrecurring Level 3 of the fair value hierarchy.

The table below presents Heartland's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2016, and December 31, 2015, in thousands, aggregated by the level in the fair value hierarchy within which those measurements fall:

	Total Fair Value		Level 1		Level 2		Level 3
March 31, 2016
Assets
Securities available for sale
U.S. government corporations and agencies	$	6,619	$	531	$	6,088	$	—
Mortgage-backed securities	1,388,687		—		1,386,913		1,774
Obligations of states and political subdivisions	281,003		—		281,003		—
Corporate debt securities	830		—		500		330
Equity securities	13,377		—		13,377		—
Derivative financial instruments(1)	4,202		—		4,202		—
Interest rate lock commitments	6,956		—		—		6,956
Forward commitments	343		—		343		—
Total assets at fair value	$	1,702,017	$	531	$	1,692,426	$	9,060
Liabilities
Derivative financial instruments(2)	$	15,347	$	—	$	15,347	$	—
Forward commitments	1,623		—		1,623		—
Total liabilities at fair value	$	16,970	$	—	$	16,970	$	—
December 31, 2015
Assets
Securities available for sale
U.S. government corporations and agencies	$	25,766	$	519	$	25,247	$	—
Mortgage-backed securities	1,242,702		—		1,240,663		2,039
Obligations of states and political subdivisions	295,982		—		295,982		—
Corporate debt securities	846		—		—		846
Equity securities	13,138		—		13,138		—
Derivative financial instruments(1)	2,237		—		2,237		—
Interest rate lock commitments	3,168		—		—		3,168
Forward commitments	523		—		523		—
Total assets at fair value	$	1,584,362	$	519	$	1,577,790	$	6,053
Liabilities
Derivative financial instruments(2)	$	8,401	$	—	$	8,401	$	—
Forward commitments	315		—		315		—
Total liabilities at fair value	$	8,716	$	—	$	8,716	$	—
(1) Includes embedded derivatives and loans swaps
(2) Includes cash flow hedges, fair value hedges, loan swaps, embedded conversion options and free standing derivative instruments

The tables below present Heartland's assets that are measured at fair value on a nonrecurring basis, in thousands:

	Fair Value Measurements at March 31, 2016
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	1,344	$	—	$	—	$	1,344	$	—
Commercial real estate	2,609		—		—		2,609		—
Agricultural and agricultural real estate	—		—		—		—		—
Residential real estate	3,168		—		—		3,168		—
Consumer	2,010		—		—		2,010		—
Total collateral dependent impaired loans	$	9,131	$	—	$	—	$	9,131	$	—
Other real estate owned	$	11,338	$	—	$	—	$	11,338	$	237
Premises, furniture and equipment held for sale	$	3,889	$	—	$	—	$	3,889	$	—

	Fair Value Measurements at December 31, 2015
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	597	$	—	$	—	$	597	$	82
Commercial real estate	1,522		—		—		1,522		86
Agricultural and agricultural real estate	—		—		—		—		—
Residential real estate	2,330		—		—		2,330		104
Consumer	1,905		—		—		1,905		—
Total collateral dependent impaired loans	$	6,354	$	—	$	—	$	6,354	$	272
Other real estate owned	$	11,524	$	—	$	—	$	11,524	$	5,520
Premises, furniture and equipment held for sale	$	3,889	$	—	$	—	$	3,889	$	—

The following tables present additional quantitative information about assets measured at fair value and for which Heartland has utilized Level 3 inputs to determine fair value, in thousands:

	Fair Value at 3/31/16		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	1,774	Discounted cash flows	Pretax discount rate	7.50 - 9.50%
				Actual defaults	22.07 - 34.19% (31.03%)
				Actual deferrals	10.67 - 20.53% (13.21%)
Corporate debt securities	330		Discounted cash flows	Bank analysis	(1)
Interest rate lock commitments	6,956		Discounted cash flows	Closing ratio	(2)
Premises, furniture and equipment held for sale	3,889		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Other real estate owned	11,338		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Collateral dependent impaired loans:
Commercial	1,344		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Commercial real estate	2,609		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Agricultural and agricultural real estate	—		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Residential real estate	3,168		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Consumer	2,010		Modified appraised value	Third party valuation	(3)
				Valuation discount	(3)
(1) The unobservable input is the bank analysis market using Moody's Global Bank Rating Methodology. The analysis takes into consideration various performance metrics as well as yield on the debt securities and credit risk analysis.
(2) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at March 31, 2016, was 88%.
(3) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

	Fair Value at 12/31/15		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	2,039	Discounted cash flows	Pretax discount rate	7.50 - 9.50%
				Actual defaults	22.20 - 33.55% (30.60%)
				Actual deferrals	10.75 - 21.82% (13.36%)
Corporate debt securities	846		Discounted cash flows	Bank analysis	(1)
Interest rate lock commitments	3,168		Discounted cash flows	Closing ratio	(2)
Premises, furniture and equipment held for sale	3,889		Modified appraised value	Third party appraisal	(3)
Other real estate owned	11,524		Modified appraised value	Disposal costs	(3)
				Third party appraisal	(3)
				Appraisal discount	(3)
Collateral dependent impaired loans:
Commercial	597		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Commercial real estate	1,522		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Agricultural and agricultural real estate	—		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Residential real estate	2,330		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Consumer	1,905		Modified appraised value	Third party valuation	(3)
				Valuation discount	(3)
(1) The unobservable input is the bank analysis market using Moody's Global Bank Rating Methodology. The analysis takes into consideration various performance metrics as well as yield on the debt securities and credit risk analysis.
(2) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at December 31, 2015, was 86%.
(3) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

The changes in fair value of the Z-TRANCHE, a Level 3 asset, that is measured on a recurring basis are summarized in the following table, in thousands:

	For the Three Months Ended March 31, 2016			For the Year Ended December 31, 2015
Balance at January 1,	$	2,039		$	4,947
Total gains (losses):
Included in earnings	—			(3,038		)
Included in other comprehensive income	(265		)	982
Purchases, sales and settlements:
Purchases	—			6
Sales	—			(736		)
Settlements	—			(122		)
Balance at period end	$	1,774		$	2,039

The changes in fair value of the corporate debt securities, Level 3 assets, that are measured on a recurring basis is summarized in the following table, in thousands:

	For the Three Months Ended March 31, 2016			For the Year Ended December 31, 2015
Balance at January 1,	$	846		$	—
Total gains (losses):
Included in earnings	121			—
Included in other comprehensive income	(91		)	106
Purchases, acquired, sales and settlements:
Purchases	—			—
Acquired	—			740
Sales	(546		)	—
Settlements	—			—
Balance at period end	$	330		$	846

The changes in fair value of the interest rate lock commitments, which are Level 3 financial instruments and are measured on a recurring basis, are summarized in the following table, in thousands:

	For the Three Months Ended March 31, 2016			For the Year Ended December 31, 2015
Balance at January 1,	$	3,168		$	2,496
Total gains (losses) included in earnings	4,727			288
Issuances	138			5,428
Settlements	(1,077		)	(5,044		)
Balance at period end	$	6,956		$	3,168

Gains included in gains (losses) on sale of loans held for sale attributable to interest rate lock commitments held at March 31, 2016, and December 31, 2015, were $7.0 million and $3.2 million, respectively.

The tables below summarize the estimated fair value of Heartland's financial instruments as defined by ASC 825 as of March 31, 2016, and December 31, 2015, in thousands. The carrying amounts in the following tables are recorded in the consolidated balance sheets under the indicated captions. In accordance with ASC 825, the assets and liabilities that are not financial instruments are not included in the disclosure, such as the value of the mortgage servicing rights, premises, furniture and equipment, premises, furniture and equipment held for sale, goodwill and other intangibles and other liabilities.

Heartland does not believe that the estimated information presented herein is representative of the earnings power or value of Heartland. The following analysis, which is inherently limited in depicting fair value, also does not consider any value associated with either existing customer relationships or the ability of Heartland to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and

assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

					Fair Value Measurements at March 31, 2016
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	133,228	$	133,228	$	133,228	$	—	$	—
Time deposits in other financial institutions	2,355		2,355		2,355		—		—
Securities:
Available for sale	1,690,516		1,690,516		531		1,687,881		2,104
Held to maturity	271,300		289,446		—		289,446		—
Other investments	22,325		22,325		—		22,090		235
Loans held for sale	76,565		76,565		—		76,565		—
Loans, net:
Commercial	1,278,343		1,271,778		—		1,270,434		1,344
Commercial real estate	2,533,220		2,533,017		—		2,530,408		2,609
Agricultural and agricultural real estate	467,844		473,559		—		473,559		—
Residential real estate	750,219		749,749		—		746,581		3,168
Consumer	423,641		428,805		—		426,795		2,010
Total Loans, net	5,453,267		5,456,908		—		5,447,777		9,131
Derivative financial instruments (1)	4,202		4,202		—		4,202		—
Interest rate lock commitments	6,956		6,956		—		—		6,956
Forward commitments	343		343		—		343		—
Financial liabilities:
Deposits
Demand deposits	2,079,521		2,079,521		—		2,079,521		—
Savings deposits	3,702,431		3,702,431		—		3,702,431		—
Time deposits	1,142,368		1,142,368		—		1,142,368		—
Short term borrowings	325,741		325,741		—		325,741		—
Other borrowings	265,760		267,812		—		267,812		—
Derivative financial instruments (2)	15,347		15,347		—		15,347		—
Forward commitments	1,623		1,623		—		1,623		—
(1) Includes embedded derivatives and loan swaps
(2) Includes cash flow hedges, fair value hedges, loan swaps, embedded conversion options and free standing derivative instruments

					Fair Value Measurements at December 31, 2015
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	258,799	$	258,799	$	258,799	$	—	$	—
Time deposits in other financial institutions	2,355		2,355		2,355		—		—
Securities:
Available for sale	1,578,434		1,578,434		519		1,575,030		2,885
Held to maturity	279,117		294,513		—		294,513		—
Other investments	21,443		21,443		—		21,208		235
Loans held for sale	74,783		74,783		—		74,783		—
Loans, net:
Commercial	1,262,612		1,257,355		—		1,256,758		597
Commercial real estate	2,305,908		2,304,716		—		2,303,194		1,522
Agricultural and agricultural real estate	468,533		469,485		—		469,485		—
Residential real estate	536,190		531,931		—		529,601		2,330
Consumer	379,558		382,579		—		380,674		1,905
Total Loans, net	4,952,801		4,946,066		—		4,939,712		6,354
Derivative financial instruments (1)	2,237		2,237		—		2,237		—
Interest rate lock commitments	3,168		3,168		—		—		3,168
Forward commitments	523		523		—		523		—
Financial liabilities:
Deposits
Demand deposits	1,914,141		1,914,141		—		1,914,141		—
Savings deposits	3,367,479		3,367,479		—		3,367,479		—
Time deposits	1,124,203		1,124,203		—		1,124,203		—
Short term borrowings	293,898		293,898		—		293,898		—
Other borrowings	263,214		281,271		—		281,271		—
Derivative financial instruments (2)	8,401		8,401		—		8,401		—
Forward commitments	315		315		—		315		—
(1) Includes embedded derivatives and loan swaps
(2) Includes cash flow hedges, fair value hedges, loan swaps and free standing derivative instruments

Cash and Cash Equivalents — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Time Deposits in Other Financial Institutions — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Securities —For securities either held to maturity, available for sale or trading, fair value equals quoted market price if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. For Level 3 securities, Heartland utilizes independent pricing provided by third party vendors or brokers.

Other Investments — Fair value measurement of other investments, which consists primarily of FHLB stock, are based on their redeemable value, which is at cost due to the restrictions placed on their transferability. The market for these securities is restricted to the issuer of the stock and subject to impairment evaluation.

Loans and Leases — The fair value of loans is estimated using an entrance price concept by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of impaired loans is measured using the fair value of the underlying collateral. The fair value of loans held for sale is estimated using quoted market prices.

Interest Rate Lock Commitments — The fair value of interest rate lock commitments is estimated using an internal valuation model, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated closing ratio based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment group.

Forward Commitments — The fair value of these instruments is estimated using an internal valuation model, which includes current trade pricing for similar financial instruments.

Derivative Financial Instruments — The fair value of all derivatives is estimated based on the amount that Heartland would pay or would be paid to terminate the contract or agreement, using current rates and prices, and, when appropriate, the current creditworthiness of the counter-party.

Deposits — The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. If the fair value of the fixed maturity certificates of deposit is calculated at less than the carrying amount, the carrying value of these deposits is reported as the fair value.

Short-term and Other Borrowings—Rates currently available to Heartland for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Commitments to Extend Credit, Unused Lines of Credit and Standby Letters of Credit — Based upon management's analysis of the off balance sheet financial instruments, there are no significant unrealized gains or losses associated with these financial instruments based upon review of the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.

NOTE 9: SEGMENT REPORTING

Heartland has identified two operating segments for purposes of financial reporting: community and other banking, and retail mortgage banking. These segments were determined based on the products and services provided or the type of customers served and are consistent with the information used by Heartland's key decision makers to make operating decisions and to assess Heartland's performance. The following tables present financial information from Heartland's operating segments for the three months ended March 31, 2016, and March 31, 2015, in thousands.

	Three Months Ended March 31,
	2016						2015
	Community and Other Banking		Retail Mortgage Banking		Total		Community and Other Banking		Retail Mortgage Banking		Total
Net interest income	$	71,583	$	1,124	$	72,707	$	52,889	$	1,041	$	53,930
Provision for loan losses	2,067		—		2,067		1,671		—		1,671
Total noninterest income	18,537		11,041		29,578		17,061		13,602		30,663
Total noninterest expense	59,739		10,570		70,309		47,459		12,155		59,614
Income before taxes	$	28,314	$	1,595	$	29,909	$	20,820	$	2,488	$	23,308
Average Loans, for the period	$	5,296,191	$	61,911	$	5,358,102	$	4,189,966	$	77,627	$	4,267,593
Segment Assets, at period end	$	8,141,960	$	111,819	$	8,253,779	$	6,365,682	$	140,594	$	6,506,276

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SAFE HARBOR STATEMENT

This document (including any information incorporated herein by reference) contains, and future oral and written statements of Heartland and its management may contain, forward-looking statements within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of Heartland. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of Heartland's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Although Heartland has made these statements based on management's experience and best estimate of future events, there may be events or factors that management has not anticipated, and the accuracy and achievement of such forward-looking statements and estimates are subject to a number of risks, including those identified in our Annual Report on Form 10-K for the year ended December 31, 2015. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and Heartland undertakes no obligation to update any statement in light of new information or future events.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances. Among other things, the estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes have the most effect on Heartland's reported financial position and results of operations are described as critical accounting policies in Heartland's Annual Report on Form 10-K for the year ended December 31, 2015. There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since the year ended December 31, 2015.

OVERVIEW

Heartland's results of operations depend primarily on net interest income, which is the difference between interest income from interest earning assets and interest expense on interest bearing liabilities. Noninterest income, which includes service charges and fees, loan servicing income, trust income, brokerage and insurance commissions, securities gains and gains on sale of loans held for sale, also affects Heartland's results of operations. Heartland's principal operating expenses, aside from interest expense, consist of the provision for loan and lease losses, salaries and employee benefits, occupancy and equipment costs, professional fees, FDIC insurance premiums, advertising and other real estate and loan collection expenses.

Net income available to common stockholders for the quarter ended March 31, 2016, was $19.8 million, or $0.82 per diluted common share, compared to $15.5 million, or $0.76 per diluted common share, for the quarter ended March 31, 2015. Return on average common equity was 12.68% and return on average assets was 0.99% for the first quarter of 2016, compared to 13.58% and 0.97%, respectively, for the same quarter in 2015.

Acquisitions were a significant contributing factor to the improved net income during the first quarter of 2016. Heartland's earning assets during the first quarter of 2016 were $7.28 billion in comparison with $5.86 billion during the first quarter of 2015, a $1.42 billion or 24% increase. This growth resulted in an increase of $18.8 million or 35% in net interest income, the effect of which was partially offset by a $10.7 million or 18% increase in noninterest expense.

On February 5, 2016, Heartland completed the acquisition of CIC Bancshares, Inc., parent company of Centennial Bank, headquartered in Denver, Colorado, in a transaction valued at approximately $76.9 million. Of this amount, approximately $15.7 million was paid in cash and the remainder of the consideration was provided by the issuance of 2,003,235 shares of Heartland common stock and 3,000 shares of newly issued Heartland Series D preferred stock. In addition, Heartland assumed convertible notes and subordinated debt totaling approximately $7.9 million. Simultaneous with closing of the transaction, Centennial Bank merged into Heartland’s Summit Bank & Trust subsidiary, with the resulting institution operating under the name Centennial Bank and Trust. As of the closing date, Centennial Bank had, at fair value, total assets of $772.6 million, total loans of $581.5 million and total deposits of $648.1 million. The systems conversion for this transaction is expected to occur during the second quarter of 2016.

On March 15, 2016, Heartland redeemed all of the 81,698 shares of its Series C Preferred Stock issued to the U.S. Treasury as part of the Small Business Lending Fund program. The aggregate redemption price was approximately $81.9 million, including dividends accrued but unpaid through the redemption date, and was paid with available funds. The redemption terminated Heartland's participation in the Small Business Lending Fund program.

Total assets of Heartland were $8.25 billion at March 31, 2016, an increase of $559.0 million or 7% since year-end 2015. Included in this increase, at fair value, were $772.6 million of assets acquired in the CIC Bancshares, Inc. transaction. Securities represented 24% of total assets at both March 31, 2016, and December 31, 2015.

Total loans and leases held to maturity were $5.50 billion at March 31, 2016, compared to $5.00 billion at year-end 2015, an increase of $501.5 million or 10%. This increase includes $581.5 million of total loans and leases held to maturity, at fair value, acquired in the CIC Bancshares, Inc. transaction.

Total deposits were $6.92 billion as of March 31, 2016, compared to $6.41 billion at year-end 2015, an increase of $518.5 million or 8%. This increase includes $648.1 million of deposits, at fair value, acquired in the CIC Bancshares, Inc. transaction. Demand deposits totaled $2.08 billion at March 31, 2016, an increase of $165.4 million or 9% since year-end 2015, with $164.3 million of the increase attributable to the CIC Bancshares, Inc. transaction.

Common stockholders' equity was $665.8 million at March 31, 2016, compared to $581.5 million at year-end 2015. Book value per common share was $27.15 at March 31, 2016, compared to $25.92 at year-end 2015. Heartland's unrealized gains on securities available for sale and derivative instruments, net of applicable taxes, were $1.9 million at March 31, 2016, compared to a $6.0 million loss at December 31, 2015.

RESULTS OF OPERATIONS

Net Interest Income

Net interest margin, expressed as a percentage of average earning assets, was 4.19% during the first quarter of 2016, compared to 3.99% during the fourth quarter of 2015 and 3.90% during the first quarter of 2015. Heartland's success in maintaining net interest margin at the 4.00% level is the result of continuous loan and deposit pricing discipline and management's ability to shift dollars from the securities portfolio into the loan portfolio. Contributing to the improved net interest margin during the most recent quarters has been the amortization of purchase accounting discounts associated with the acquisitions completed during the last half of 2015 and first quarter of 2016.

Interest income for the first quarter of 2016 was $80.7 million, an increase of $17.6 million or 28%, compared to the $63.1 million recorded in the first quarter of 2015. The tax-equivalent adjustment for income taxes saved on the interest earned on nontaxable securities and loans was $3.0 million for the first quarter of 2016 and $2.4 million for the first quarter of 2015. With these adjustments, interest income on a tax-equivalent basis was $83.7 million for the first quarter of 2016, an increase of $18.2 million or 28%, compared to $65.5 million for the first quarter of 2015. The increase in interest income in the first quarter of 2016, as compared to the first quarter of 2015, was primarily due to an increase in average earning assets, which totaled $7.28 billion during the first quarter of 2016 compared to $5.86 billion during the first quarter of 2015, a $1.42 billion or 24% increase. A majority of this growth was attributable to the three acquisitions completed during last half of 2015, in addition to the CIC Bancshares, Inc. acquisition completed in February 2016.

Interest expense for the first quarter of 2016 was $8.0 million, a decrease of $1.2 million or 13% from $9.2 million in the first quarter of 2015. Average interest bearing liabilities increased $875.0 million or 20% for the quarter ended March 31, 2016, as compared to the same quarter in 2015, while the average interest rate paid on Heartland's interest bearing deposits and borrowings declined 24 basis points from 0.85% in the first quarter of 2015 to 0.61% in the first quarter of 2016. The average interest rate paid on savings deposits was 0.21% during the first quarter of 2016 compared to 0.26% during the first quarter of 2015, and the average interest rate paid on time deposits was 0.80% during the first quarter of 2016 compared to 1.09% during the first quarter of 2015.

Net interest income increased $18.8 million or 35% to $72.7 million in the first quarter of 2016 from $53.9 million in the first quarter of 2015. Net interest income on a tax-equivalent basis totaled $75.7 million during the first quarter of 2016, an increase of $19.4 million or 34% from $56.3 million during the first quarter of 2015. Net interest income in dollars has increased steadily for each of the last fourteen quarters.

Heartland attempts to manage its balance sheet to minimize the effect that a change in interest rates has on its net interest margin. Heartland plans to continue to work toward improving both its earning assets and funding mix through targeted organic growth

strategies, which management believes will result in additional net interest income. Heartland believes its net interest income simulations reflect a well-balanced and manageable interest rate position. Approximately 33% of Heartland's commercial and agricultural loan portfolios consist of floating rate loans that reprice based upon changes in the national prime or LIBOR interest rate. Since nearly 41% of these floating rate loans have interest rate floors that are currently in effect, an upward movement in the national prime interest rate or LIBOR would not have an immediate positive effect on Heartland's interest income. Item 3 of Part I of this Form 10-Q report contains additional information about the results of Heartland's most recent net interest income simulations. Note 7 to the quarterly consolidated financial statements contains a detailed discussion of the derivative instruments Heartland has utilized to manage its interest rate risk.

The following table sets forth certain information relating to Heartland's average consolidated balance sheets and reflects the yield on average earning assets and the cost of average interest bearing liabilities for the periods indicated, in thousands. Dividing income or expense by the average balance of assets or liabilities derives such yields and costs. Average balances are derived from daily balances, and nonaccrual loans and loans held for sale are included in each respective loan category. Assets with tax favorable treatment are evaluated on a tax-equivalent basis assuming a federal income tax rate of 35%. Tax favorable assets generally have lower contractual pre-tax yields than fully taxable assets. A tax-equivalent yield is calculated by adding the tax savings to the interest earned on tax favorable assets and dividing this amount by the average balance of the tax favorable assets.

ANALYSIS OF AVERAGE BALANCES, TAX-EQUIVALENT YIELDS AND RATES(1) For the Three Months Ended March 31, 2016 and 2015
	2016							2015
	Average Balance			Interest		Rate		Average Balance			Interest		Rate
Earning Assets
Securities:
Taxable	$	1,508,432		$	8,735	2.33	%	$	1,283,509		$	7,132	2.25	%
Nontaxable(1)	417,224			5,400		5.21		331,339			4,486		5.49
Total securities	1,925,656			14,135		2.95		1,614,848			11,618		2.92
Interest bearing deposits	11,634			4		0.14		9,194			4		0.18
Federal funds sold	31,126			10		0.13		7,617			1		0.05
Loans and leases:(2)
Commercial and commercial real estate(1)	3,743,940			46,754		5.02		3,023,204			35,875		4.81
Residential mortgage	734,134			7,599		4.16		478,948			4,883		4.13
Agricultural and agricultural real estate(1)	467,978			5,729		4.92		418,251			5,030		4.88
Consumer	412,050			7,923		7.73		347,190			6,888		8.05
Fees on loans				1,571		—		—			1,196		—
Less: allowance for loan and lease losses	(49,815		)	—		—		(42,048		)	—		—
Net loans and leases	5,308,287			69,576		5.27		4,225,545			53,872		5.17
Total earning assets	7,276,703			83,725		4.63	%	5,857,204			65,495		4.53	%
Nonearning Assets	748,367							597,067
Total Assets	$	8,025,070						$	6,454,271
Interest Bearing Liabilities
Savings	$	3,556,207		$	1,894	0.21	%	$	2,830,961		$	1,795	0.26	%
Time, $100,000 and over	498,620			871		0.70		344,360			838		0.99
Other time deposits	642,301			1,408		0.88		536,170			1,539		1.16
Short-term borrowings	311,161			329		0.43		294,756			198		0.27
Other borrowings	264,875			3,475		5.28		391,937			4,802		4.97
Total interest bearing liabilities	5,273,164			7,977		0.61	%	4,398,184			9,172		0.85	%
Noninterest Bearing Liabilities
Noninterest bearing deposits	1,981,882							1,450,291
Accrued interest and other liabilities	74,253							61,050
Total noninterest bearing liabilities	2,056,135							1,511,341
Stockholders' Equity	695,771							544,746
Total Liabilities and Stockholders' Equity	$	8,025,070						$	6,454,271
Net interest income(1)				$	75,748						$	56,323
Net interest spread(1)						4.02	%						3.68	%
Net interest income to total earning assets(1)						4.19	%						3.90	%
Interest bearing liabilities to earning assets	72.47		%					75.09		%
(1)Tax-equivalent basis is calculated using an effective tax rate of 35%.
(2) Nonaccrual loans are included in average loans outstanding.

Provision For Loan And Lease Losses

The allowance for loan and lease losses is established through a provision charged to expense to provide, in Heartland management's opinion, an appropriate allowance for loan and lease losses. The provision for loan losses was $2.1 million for the first quarter of 2016 compared to $1.7 million for the first quarter of 2015.

In determining that the allowance for loan and lease losses is appropriate, management uses factors that include the overall composition of the loan portfolio, general economic conditions, types of loans, loan collateral values, past loss experience, loan

delinquencies, substandard credits, and doubtful credits. For additional details on the specific factors considered, refer to the discussion of critical accounting policies set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Heartland's Annual Report on Form 10-K for the year ended December 31, 2015, and under the caption "Allowance For Loan and Lease Losses" in this Form 10-Q report. Heartland believes the allowance for loan and lease losses as of March 31, 2016, was at a level commensurate with the overall risk exposure of the loan portfolio. However, if economic conditions should become more unfavorable, certain borrowers may experience difficulty and the level of nonperforming loans, charge-offs and delinquencies could rise and require further increases in the provision for loan and lease losses.

Noninterest Income

The tables below show Heartland's noninterest income for the three months ended March 31, 2016 and 2015, in thousands:

	Three Months Ended March 31,
	2016		2015		Change			% Change
Service charges and fees	$	7,162	$	5,404	$	1,758		33	%
Loan servicing income	1,268		1,041		227			22
Trust fees	3,813		3,631		182			5
Brokerage and insurance commissions	1,022		1,087		(65		)	(6	)
Securities gains, net	3,526		4,353		(827		)	(19	)
Net gains on sale of loans held for sale	11,065		13,742		(2,677		)	(19	)
Income on bank owned life insurance	522		524		(2		)	—
Other noninterest income	1,200		881		319			36
Total noninterest income	$	29,578	$	30,663	$	(1,085	)	(4	)%

Noninterest income totaled $29.6 million during the first quarter of 2016 compared to $30.7 million during the first quarter of 2015, a decrease of $1.1 million or 4%. This decrease reflected lower securities gains, net and gains on sale of loans held for sale, the effect of which was partially mitigated by in an increase in services charges and fees.

Service charges and fees totaled $7.2 million during the first quarter of 2016 compared to $5.4 million during the first quarter of 2015, an increase of $1.8 million or 33%. Service charges on checking and savings accounts recorded during the first quarter of 2016 were $1.9 million compared to $1.5 million during the first quarter of 2015, an increase of $424,000 or 29%. Overdraft fees were $2.0 million during the first quarter of 2016 compared to $1.6 million during the first quarter of 2015, an increase of $385,000 or 25%. Interchange revenue from activity on bank debit cards, along with surcharges on ATM activity, resulted in service charges and fees of $2.3 million during the first quarter of 2016 compared to $1.9 million during the first quarter of 2015, an increase of $458,000 or 24%. These increases were primarily attributable to a larger demand deposit customer base, a portion of which is attributable to the acquisitions completed during the last half of 2015 and first quarter of 2016. Fees associated with credit card services were $909,000 during the first quarter of 2016 compared to $365,000 during the first quarter of 2015, an increase of $544,000 or 149%, primarily as a result of efforts to increase the level of credit card services provided at Heartland's subsidiary banks during 2015.

Loan servicing income includes the fees collected for the servicing of commercial, agricultural, and mortgage loans, which are dependent upon the aggregate outstanding balances of these loans, rather than quarterly production and sale of these loans. Loan servicing income totaled $1.3 million during the first quarter of 2016 compared to $1.0 million during the first quarter of 2015. Loan servicing income related to the servicing of commercial and agricultural loans totaled $597,000 during the first quarter of 2016 compared to $721,000 during the first quarter of 2015, a decrease of $124,000 or 17%. Fees collected for the servicing of mortgage loans, primarily for government sponsored entities, were $2.9 million during the first quarter of 2016 compared to $2.5 million during the first quarter of 2015, an increase of $436,000 or 17%. Included in and offsetting loan servicing income is the amortization of capitalized servicing rights, which was $2.3 million during the first quarter of 2016 compared to $2.2 million during the first quarter of 2015, an increase of $84,000 or 4%. The portfolio of mortgage loans serviced primarily for government sponsored entities by Heartland totaled $4.11 billion at March 31, 2016, compared to $3.58 billion at March 31, 2015.

The following table summarizes Heartland's residential mortgage loan activity during the most recent five quarters, in thousands:

	As Of and For the Quarter Ended
	3/31/2016			12/31/2015			9/30/2015			6/30/2015			3/31/2015
Mortgage Servicing Fees	$	2,931		$	2,921		$	2,738		$	2,553		$	2,495
Mortgage Servicing Rights Amortization	(2,259		)	(2,154		)	(2,086		)	(2,186		)	(2,175		)
Total Residential Mortgage Loan Servicing Income	$	672		$	767		$	652		$	367		$	320
Net Gains On Sale of Residential Mortgage Loans	$	10,368		$	6,789		$	8,489		$	14,121		$	13,602
Total Residential Mortgage Loan Applications	$	406,999		$	307,163		$	443,294		$	615,463		$	647,487
Residential Mortgage Loans Originated	$	238,266		$	258,939		$	370,956		$	421,798		$	319,581
Residential Mortgage Loans Sold	$	220,381		$	260,189		$	360,172		$	402,151		$	268,786
Residential Mortgage Loan Servicing Portfolio	$	4,112,519		$	4,057,861		$	3,963,677		$	3,785,794		$	3,578,409

Net gains on sale of loans held for sale totaled $11.1 million during the first quarter of 2016 compared to $13.7 million during the first quarter of 2015, a decrease of $2.6 million or 19%. These gains result primarily from the gain or loss on sales of mortgage loans into the secondary market, related fees and fair value marks on the associated derivatives. Mortgage loan applications were $407.0 million in the first quarter of 2016 compared to $647.5 million in the first quarter of 2015, a decrease of $240.5 million or 37%. The volume of mortgage loans sold totaled $220.4 million during the first quarter of 2016, a $48.4 million or 18% decrease from the $268.8 million sold during the first quarter of 2015. These decreases were attributable to the decreasing interest rate environment during the last quarter of 2014 and first of quarter of 2015 compared to an interest rate environment that remained relatively flat during the last quarter of 2015 and first quarter of 2016. Principally due to the changing interest rate environment, the percentage of residential mortgage loans that represented refinancings was 53% during the first quarter of 2015 compared to 42% during the first quarter of 2016. Net gains on sale of loans held for sale also includes gains on the sale of commercial and agricultural loans, which totaled $697,000 during the first quarter of 2016 compared to $140,000 during the first quarter of 2015. An area of emphasis for the Community Banc-Corp of Sheboygan, Inc. bank branches was the origination for sale of small business loans written under the United States Small Business Administration and United States Department of Agriculture Rural Development Business and Industry loan programs. This focus was the primary reason for the increased gains on sale of commercial and agricultural loans during first quarter of 2016.

Trust fees increased $182,000 or 5% during the first quarter of 2016 compared to the same quarter in 2015. A large portion of trust fees are based upon the market value of the trust assets under management, which was $2.22 billion at March 31, 2016, compared to $1.92 billion at December 31, 2015, and $2.06 billion at March 31, 2015. Those values fluctuate throughout the year as market conditions improve or decline.

Net securities gains totaled $3.5 million during the first quarter of 2016 compared to $4.4 million during the first quarter of 2015, a decrease of $827,000 or 19%.

Other noninterest income was $1.2 million during the first quarter of 2016 compared to $881,000 during the first quarter of 2015, an increase of $319,000 or 36%, which was primarily attributable to the reimbursement from a customer for loan workout expenses that had been incurred and paid in prior years.

Noninterest Expenses

The tables below show Heartland's noninterest expenses for the three month periods ended March 31, 2016 and 2015, in thousands:

	Three Months Ended March 31,
	2016			2015			Change			% Change
Salaries and employee benefits	$	41,714		$	36,638		$	5,076		14	%
Occupancy	5,003			4,259			744			17
Furniture and equipment	2,113			2,106			7			—
Professional fees	7,010			6,044			966			16
FDIC insurance assessments	1,168			956			212			22
Advertising	1,284			1,181			103			9
Intangible assets amortization	1,895			631			1,264			200
Other real estate and loan collection expenses	572			465			107			23
Loss on sales/valuations of assets, net	313			353			(40		)	(11	)
Other noninterest expenses	9,237			6,981			2,256			32
Total Noninterest Expenses	$	70,309		$	59,614		$	10,695		18	%
Efficiency ratio, fully taxable equivalent(1)	66.90		%	70.95		%
(1) See the reconciliation of Non-GAAP measure below.

Reconciliation of Non-GAAP Measure-Efficiency Ratio
	For the Three Months Ended March 31,
	2016			2015
Net interest income	$	72,707		$	53,930
Taxable equivalent adjustment(1)	3,041			2,393
Fully taxable equivalent net interest income	75,748			56,323
Noninterest income	29,578			30,663
Securities gains, net	(3,526		)	(4,353		)
Adjusted income	$	101,800		$	82,633
Total noninterest expenses	$	70,309		$	59,614
Less:
Intangible assets amortization	1,895			631
Partnership investment in historic rehabilitation tax credits	—			—
Loss on sales/valuations of assets, net	313			353
Adjusted noninterest expenses	$	68,101		$	58,630
Efficiency ratio, fully taxable equivalent(2)	66.90		%	70.95		%
(1) Computed on a tax equivalent basis using an effective tax rate of 35%.
(2) Efficiency ratio, fully taxable equivalent, expresses noninterest expenses as a percentage of fully taxable equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax equivalent basis, which adjusts net interest income and noninterest expenses for the tax favored status of certain loans, securities and historic rehabilitation tax credits. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the financial results as it enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items, such as securities gains, net and losses on sales/valuations of assets, net. This measure should not be considered a substitute for operating results determined in accordance with GAAP.

For the first quarter of 2016, noninterest expenses totaled $70.3 million compared to $59.6 million during the first quarter of 2015, an increase of $10.7 million or 18%. The categories with the most significant increases were salaries and employee benefits, professional fees, intangible assets amortization and other noninterest expenses. These increases were primarily attributable to the recent acquisitions.

One of Heartland's top priorities is to improve its efficiency ratio to a ratio of 65% by the end of 2016. During the first quarter of 2016, Heartland's efficiency ratio was 66.90% in comparison with 68.53% during the fourth quarter of 2015 and 70.95% during the first quarter of 2015. During the second and third quarters of 2015, management announced the consolidation of two banking centers and the closing of seven under-performing loan production offices. During the first quarter of 2016, management announced the closing of one additional loan production office located outside of Heartland's geographic footprint. Heartland also expects to improve its efficiency ratio by completing systems conversions of acquired banks as soon as possible after the closing dates. The Premier Valley Bank systems conversion was completed during the first quarter of 2016, and the systems conversion for Centennial Bank is scheduled for completion during the second quarter of 2016.

The largest component of noninterest expenses, salaries and employee benefits, increased $5.1 million or 15% during the first quarter of 2016 as compared to the same quarter in 2015. This increase was primarily attributable to the additional salaries and employee benefits for employees of Premier Valley Bank, which was acquired in the fourth quarter of 2015, and Centennial Bank, which was acquired in the first quarter of 2016. Full-time equivalent employees totaled 1,907 on March 31, 2016, compared to 1,776 on March 31, 2015. Included in the full-time equivalent employees on March 31, 2016, were approximately 90 at Premier Valley Bank and 105 at Centennial Bank. The closing of out-of-footprint mortgage loan production offices resulted in a reduction of approximately 45 full-time equivalent employees during the first quarter of 2016.

Occupancy expense increased $744,000 or 17% during the first quarter of 2016 compared to the first quarter of 2015. A majority of this increase was attributable to the acquisitions completed during the last half of 2015 and first quarter of 2016.

Professional fees increased $966,000 or 16% during the first quarter of 2016 compared to the first quarter of 2015, primarily a result of additional services provided to Heartland by third-party advisors, including services performed in connection with acquisitions.

Intangible assets amortization increased $1.3 million or 200% during the first quarter of 2016 compared to the first quarter of 2015 as a result of the acquisitions completed during the last half of 2015 and first quarter of 2016.

For the first quarter of 2016, other noninterest expenses increased $2.3 million or 32% over the first quarter of 2015. These increases were primarily a result of additional investments in technology and initial and ongoing costs associated with the acquisitions.

Income Taxes

Heartland's effective tax rate was 33.10% for the first quarter of 2016 compared to 32.60% for the first quarter of 2015. Federal low-income housing tax credits included in the determination of Heartland's income taxes totaled $304,000 during the first quarter of 2016 compared to $145,000 during the first quarter of 2015. Heartland's effective tax rate was also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 18.88% during the first quarter of 2016 compared to 19.07% during the first quarter of 2015.

Segment Reporting

Heartland has two reportable segments: community and other banking and retail mortgage banking. Revenues from community and other banking operations consist primarily of interest earned on loans and investment securities, fees from deposit and ancillary services and net security gains. Retail mortgage banking operating revenues consist of interest earned on mortgage loans held for sale, gains on sale of mortgage loans into the secondary market, the servicing of mortgage loans for various investors and loan origination fee income. See Note 9 to our consolidated financial statements for further information regarding our segment reporting.

Income before taxes for the community and other banking segment for the first quarter of 2016 was $28.3 million compared to $20.8 million for the first quarter of 2015, a $7.5 million or 36% increase, primarily as a result of increased net interest income and increased noninterest income, the effect of which was partially offset by increased noninterest expenses. Net interest income from the community and other banking segment improved by $18.7 million or 35% for the first quarter of 2016 as compared to the first quarter of 2015, primarily as a result of additional earning assets from the four acquisitions completed during 2015 and the CIC Bancshares, Inc. acquisition completed during the first quarter of 2016, combined with strong loan growth experienced during the last half of 2015. Noninterest income allocable to the community and other banking segment totaled $18.5 million during the first three months of 2016 compared to $17.1 million during the first three months of 2015, an increase of $1.5 million

or 9%, primarily a result of increased service charges and fees. Noninterest expenses allocable to the community and other banking segment increased $12.3 million or 26% during the first quarter of 2016 as compared to the first quarter of 2015, which was primarily a result of the acquisitions.

The retail mortgage banking segment recorded income before taxes of $1.6 million for the first quarter of 2016 compared to income before taxes of $2.5 million for the first quarter of 2015, a decrease of $893,000 or 36%. Noninterest income from the retail mortgage banking segment totaled $11.0 million during the first quarter of 2016 compared to $13.6 million during the first quarter of 2015, a $2.6 million or 19% decrease. Retail mortgage banking income results primarily from net gains on sale of mortgage loans into the secondary market, related fees and fair value marks on the associated derivatives. Mortgage loan applications were $407.0 million in the first quarter of 2016 compared to $647.5 million in the first quarter of 2015, a decrease of $240.5 million or 37%. The volume of mortgage loans sold totaled $220.4 million during the first quarter of 2016, an 18% decrease from the $268.8 million sold during the first quarter of 2015. Noninterest expenses allocable to the retail mortgage banking segment were $10.6 million during the first quarter of 2016 compared to $12.2 million during the first quarter of 2015, a decrease of $1.6 million or 13%. During 2015, management refined its strategy with respect to its retail mortgage banking business by emphasizing growth in this line of business in bank subsidiary locations instead of in out-of-footprint locations. To implement this strategy, seven under-performing mortgage loan production offices were closed during the second and third quarters of 2015, and an additional closure was announced during the first quarter of 2016. In addition to reduced transaction-based compensation to mortgage banking personnel as a result of the lower volume of residential mortgage loans underwritten during the first quarter of 2016 in comparison with first quarter of 2015, the office closures also contributed to the reduction in noninterest expenses during the first quarter of 2016 in comparison with the first quarter of 2015.

FINANCIAL CONDITION

Total assets were $8.25 billion at March 31, 2016, an increase of $559.0 million or 7% since year-end 2015. Included in this growth, at fair value, was $772.6 million of assets acquired in the CIC Bancshares, Inc. transaction.

Lending Activities

Total net loans and leases held to maturity were $5.50 billion at March 31, 2016, compared to $5.00 billion at year-end 2015, an increase of $501.5 million or 10%. This increase includes $581.5 million of total loans and leases held to maturity, at fair value, acquired in the CIC Bancshares, Inc. transaction. Exclusive of this transaction, total loans and leases held to maturity decreased $80.0 million or 2%. This downward trend began to reverse during the month of March 2016 and the loan pipeline looks stronger for the second quarter of 2016. Management expects loan growth will fluctuate from quarter-to-quarter, but overall to average 1% to 2% per quarter.

The table below presents the composition of the loan portfolio as of March 31, 2016, and December 31, 2015, in thousands:

LOAN PORTFOLIO	March 31, 2016					December 31, 2015
	Amount			Percent		Amount			Percent
Loans and leases receivable held to maturity:
Commercial	$	1,295,504		23.53	%	$	1,279,214		25.56	%
Commercial real estate	2,555,268			46.40		2,326,360			46.50
Agricultural and agricultural real estate	471,271			8.56		471,870			9.43
Residential mortgage	753,666			13.69		539,555			10.78
Consumer	430,699			7.82		386,867			7.73
Gross loans and leases receivable held to maturity	5,506,408			100.00	%	5,003,866			100.00	%
Unearned discount	(640		)			(488		)
Deferred loan fees	(2,763		)			(1,892		)
Total net loans and leases receivable held to maturity	5,503,005					5,001,486
Allowance for loan and lease losses	(49,738		)			(48,685		)
Loans and leases receivable, net	$	5,453,267				$	4,952,801

Loans and leases secured by real estate, either fully or partially, totaled $3.75 billion or 68% of gross loans and leases at March 31, 2016. Excluding purchase accounting valuations, of the properties securing non-farm, nonresidential real estate loans, 56% are owner occupied. The largest categories within Heartland's real estate secured loans at March 31, 2016, and December 31, 2015, are listed below, in thousands:

LOANS SECURED BY REAL ESTATE
	March 31, 2016			December 31, 2015
Residential real estate, excluding residential construction and residential lot loans	$	916,658		$	849,296
Industrial, manufacturing, business and commercial	488,426			429,891
Agriculture	250,110			255,345
Retail	303,464			239,975
Office	311,258			275,289
Land development and lots	121,294			122,551
Hotel, resort and hospitality	121,205			115,083
Multi-family	172,362			179,243
Food and beverage	88,958			90,339
Warehousing	105,482			82,356
Health services	119,631			101,961
Residential construction	102,645			97,205
All other	163,257			164,255
Loans acquired in the quarter	512,834			318,797
Purchase accounting valuations	(24,945		)	(20,994		)
Total loans secured by real estate	$	3,752,639		$	3,300,592

Allowance For Loan and Lease Losses

The process utilized by Heartland to determine the appropriateness of the allowance for loan and lease losses is considered a critical accounting practice for Heartland and has remained consistent over the past several years. The allowance for loan and lease losses represents management's estimate of identified and unidentified probable losses in the existing loan portfolio. For additional details on the specific factors considered in determining the allowance for loan and lease losses, refer to the critical accounting policies section of our Annual Report on Form 10-K for the year ended December 31, 2015.

The allowance for loan and lease losses at March 31, 2016, was 0.90% of loans and leases and 102.79% of nonperforming loans compared to 0.97% of loans and leases and 122.77% of nonperforming loans at December 31, 2015.

Nonperforming loans were $48.4 million or 0.88% of total loans and leases at March 31, 2016, compared to $39.7 million or 0.79% of total loans and leases at December 31, 2015, an increase of $8.7 million or 22%. Exclusive of $1.6 million of nonperforming loans acquired in the CIC Bancshares, Inc. transaction, nonperforming loans increased $7.2 million or 18% since year-end 2015. A majority of the new nonperforming loans were part of the loan portfolios acquired in the bank acquisitions completed during 2015, which had been identified as potential problem loans prior to the closing of the acquisitions. Heartland's special assets group continues to work with these borrowers to obtain an appropriate resolution of these nonperforming loans. At March 31, 2016, approximately $15.5 million or 32% of Heartland's nonperforming loans had individual loan balances exceeding $1.0 million and represented loans to an aggregate of eight borrowers. The portion of Heartland's nonperforming loans covered by government guarantees was $12.0 million at March 31, 2016, and $8.9 million at December 31, 2015.

Loans delinquent 30 to 89 days as a percent of total loans increased to 0.45% at March 31, 2016, in comparison with 0.31% at December 31, 2015, primarily due agricultural loans made to a borrower experiencing financial difficulties.

The tables below present the changes in the allowance for loan and lease losses during the three months ended March 31, 2016 and 2015, in thousands:

ANALYSIS OF ALLOWANCE FOR LOAN AND LEASE LOSSES	Three Months Ended March 31,
	2016			2015
Balance at beginning of period	$	48,685		$	41,449
Provision for loan and lease losses	2,067			1,671
Recoveries on loans and leases previously charged off	591			738
Charge-offs on loans and leases	(1,605		)	(2,004		)
Balance at end of period	$	49,738		$	41,854
Annualized ratio of net charge offs to average loans and leases	0.08		%	0.12		%

The table below presents the amounts of nonperforming loans and leases and other nonperforming assets on the dates indicated, in thousands:

NONPERFORMING ASSETS	March 31,						December 31,
	2016			2015			2015			2014
Not covered under loss share agreements:
Nonaccrual loans and leases	$	47,750		$	27,023		$	39,655		$	25,070
Loan and leases contractually past due 90 days or more	639			9			—			—
Total nonperforming loans and leases	48,389			27,032			39,655			25,070
Other real estate	11,338			19,097			11,524			19,016
Other repossessed assets	426			404			485			445
Total nonperforming assets not covered under loss share agreements	$	60,153		$	46,533		$	51,664		$	44,531
Covered under loss share agreements:
Nonaccrual loans and leases	$	—		$	—		$	—		$	278
Other real estate	—			—			—			—
Total nonperforming assets covered under loss share agreements	$	—		$	—		$	—		$	278
Performing troubled debt restructured loans(1)	$	10,711		$	10,904		$	11,075		$	12,133
Nonperforming loans and leases not covered under loss share agreements to total loans and leases	0.88		%	0.64		%	0.79		%	0.63		%
Nonperforming assets not covered under loss share agreements to total loans and leases plus repossessed property	1.09		%	1.09		%	1.03		%	1.14		%
Nonperforming assets not covered under loss share agreements to total assets	0.73		%	0.72		%	0.67		%	0.74		%
(1) Represents accruing troubled debt restructured loans performing according to their restructured terms.

The schedule below summarizes the changes in Heartland's nonperforming assets, including those covered by loss share agreements, during the first three months of 2016, in thousands:

	Nonperforming Loans			Other Real Estate Owned			Other Repossessed Assets			Total Nonperforming Assets
December 31, 2015	$	39,655		$	11,524		$	485		$	51,664
Loan foreclosures	(442		)	436			6			—
Net loan charge-offs	(1,014		)	—			—			(1,014		)
Acquired nonperforming assets	1,582			1,934			—			3,516
New nonperforming loans	12,171			—			—			12,171
Reduction of nonperforming loans(1)	(3,563		)	—			—			(3,563		)
OREO/Repossessed assets sales proceeds	—			(2,345		)	(66		)	(2,411		)
OREO/Repossessed assets writedowns, net	—			(211		)	29			(182		)
Net activity at Citizens Finance Co.	—			—			(28		)	(28		)
March 31, 2016	$	48,389		$	11,338		$	426		$	60,153
(1) Includes principal reductions and transfers to performing status.

Securities

The composition of Heartland's securities portfolio is managed to maximize the return on the portfolio while considering the impact it has on Heartland's asset/liability position and liquidity needs. Securities represented 24% of total assets at both March 31, 2016, and December 31, 2015. Total available for sale securities as of March 31, 2016, were $1.69 billion, an increase of $112.1 million or 7% from $1.58 billion atDecember 31, 2015.

The table below presents the composition of the securities portfolio, including trading, available for sale and held to maturity securities, by major category, as of March 31, 2016, and December 31, 2015, in thousands:

SECURITIES PORTFOLIO COMPOSITION	March 31, 2016				December 31, 2015
	Amount		Percent		Amount		Percent
U.S. government corporations and agencies	$	6,619	0.33	%	$	25,766	1.37	%
Mortgage-backed securities	1,388,687		69.99		1,247,071		66.37
Obligation of states and political subdivisions	552,303		27.84		570,730		30.37
Corporate debt securities	830		0.04		846		0.05
Equity securities	13,377		0.67		13,138		0.70
Other securities	22,325		1.13		21,443		1.14
Total securities	$	1,984,141	100.00	%	$	1,878,994	100.00	%

The percentage of Heartland's securities portfolio comprised of mortgage-backed securities was 70% at March 31, 2016, compared to 66% at December 31, 2015. Approximately 79% of Heartland's mortgage-backed securities were issued by government-sponsored enterprises at March 31, 2016. Heartland's securities portfolio had an expected duration of 4.1 years as of March 31, 2016, compared to 3.9 years at year-end 2015.

The Volcker Rule, which is scheduled to be fully implemented in 2017, prohibits insured depository institutions and their holding companies from engaging in proprietary trading except in limited circumstances, and prohibits them from owning equity interests in excess of 3% of Tier 1 Capital in private equity and hedge funds. The Volcker Rule will not have a material impact on Heartland’s investment securities portfolio.

At March 31, 2016, Heartland had $22.3 million of other securities, including capital stock in each Federal Home Loan Bank ("FHLB") of which each of its bank subsidiaries is a member. All of these securities were classified as other securities held at cost.

Deposits And Borrowed Funds

Total deposits were $6.92 billion as of March 31, 2016, compared to $6.41 billion at year-end 2015, an increase of $518.5 million or 8%. This increase includes $648.1 million of deposits, at fair value, acquired in the CIC Bancshares, Inc. transaction. Exclusive

of this acquisition, total deposits decreased $129.6 million or 2%. This entire decrease was attributable to reduced time deposits, which decreased $131.4 million or 12% when excluding the $149.5 million of time deposits acquired in the CIC Bancshares, Inc. transaction. This trend of reduced time deposits is expected to continue during the second quarter of 2016 as management remains focused on building its demand and savings deposit customer base. Heartland does not plan to offer highly competitive interest rates on time deposits except to customers with which it has significant banking relationships. Demand deposits totaled $2.08 billion at March 31, 2016, an increase of $165.4 million or 9% since year-end 2015, with $164.3 million of the increase attributable to the CIC Bancshares, Inc. transaction. Deposit composition continued to reflect a favorable mix with demand deposits at 30% of total deposits, savings deposits at 53% and time deposits at 17% at both March 31, 2016, and December 31, 2015.

Short-term borrowings generally include federal funds purchased, securities sold under agreements to repurchase, short-term FHLB advances and discount window borrowings from the Federal Reserve Bank. These funding alternatives are utilized in varying degrees depending on their pricing and availability. All of Heartland's bank subsidiaries own FHLB stock in either the Chicago, Dallas, Des Moines, San Francisco or Topeka FHLBs, enabling them to borrow funds from their respective FHLB for short- or long-term purposes under a variety of programs. The amount of short-term borrowings was $325.7 million at March 31, 2016, compared to $293.9 million at year-end 2015. Short-term FHLB advances of $32.7 million were included in short-term borrowings at March 31, 2016, in comparison with $11.1 million at December 31, 2015.

All of the Heartland bank subsidiaries provide retail repurchase agreements to their customers as a cash management tool, sweeping excess funds from demand deposit accounts into these agreements. This source of funding does not increase the bank's reserve requirements. Although the aggregate balance of these retail repurchase agreements is subject to variation, the account relationships represented by these balances are principally local. The balances of retail repurchase agreements were $207.2 million at March 31, 2016, compared to $253.7 million at December 31, 2015.

Also included in short-term borrowings is a $20.0 million revolving credit line Heartland has with an unaffiliated bank, primarily to provide liquidity to Heartland. A balance of $15.0 million was outstanding on this line at both March 31, 2016, and December 31, 2015. Heartland entered into an additional non-revolving credit facility with the same unaffiliated bank on December 15, 2015, which provides borrowing capacity not to exceed $50.0 million when combined with the outstanding balance on its existing amortizing term loan with the same unaffiliated bank described below. At March 31, 2016, a $40.0 million balance was outstanding on this non-revolving credit line compared to no balance outstanding at December 31, 2015. Any outstanding balance on the non-revolving credit line is due on November 30, 2016.

Other borrowings include all debt arrangements Heartland and its subsidiaries have entered into with original maturities that extend beyond one year, including long-term FHLB borrowings, term borrowings under term notes, subordinated notes and senior notes, and obligations under trust preferred capital securities. As of March 31, 2016, the amount of other borrowings was $265.8 million, an increase of $2.5 million or 1% since year-end 2015.

Long-term FHLB borrowings with an original term of more than one year totaled $12.2 million at March 31, 2016, compared to $17.2 million at December 31, 2015, a decrease of $5.1 million or 30%. Total long-term FHLB borrowings at March 31, 2016, had an average rate of 2.29% and an average maturity of 3.2 years. Structured wholesale repurchase agreements totaled $30.0 million at both March 31, 2016 and December 31, 2015.

In 2008, Heartland entered into various wholesale repurchase agreements, which had balances totaling $30.0 million at both March 31, 2016, and December 31, 2015. These wholesale repurchase agreements mature in 2018.

In April 2011, Heartland obtained a $15.0 million amortizing term loan from an unaffiliated bank with a maturity date of April 20, 2016. The outstanding balance on this amortizing term loan was $8.6 million at March 31, 2016, compared to $8.9 million at December 31, 2015. At maturity, this amortizing term loan was repaid with an advance on Heartland's non-revolving credit line.

Heartland had senior notes totaling $16.0 million outstanding at both March 31, 2016, and December 31, 2015, and subordinated notes totaling $82.1 million outstanding at March 31, 2016, and $74.1 million at December 31, 2015. Included in the subordinated notes at March 31, 2016, were the $2.0 million of subordinated convertible notes and $5.9 million of subordinated debentures assumed in the CIC Bancshares, Inc. transaction.

A schedule of Heartland's trust preferred securities outstanding as of March 31, 2016, is as follows, in thousands:

	Amount Issued		Issuance Date	Interest Rate	Interest Rate as of 3/31/16(1)	Maturity Date	Callable Date
Heartland Financial Statutory Trust IV	25,774		03/17/2004	2.75% over LIBOR	3.39%(2)	03/17/2034	06/17/2016
Heartland Financial Statutory Trust V	20,619		01/27/2006	1.33% over LIBOR	1.95%(3)	04/07/2036	07/07/2016
Heartland Financial Statutory Trust VI	20,619		06/21/2007	6.75%	6.75%(4)	09/15/2037	06/15/2016
Heartland Financial Statutory Trust VII	20,619		06/26/2007	1.48% over LIBOR	2.12%(5)	09/01/2037	06/01/2016
Morrill Statutory Trust I	8,735		12/19/2002	3.25% over LIBOR	3.88%(6)	12/26/2032	06/26/2016
Morrill Statutory Trust II	8,337		12/17/2003	2.85% over LIBOR	3.49%(7)	12/17/2033	06/17/2016
Sheboygan Statutory Trust I	6,199		9/17/2003	2.95% over LIBOR	3.59%	09/17/2033	06/17/2016
CBNM Capital Trust I	4,222		9/10/2004	3.25% over LIBOR	3.88%	12/15/2034	06/15/2016
	$	115,124
(1) Effective weighted average interest rate as of March 31, 2016, was 4.97% due to interest rate swap transactions on the variable rate securities as discussed in Note 7 to Heartland's consolidated financial statements.
(2) Effective interest rate as of March 31, 2016, was 5.01% due to an interest rate swap transaction as discussed in Note 7 to Heartland's consolidated financial statements.
(3) Effective interest rate as of March 31, 2016, was 4.69% due to an interest rate swap transaction as discussed in Note 7 to Heartland's consolidated financial statements.
(4) Interest rate is fixed at 6.75% through June 15, 2017, then resets to 1.48% over LIBOR for the remainder of the term.
(5) Effective interest rate as of March 31, 2016, was 4.70% due to an interest rate swap transaction as discussed in Note 7 to Heartland's consolidated financial statements.
(6) Effective interest rate as of March 31, 2016, was 4.92% due to an interest rate swap transaction as discussed in Note 7 to Heartland's consolidated financial statements.
(7) Effective interest rate as of March 31, 2016, was 4.51% due to an interest rate swap transaction as discussed in Note 7 to Heartland's consolidated financial statements.

CAPITAL REQUIREMENTS

Bank regulatory agencies have adopted capital standards by which all bank holding companies are evaluated, including requirements to maintain certain core capital amounts included as Tier 1 capital at minimum levels relative to total assets (the "Tier 1 Leverage Capital Ratio") and at minimum levels relative to "risk-weighted assets" which are calculated by assigning value to assets, and off balance sheet commitments, based on their risk characteristics (the "Tier 1 Risk-Based Capital Ratio"), and to maintain total capital at minimum levels relative to risk-weighted assets (the "Total Risk-Based Capital Ratio"). Starting in 2015, bank holding companies became subject to a new Common Equity Tier 1 Capital Ratio, an increased Tier 1 Leverage Capital Ratio and an increased Tier 1 Risk-Based Capital Ratio under the Basel III rules and are required to include in Common Equity Tier 1 capital the effects of other comprehensive income adjustments, such as gains and losses on securities held to maturity, that were previously excluded from the definition of Tier 1 capital, but were allowed to make a one-time election not to include those effects. Heartland and its bank subsidiaries have been, and will continue to be, managed so they meet the well-capitalized requirements under the regulatory framework for prompt corrective action and have made the one-time election to exclude the effects of other comprehensive income adjustments on their Tier 1 capital. Under the Basel III rules, the requirements to be categorized as well-capitalized changed from 4% to 5% for the Tier 1 Leverage Capital Ratio, from 6% to 8% for the Tier 1 Risk-Based Capital Ratio and remained at 10% for the Total Risk-Based Capital Ratio. The most recent notification from the Federal Deposit Insurance Corporation categorized Heartland and each of its bank subsidiaries as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed each institution's category.

Heartland's capital ratios were as follows for the dates indicated, in thousands:

CAPITAL RATIOS	March 31, 2016				December 31, 2015
	Amount		Ratio		Amount		Ratio
Risk-Based Capital Ratios:
Tier 1 capital	$	648,796	9.98	%	$	683,706	11.56	%
Tier 1 capital minimum requirement	389,880		6.00	%	354,980		6.00	%
Excess	$	258,916	3.98	%	$	328,726	5.56	%
Common equity Tier 1	$	530,053	8.16	%	$	487,132	8.23	%
Common equity Tier 1 minimum requirement	292,410		4.50	%	266,324		4.50	%
Excess	$	237,643	3.66	%	$	220,808	3.73	%
Total capital	$	778,834	11.99	%	$	812,568	13.74	%
Total capital minimum requirement	519,840		8.00	%	473,282		8.00	%
Excess	$	258,994	3.99	%	$	339,286	5.74	%
Total risk-adjusted assets	$	6,497,996			$	5,916,027
Leverage Capital Ratios(1)
Tier 1 capital	$	648,796	8.22	%	$	683,706	9.58	%
Tier 1 capital minimum requirement(2)	315,621		4.00	%	285,606		4.00	%
Excess	$	333,175	4.22	%	$	398,100	5.58	%
Average adjusted assets (less goodwill and other intangible assets)	$	7,890,530			$	7,140,152
(1) The leverage ratio is defined as the ratio of Tier 1 capital to average total assets.
(2) Heartland has established a minimum target leverage ratio of 4.00%. Based on Federal Reserve Bank guidelines, a bank holding company generally is required to maintain a leverage ratio of 3.00% plus an additional cushion of at least 100 basis points.

Heartland filed a universal shelf registration statement with the Securities and Exchange Commission on August 28, 2013, which became effective on September 9, 2013, to register up to $75.0 million in equity securities. The shelf registration statement provides Heartland with the ability to raise capital, subject to Securities and Exchange Commission rules and limitations, if Heartland’s board of directors decides to do so. At March 31, 2016, $75.0 million was available to be issued under the universal shelf registration statement.

On February 5, 2016, Heartland completed the acquisition of CIC Bancshares, Inc., parent company of Centennial Bank, headquartered in Denver, Colorado, in a transaction valued at approximately $76.9 million. Of this amount, approximately $15.7 million was paid in cash and the remainder was provided by the issuance of 2,003,235 shares of Heartland common stock and 3,000 shares of newly issued Heartland Series D preferred stock. In addition, Heartland assumed convertible notes and subordinated debt totaling approximately $7.9 million. Simultaneous with closing of the transaction, Centennial Bank merged into Heartland’s Summit Bank & Trust subsidiary, with the resulting institution operating under the name Centennial Bank and Trust.

Common stockholders' equity was $665.8 million at March 31, 2016, compared to $581.5 million at December 31, 2015. Book value per common share was $27.15 at March 31, 2016, compared to $25.92 at year-end 2015. Changes in common stockholders' equity and book value per common share are the result of earnings, dividends paid, stock transactions and mark-to-market adjustment for unrealized gains and losses on securities available for sale and derivative instruments. Heartland had unrealized gains on securities available for sale and derivative instruments, net of applicable taxes, of $1.9 million at March 31, 2016, compared to unrealized losses of $4.1 million at December 31, 2015.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Heartland's bank subsidiaries evaluate the creditworthiness of customers to which they extend a credit commitment on a case-by-case basis and may require collateral to secure any credit extended. The amount of collateral obtained is based upon management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. Standby letters of credit and financial guarantees are conditional commitments issued by Heartland's bank subsidiaries to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. At March 31, 2016, and December 31, 2015, commitments to extend credit aggregated $1.77 billion and $1.56 billion, and standby letters of credit aggregated $51.8 million and $55.4 million, respectively.

Contractual obligations and other commitments were disclosed in Heartland's Annual Report on Form 10-K for the year ended December 31, 2015. As part of the CIC Bancshares, Inc. transaction completed on February 5, 2016, Heartland assumed $2.0 million of subordinated convertible notes and $5.9 million of subordinated debentures. Except for the commitments with respect to the CIC Bancshares, Inc. acquisition, there have been no material changes in Heartland's contractual obligations and other commitments since that report was filed.

On a consolidated basis, Heartland maintains a large balance of short-term securities that, when combined with cash from operations, Heartland believes are adequate to meet its funding obligations.

At the parent company level, routine funding requirements consist primarily of dividends paid to stockholders, debt service on revolving credit arrangements and trust preferred securities issuances, debt repayment requirements under other obligations and payments for acquisitions. The parent company obtains the funding to meet these obligations from dividends collected from its bank subsidiaries and the issuance of debt securities. At March 31, 2016, Heartland’s revolving credit agreement with an unaffiliated bank provided a maximum borrowing capacity of $20.0 million, of which $15.0 million was outstanding. Heartland also has a non-revolving credit line with the same unaffiliated bank that provides borrowing capacity not to exceed $50.0 million when combined with the outstanding balance on Heartland's existing amortizing term loan with the same unaffiliated bank. At March 31, 2016, $40.0 million was outstanding on this non-revolving credit line and an additional borrowing capacity of $1.4 million was available. These credit agreements contains specific financial covenants, all of which Heartland was in compliance with as of March 31, 2016.

The ability of Heartland to pay dividends to its stockholders is dependent upon dividends paid by its subsidiaries. The bank subsidiaries are subject to statutory and regulatory restrictions on the amount they may pay in dividends. To maintain acceptable capital ratios in Heartland's bank subsidiaries, certain portions of their retained earnings are not available for the payment of dividends.

Heartland continues to explore opportunities to expand its footprint of independent community banks. Given the current issues in the banking industry, Heartland has changed its strategic growth initiatives from establishing de novo banks and branching to acquisitions. Heartland is focused on possible acquisitions in the markets it currently serves, in which there would be an opportunity to grow market share, achieve efficiencies and provide greater convenience for current customers. Future expenditures relating to expansion efforts, in addition to those identified above, cannot be estimated at this time.

LIQUIDITY

Liquidity refers to Heartland's ability to maintain cash flow that is adequate to meet maturing obligations and existing commitments, to withstand fluctuations in deposit levels, to fund operations and to provide for customers' credit needs. The liquidity of Heartland principally depends on cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings and its ability to borrow funds in the money or capital markets.

Operating activities provided $22.9 million of cash during the first three months of 2016. In contrast, operating activities used $18.2 million of cash during the first three months of 2015. The largest factor in this change was the activity in loans originated for sale and the proceeds on sales of loans held for sale, which used cash of $1.8 million during the first three months of 2016 compared to $34.4 million during the first three months of 2015.

Investing activities provided cash of $74.4 million during the first three months of 2016 compared to $130.4 million during the first three months of 2015. The proceeds from securities sales, paydowns and maturities were $349.0 million during the first three months of 2016 compared to $332.6 million during the first three months of 2015. Cash used for the purchase of securities totaled $363.0 million during the first three months of 2016 compared to $234.4 million during the first three months of 2015. A net change in loans and leases provided $78.5 million of cash during the first three months of 2016 compared to $25.7 million during the first three months of 2015.

Financing activities used cash of $222.9 million during the first three months of 2016 compared to $74.4 million during the first three months of 2015.The net increase in demand and savings deposits provided cash of $1.8 million during the first three months of 2016 compared to providing $90.1 million during the first three months of 2015, while the net decrease in time deposits used cash of $131.4 million during the first three months of 2016 compared to $25.6 million during the first three months of 2015. Short-term borrowings activity used cash of $3.9 million during the first three months of 2016 compared to using $95.8 million of cash during the first three months of 2015. Other borrowing activity used cash of $5.5 million during the first three months of 2016 compared to $40.5 million during the first three months of 2015. Also included in the use of cash during the first three months of 2016 was the $81.7 million of cash used for the redemption of Heartland's Series C Preferred Stock issued to the U.S. Treasury under the Small Business Lending Fund.

Management of investing and financing activities, and market conditions, determine the level and the stability of net interest cash flows. Management attempts to mitigate the impact of changes in market interest rates to the extent possible, so that balance sheet growth is the principal determinant of increases in net interest cash flows.

Heartland's short-term borrowing balances are dependent on commercial cash management and smaller correspondent bank relationships, and, as a result, short-term borrowing balances will normally fluctuate. Management believes these balances, on average, to be stable sources of funds; however, management intends to rely on deposit growth and additional FHLB borrowings in the future.

In the event of short-term liquidity needs, Heartland's bank subsidiaries may purchase federal funds from each other or from correspondent banks and may also borrow from the Federal Reserve Bank. Additionally, the bank subsidiaries’ FHLB memberships give them the ability to borrow funds for short- and long-term purposes under a variety of programs.

Heartland's revolving credit agreement with an unaffiliated bank provides a maximum borrowing capacity of $20.0 million, of with $15.0 million had been drawn down at March 31, 2016. Heartland also has a non-revolving credit line with the same unaffiliated bank under which $40.0 was outstanding at March 31, 2016. The non-revolving credit line provided an additional borrowing capacity of $1.4 million at March 31, 2016.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market prices and rates. Heartland's market risk is comprised primarily of interest rate risk resulting from its core banking activities of lending and deposit gathering. Interest rate risk measures the impact on earnings from changes in interest rates and the effect on the current fair market values of Heartland's assets, liabilities and off-balance sheet contracts. The objective is to measure this risk and manage the balance sheet to avoid unacceptable potential for economic loss.

Management continually develops and applies strategies to mitigate market risk. Exposure to market risk is reviewed on a regular basis by the asset/liability committees of the banks and, on a consolidated basis, by Heartland's executive management and board of directors. Darling Consulting Group, Inc. has been engaged to provide asset/liability management position assessment and

strategy formulation services to Heartland and its bank subsidiaries. At least quarterly, a detailed review of the balance sheet risk profile is performed for Heartland and each of its bank subsidiaries. Included in these reviews are interest rate sensitivity analyses, which simulate changes in net interest income in response to various interest rate scenarios. These analyses consider current portfolio rates, existing maturities, repricing opportunities and market interest rates, in addition to prepayments and growth under different interest rate assumptions. Selected strategies are modeled prior to implementation to determine their effect on Heartland's interest rate risk profile and net interest income. Heartland believes its primary market risk exposures did not change significantly in the first three months of 2016.

The core interest rate risk analysis utilized by Heartland examines the balance sheet under increasing and decreasing interest rate scenarios that are neither too modest nor too extreme. All rate changes are ramped over a 12-month horizon based upon a parallel shift in the yield curve and then maintained at those levels over the remainder of the simulation horizon. Using this approach, management is able to see the effect that both a gradual change of rates (year 1) and a rate shock (year 2 and beyond) could have on Heartland's net interest income. Starting balances in the model reflect actual balances on the “as of” date, adjusted for material and significant transactions. Pro-forma balances remain static. This methodology enables interest rate risk embedded within the existing balance sheet structure to be isolated from the interest rate risk often caused by growth in assets and liabilities. Due to the low interest rate environment, the simulations under a decreasing interest rate scenario were prepared using a 100 basis point shift in rates. The most recent reviews at March 31, 2016, and March 31, 2015, provided the following results, in thousands:

	2016				2015
	Net Interest Margin		% Change From Base		Net Interest Margin		% Change From Base
Year 1
Down 100 Basis Points	$	277,416	(2.76	)%	$	202,855	(2.37	)%
Base	$	285,293			$	207,778
Up 200 Basis Points	$	281,351	(1.38	)%	$	202,708	(2.44	)%
Year 2
Down 100 Basis Points	$	266,563	(6.57	)%	$	193,859	(6.70	)%
Base	$	287,656	0.83	%	$	207,469	(0.15	)%
Up 200 Basis Points	$	289,691	1.54	%	$	207,638	(0.07	)%

Heartland uses derivative financial instruments to manage the impact of changes in interest rates on its future interest income or interest expense. Heartland is exposed to credit-related losses in the event of nonperformance by the counterparties to these derivative instruments, but believes it has minimized the risk of these losses by entering into the contracts with large, stable financial institutions. The estimated fair market values of these derivative instruments are presented in Note 7 to the consolidated financial statements.

Heartland enters into financial instruments with off balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Commitments to extend credit are agreements to lend funds to a customer as long as there is no violation of any condition established in the contract relating to the commitment. Commitments generally have fixed expiration dates and may require collateral from the borrower. Standby letters of credit are conditional commitments issued by Heartland to guarantee the performance of a customer to a third party up to a stated amount and subject to specified terms and conditions. These commitments to extend credit and standby letters of credit are not recorded on the balance sheet until the loan is made or the letter or credit is issued.

Heartland periodically holds a securities trading portfolio that would also be subject to elements of market risk. These securities are carried on the balance sheet at fair value. At both March 31, 2016, and December 31, 2015, Heartland held no securities in its securities trading portfolio.

ITEM 4. CONTROLS AND PROCEDURES

Under the direction of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2016. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act

of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

There were no significant changes to Heartland's disclosure controls or internal controls over financial reporting during the quarter ended March 31, 2016, that have materially affected or are reasonably likely to materially affect Heartland's internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which Heartland or its subsidiaries are a party other than ordinary routine litigation incidental to their respective businesses. While the ultimate outcome of current legal proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of these legal actions should not have a material effect on Heartland's consolidated financial position or results of operations.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors applicable to Heartland from those disclosed in Part I, Item 1A. “Risk Factors” in Heartland's 2015 Annual Report on Form 10-K. Please refer to that section of Heartland's Form 10-K for disclosures regarding the risks and uncertainties related to Heartland's business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Heartland's board of directors has authorized management to acquire and hold up to 500,000 shares of common stock as treasury shares at any one time. Heartland and its affiliated purchasers made no purchases of its common stock during the three months ended March 31, 2016.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits

10.1	(1) (2)	Form of Performance-Based Restricted Stock Unit Award Agreement One-Year Performance Period under the Heartland Financial USA, Inc. 2012 Long-Term Incentive Plan.
10.2	(1) (2)	Form of Performance-Based Restricted Stock Unit Award Agreement Three-Year Performance Period under the Heartland Financial USA, Inc. 2012 Long-Term Incentive Plan.
10.3	(1) (2)	Form of Time-Based Restricted Stock Unit Award Agreement under the Heartland Financial USA, Inc. 2012 Long-Term Incentive Plan.
31.1	(2)	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2	(2)	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1	(2)	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	(2)	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	(2)	Financial statement formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Changes in Equity, and (vi) the Notes to Consolidated Financial Statements.
(1) Management contracts or compensatory plans or agreements.
(2) Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.

HEARTLAND FINANCIAL USA, INC.

(Registrant)

/s/ Lynn B. Fuller

By: Lynn B. Fuller

Chairman and Chief Executive Officer

(Principal Executive Officer and Duly Authorized Officer)

/s/ Bryan R. McKeag

By: Bryan R. McKeag

Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Duly Authorized Officer)

/s/ Janet M. Quick

By: Janet M. Quick

Executive Vice President and Deputy Chief Financial Officer

(Principal Accounting Officer and Duly Authorized Officer)

Dated: May 6, 2016

EX-10.1

Exhibit 10.1

HEARTLAND FINANCIAL USA, INC.

2012 LONG-TERM INCENTIVE PLAN

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT

ONE-YEAR PERFORMANCE PERIOD

The Participant specified below is hereby granted a performance-based restricted stock unit award by HEARTLAND FINANCIAL USA, INC.(the “Company”) under the HEARTLAND FINANCIAL USA, INC. 2012 LONG-TERM INCENTIVE PLAN(the “Plan”). The restricted stock units awarded by this Award Agreement (this “Agreement”) shall be subject to the terms of the Plan and the terms set forth in this Agreement. All capitalized terms used in this Agreement and not otherwise defined have the meaning assigned to them in the Plan.

Section 1.Award. The Company hereby grants to the Participant an award of restricted stock units (each such unit, an “RSU”), where each RSU represents the right of the Participant to receive one Share in the future, subject to the terms of this Agreement and the Plan. For all purposes of this RSU:

The “Participant” is	___________________________________.
The “Grant Date” is	___________________________________.
The number of RSUs is	___________________________________.
If not a direct employee of the Company, the
Participant is an employee of: ______________________________ (the "Bank.")

Section 2.    Vesting of RSUs.

(a)Vesting. To the extent earned in accordance with Section 2(b), and subject to forfeiture prior to vesting in accordance with Section 2(c), the RSUs shall vest on [month and day] of the third calendar year following the year of the Grant Date (such date, or such earlier date on which the RSU shall vest pursuant to Section 2(c)(iii), Section 2(c)(iv), Section 2(c)(vi) or Section 2(c)(vii) being hereafter referred to as the “Vesting Date”). Shares shall be delivered based upon vesting of RSUs pursuant to and subject to Section3 below.

(a)Earning of RSUs. The RSUs shall be earned based upon the financial performance of the Company or the Bank, or both (as the case may be), during the fiscal year in which the Grant Date occurs (the “Fiscal Year”) as set forth in Exhibit A (the “Performance Targets”). The Committee shall determine whether the RSUs have been earned based upon the Performance Targets at its first meeting (the date of such meeting, the “Measurement Date”) after financial statements for the Company or the Bank, or both (as the case may be), are available for the Fiscal Year, and the Company shall advise the Participant as soon as practicable thereafter of the number of RSUs that have been earned; provided, however, that no RSUs shall become earned if there exists as of the Measurement Date, as determined by the Committee, a material weakness (a “Material Weakness”) in safety, soundness or compliance (e.g., a regulatory memorandum of understanding, or a material weakness in internal control over financial

reporting) at the Company level (with respect to RSUs to be earned based upon Company Performance Targets) or the Bank level (with respect to RSUs to be earned based upon Bank Performance Targets); provided, however, that RSUs that would have become earned on the Measurement Date but for the Material Weakness shall not be forfeited, but instead may become earned if the Material Weakness has been remediated in its entirety prior to the Vesting Date. In determining whether the RSUs have been earned based upon the Performance Targets, the Committee shall consider the effects of the following items, to the extent identified in the audited financial statements of the Company or the Bank (as the case may be), or in the Management Discussion and Analysis section of the Company’s annual report provided to its stockholders: (i) extraordinary, unusual or nonrecurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting principles, regulations or laws or (iv) mergers or acquisitions.

(b)Forfeiture and Special Vesting of RSUs. Notwithstanding the foregoing provisions of Section 2(b):

(i)Any RSUs that have not been earned as of the Measurement Date based upon failure to meet the Performance Targets shall expire and be forfeited on, and as of, the Measurement Date.

(ii)Any RSUs that have not been earned as of the Vesting Date based upon failure to remediate a Material Weakness shall expire and be forfeited on, and as of, the Vesting Date.

(iii)If a Participant’s Termination of Service occurs due to termination of the Participant’s employment by the Participant’s employer without Cause, any earned RSUs held by the Participant shall become vested on the date of Termination of Service, and any unearned RSUs held by the Participant shall expire and shall be forfeited as of the date of employment termination. For the avoidance of doubt, if such Termination of Service occurs before the Measurement Date, all RSUs shall expire and be forfeited. Any RSUs that are not earned solely because of a Material Weakness shall remain outstanding until remediation of such Material Weakness prior to the Vesting Date (when such RSUs shall vest) or until the Vesting Date (when such RSUs shall expire and be forfeited).

(iv)If a Participant’s Termination of Service occurs on or after the Measurement Date due to the Participant’s Disability or death, any earned RSUs held by the Participant shall become vested on the date of Termination of Service. If a Participant’s Termination of Service occurs prior to the Measurement Date due to the Participant’s Disability or death, then the RSUs shall continue to remain outstanding until the Measurement Date and shall become vested, to the extent earned, as of and on the Measurement Date. Any RSUs that are not earned solely because of a Material Weakness shall remain outstanding until remediation of such Material Weakness prior to the Vesting Date (when such RSUs shall vest) or until the Vesting Date (when such RSUs shall expire and be forfeited).

(v)If the Participant’s Termination of Service occurs due to termination of the Participant’s employment by the Participant’s employer for Cause or by the Participant voluntarily (other than due to Qualifying Retirement), the Participant shall forfeit all RSUs (whether or not earned).

(vi)If the Participant’s Termination of Service occurs due to a Qualifying Retirement, (1) prior to the Measurement Date, then the RSUs shall continue to remain outstanding until the Measurement Date and shall become vested, to the extent earned, as of and on the Measurement Date, (2) on or after the Measurement Date, then to the extent earned, the RSUs shall become vested on the date of such Termination of Service due to Qualifying Retirement, and (3) there is or was a Material Weakness on the Measurement Date, then the portion of the RSUs that are not earned because of such Material Weakness shall remain outstanding until remediation of the Material Weakness (when such RSUs shall vest) or until the Vesting Date (when such RSUs shall expire and be forfeited). For such purposes, a “Qualifying Retirement” means a voluntary Termination of Services by the Participant on or after the date the Participant reaches the age of 62, and provided that (A) the Participant has provided at least five (5) years of full-time equivalent services to the Company or a Subsidiary through the date of such Termination of Services; (B) the Participant covenants that the Participant shall not engage in any full-time employment with any entity thereafter (although Participant shall be entitled to engage in part-time employment, including services as a member of a board of directors or similar body, with an entity that does not compete with the Company or any Subsidiary) unless such employment has been approved in writing by the Chair of the Committee;(C) the Participant executes a general release and waiver of claims against the Company at the time of such Termination of Services; and (D) the Participant executes a confidentiality, non-solicitation, and non-competition agreement with the Company at the time of such Termination of Service.  Consistent with Section 5.2 of the Plan, any question regarding whether a voluntary Termination of Service constitutes a Qualifying Retirement shall be determined by the Committee and the decision of the Committee shall be final and binding upon the Participant.

(vii)If there is a Change in Control (1) all RSUs that have not been previously forfeited shall become fully vested if the obligations under this Agreement are not assumed by the Company or the successor in such Change in Control, and (2) all RSUs that have not been previously forfeited shall become fully vested upon an Involuntary Termination within two years after the Change in Control.

Section 3.     Settlement of RSUs. Delivery of Shares or other amounts under this Agreement shall be subject to the following:

(a)Delivery of Shares. The Company shall deliver to the Participant one Share, free and clear of any restrictions, in settlement of each vested RSU within 30 days following the Vesting Date.

(b)Compliance with Applicable Laws. Notwithstanding any other term of this Agreement or the Plan, the Company shall have no obligation to deliver any Shares or make any other distribution of benefits under this Agreement unless such delivery or distribution complies with all applicable laws and the applicable rules of any securities exchange or similar entity.

(c)Certificates Not Required. To the extent that this Agreement and the Plan provide for the issuance of Shares, such issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any securities exchange or similar entity.

Section 4.     Withholding. All deliveries of Shares pursuant to this Agreement shall be subject to withholding of all applicable taxes. The Company shall have the right to require the Participant (or if applicable, permitted assigns, heirs and Designated Beneficiaries) to remit to the Company an amount sufficient to satisfy any tax requirements prior to the delivery date of any Shares in connection with this Agreement.  Except as may be provided otherwise by the Committee, such withholding obligations may be satisfied at the election of the Participant (a) through debit of a deposit account held by the Participant at a bank affiliated with the Company, or (b) through the surrender of Shares to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such Shares under clause (b) may not be used to satisfy more than the Company’s minimum statutory withholding obligation.

Section 5.    Non-Transferability of RSUs. Neither the RSUs awarded pursuant to this Agreement, nor any portion thereof, shall be transferable, except as designated by the Participant by will or by the laws of descent and distribution or pursuant to a domestic relations order. Except as provided in the immediately preceding sentence, this Agreement shall not be assigned, transferred, pledged, hypothecated or otherwise disposed of by the Participant in any way whether by operation of law or otherwise, and shall not be subject to execution, attachment or similar process.  Any attempt at assignment, transfer, pledge, hypothecation or other disposition of this Agreement contrary to the provisions hereof, or the levy of any attachment or similar process upon this Agreement or the RSUs it represents, shall be null and void and without effect.

Section 6.    No Rights as Stockholder. The Participant shall not have any rights of a stockholder of the Company with respect to the RSUs, including but not limited to, dividend or voting rights, prior to the settlement of the RSUs pursuant to Section 3(a) above and issuance of a stock certificate or its equivalent as provided herein.

Section 7.    Heirs and Successors. This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring all or substantially all of the Company’s assets or business. If any rights of the Participant or benefits distributable to the Participant under this Agreement have not been settled or distributed at the time of the Participant’s death, such rights shall be settled for and such benefits shall be distributed to the Designated Beneficiary in accordance with the provisions of this Agreement and the Plan. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form as the Committee may require. The Participant’s designation of beneficiary may be amended or revoked from time to time by the Participant in accordance with any procedures established by the Committee. If a Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any benefits that would have been provided to the Participant shall be provided to the legal representative of the estate of the Participant. If a Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the provision of the Designated Beneficiary’s benefits under this Agreement, then any benefits that would have been provided to the Designated Beneficiary shall be provided to the legal representative of the estate of the Designated Beneficiary.

Section 8.    Administration. The authority to manage and control the operation and administration of this Agreement and the Plan shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan. Any interpretation of this Agreement or the Plan by the Committee and any decision made by the Committee with respect to this Agreement or the Plan shall be final and binding on all persons.

Section 9.    Plan Governs. Notwithstanding anything in this Agreement to the contrary, this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the Human Resources Department of the Company. This Agreement shall be subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time. Notwithstanding any term of this Agreement to the contrary, in the event of any discrepancy between the corporate records of the Company and this Agreement, the corporate records of the Company shall control.

Section 10.    Not an Employment Contract. Neither the RSUs granted under this Agreement nor this Agreement shall confer upon the Participant any rights with respect to continuance of employment or other service with the Company or a Subsidiary, nor shall they interfere in any way with any right the Company or a Subsidiary may otherwise have to terminate or modify the terms of the Participant’s employment or other service at any time.

Section 11.    Amendment. Without limitation of Section 14 and Section 15 below, this Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended in writing by the Participant and the Company without the consent of any other person.

Section 12.    Governing Law. This Agreement, the Plan and all actions taken in connection herewith and therewith shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws, except as superseded by applicable federal law.

Section 13.    Validity. If any provision of this Agreement is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein.

Section 14.    Section 409A Amendment. This Agreement is intended to be exempt from Code Section 409A and this Agreement shall be administered and interpreted in accordance with such intent. The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Agreement without the consent of the Participant in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A; and the Participant hereby acknowledges and consents to such rights of the Committee.

Section 15.    Clawback. This Agreement, the RSUs and any Shares issued under this Agreement, and any amount or benefit received under the Plan, shall be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of any applicable Company or Subsidiary clawback policy (the “Policy”) or any applicable law, as may be in effect from time to time. The Participant hereby acknowledges and consents to the Company’s or a Subsidiary’s application, implementation and enforcement of (a) the Policy and

any similar policy established by the Company or a Subsidiary that may apply to the Participant, whether adopted prior to or following the date of this Agreement, and (b) any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, and agrees that the Company or a Subsidiary may take such actions as may be necessary to effectuate the Policy, any similar policy and applicable law, without further consideration or action.

* * * * *

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its name and on its behalf, and the Participant acknowledges understanding and acceptance of, and agrees to, the terms of this Agreement, all as of the Grant Date. This Agreement and any amendments or supplements hereto may be executed in counterparts, each of which shall constitute an original, but taken together shall constitute a single contract.  Signature may be in electronic format, including by electronic acknowledgment.

	HEARTLAND FINANCIAL USA, INC.
By:	/s/ Mark Murtha
Print Name:	Mark Murtha
Print Title:	EVP Human Resources

	PARTICIPANT
By:	Via Electronic Acknowledgment
Print Name:

EXHIBIT A

Performance Targets

EX-10.2

Exhibit 10.2

HEARTLAND FINANCIAL USA, INC.

2012 LONG-TERM INCENTIVE PLAN

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT

THREE-YEAR PERFORMANCE PERIOD

The Participant specified below is hereby granted a performance-based restricted stock unit award by HEARTLAND FINANCIAL USA, INC.(the “Company”) under the HEARTLAND FINANCIAL USA, INC. 2012 LONG-TERM INCENTIVE PLAN(the “Plan”). The restricted stock units awarded by this Award Agreement (this “Agreement”) shall be subject to the terms of the Plan and the terms set forth in this Agreement. All capitalized terms used in this Agreement and not otherwise defined have the meaning assigned to them in the Plan.

Section 1.Award. The Company hereby grants to the Participant an award of restricted stock units (each such unit, an “RSU”), where each RSU represents the right of the Participant to receive one Share in the future, subject to the terms of this Agreement and the Plan. For all purposes of this RSU:

The “Participant” is	______________________________.
The “Grant Date” is	______________________________.
The number of RSUs is	______________________________.

Section 2.Vesting of RSUs.

(a)Vesting. To the extent earned in accordance with Section 2(b), and subject to forfeiture prior to vesting in accordance with Section 2(c), the RSUs shall vest on the Measurement Date (as defined in Section 2(b)). Shares shall be delivered based upon vesting of RSUs pursuant to and subject to Section3 below.

(b)Earning of RSUs. The RSUs shall be earned based upon the financial performance of the Company as set forth in Exhibit A (the “Performance Targets”) during the three fiscal years commencing with the fiscal year in which the Grant Date occurs (the “Three-Year Performance Period”). The Committee shall determine whether the RSUs have been earned based upon the Performance Targets at its first meeting (the date of such meeting, the “Measurement Date”) after measurement of performance in relation to the Performance Targets is attainable for the last fiscal year of the Three-Year Performance Period, and the Company shall advise the Participant as soon as practicable thereafter of the number of RSUs that have been earned; provided, however, that no RSUs shall become earned if there exists as of the Measurement Date, as determined by the Committee, a material weakness (a “Material Weakness”) in the safety, soundness or compliance (e.g., a regulatory memorandum of understanding, or a material weakness in internal control over financial reporting) of the Company. In determining whether the RSUs have been earned based upon the Performance Targets, the Committee shall consider the effects of the following items, to the extent identified in the audited financial statements of the Company as of and for the fiscal years ended during the Three-Year Performance Period, or in the Management Discussion and Analysis section of the Company’s annual reports made

available to its stockholders during the Three-Year Performance Period: (i) extraordinary, unusual or nonrecurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting principles, regulations or laws or (iv) mergers or acquisitions.

(c)Forfeiture and Special Vesting of RSUs. Notwithstanding the foregoing provisions of Section 2(b):

(i)Any RSUs that have not been earned as of the Measurement Date based upon failure to meet the Performance Targets shall expire and be forfeited on, and as of, the Measurement Date.

(ii)Any RSUs that have not been earned as of the Measurement Date based upon failure to remediate a Material Weakness shall expire and be forfeited on, and as of, the Measurement Date.

(iii)If a Participant’s Termination of Service occurs prior to the Measurement Date due to termination of the Participant’s employment by the Participant’s employer (with or without Cause) or by the Participant voluntarily (other than due to Qualifying Retirement), any RSUs held by the Participant shall expire and shall be forfeited as of the date of employment termination.

(iv)If a Participant’s Termination of Service occurs prior to the Measurement Date due to the Participant’s Disability or death, then the RSUs shall continue to remain outstanding until the Measurement Date and shall become vested, to the extent earned, as of and on the Measurement Date.

(v)If the Participant’s Termination of Service occurs prior to the Measurement Date due to a Qualifying Retirement, then the RSUs shall continue to remain outstanding until the Measurement Date and shall become vested, to the extent earned, as of and on the Measurement Date. For such purposes, a “Qualifying Retirement” means a voluntary Termination of Services by the Participant on or after the date the Participant reaches the age of 62, and provided that (A) the Participant has provided at least five (5) years of full-time equivalent services to the Company or a Subsidiary through the date of such Termination of Services; (B) the Participant covenants that the Participant shall not engage in any full-time employment with any entity thereafter (although Participant shall be entitled to engage in part-time employment, including services as a member of a board of directors or similar body, with an entity that does not compete with the Company or any Subsidiary) unless such employment has been approved in writing by the Chair of the Committee;(C) the Participant executes a general release and waiver of claims against the Company at the time of such Termination of Services; and (D) the Participant executes a confidentiality, non-solicitation, and non-competition agreement with the Company at the time of such Termination of Service.  Consistent with Section 5.2 of the Plan, any question regarding whether a voluntary Termination of Service constitutes a Qualifying Retirement shall be determined by the Committee and the decision of the Committee shall be final and binding upon the Participant.

(vi)If there is a Change in Control that occurs prior to the Measurement Date, (1) all RSUs shall become fully vested if the obligations under this Agreement are not

assumed by the Company or the successor in such Change in Control, and (2) all RSUs shall become fully vested upon an Involuntary Termination within two years after the Change in Control.

Section 3.Settlement of RSUs. Delivery of Shares or other amounts under this Agreement shall be subject to the following:

a.Delivery of Shares. The Company shall deliver to the Participant one Share, free and clear of any restrictions, in settlement of each vested RSU within 30 days following the Measurement Date.

b.Compliance with Applicable Laws. Notwithstanding any other term of this Agreement or the Plan, the Company shall have no obligation to deliver any Shares or make any other distribution of benefits under this Agreement unless such delivery or distribution complies with all applicable laws and the applicable rules of any securities exchange or similar entity.

c.Certificates Not Required. To the extent that this Agreement and the Plan provide for the issuance of Shares, such issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any securities exchange or similar entity.

Section 4.Withholding. All deliveries of Shares pursuant to this Agreement shall be subject to withholding of all applicable taxes. The Company shall have the right to require the Participant (or if applicable, permitted assigns, heirs and Designated Beneficiaries) to remit to the Company an amount sufficient to satisfy any tax requirements prior to the delivery date of any Shares in connection with this Agreement.  Except as may be provided otherwise by the Committee, such withholding obligations may be satisfied at the election of the Participant (a) through debit of a deposit account held by the Participant at a bank affiliated with the Company, or (b) through the surrender of Shares to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such Shares under clause (b) may not be used to satisfy more than the Company’s minimum statutory withholding obligation.

Section 5.Non-Transferability of RSUs. Neither the RSUs awarded pursuant to this Agreement, nor any portion thereof, shall be transferable, except as designated by the Participant by will or by the laws of descent and distribution or pursuant to a domestic relations order. Except as provided in the immediately preceding sentence, this Agreement shall not be assigned, transferred, pledged, hypothecated or otherwise disposed of by the Participant in any way whether by operation of law or otherwise, and shall not be subject to execution, attachment or similar process.  Any attempt at assignment, transfer, pledge, hypothecation or other disposition of this Agreement contrary to the provisions hereof, or the levy of any attachment or similar process upon this Agreement or the RSUs it represents, shall be null and void and without effect.

Section 6.No Rights as Stockholder. The Participant shall not have any rights of a stockholder of the Company with respect to the RSUs, including but not limited to, dividend or voting rights, prior to the settlement of the RSUs pursuant to Section 3(a) above and issuance of a stock certificate or its equivalent as provided herein.

Section 7.Heirs and Successors. This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring all or substantially all of the Company’s assets or business. If any rights of the Participant or benefits distributable to the Participant under this Agreement have not been settled or distributed at the time of the Participant’s death, such rights shall be settled for and such benefits shall be distributed to the Designated Beneficiary in accordance with the provisions of this Agreement and the Plan. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form as the Committee may require. The Participant’s designation of beneficiary may be amended or revoked from time to time by the Participant in accordance with any procedures established by the Committee. If a Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any benefits that would have been provided to the Participant shall be provided to the legal representative of the estate of the Participant. If a Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the provision of the Designated Beneficiary’s benefits under this Agreement, then any benefits that would have been provided to the Designated Beneficiary shall be provided to the legal representative of the estate of the Designated Beneficiary.

Section 8.Administration. The authority to manage and control the operation and administration of this Agreement and the Plan shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan. Any interpretation of this Agreement or the Plan by the Committee and any decision made by the Committee with respect to this Agreement or the Plan shall be final and binding on all persons.

Section 9.Plan Governs. Notwithstanding anything in this Agreement to the contrary, this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the Human Resources Department of the Company. This Agreement shall be subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time. Notwithstanding any term of this Agreement to the contrary, in the event of any discrepancy between the corporate records of the Company and this Agreement, the corporate records of the Company shall control.

Section 10.Not an Employment Contract. Neither the RSUs granted under this Agreement nor this Agreement shall confer upon the Participant any rights with respect to continuance of employment or other service with the Company or a Subsidiary, nor shall they interfere in any way with any right the Company or a Subsidiary may otherwise have to terminate or modify the terms of the Participant’s employment or other service at any time.

Section 11.Amendment. Without limitation of Section 14 and Section 15 below, this Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended in writing by the Participant and the Company without the consent of any other person.

Section 12.Governing Law. This Agreement, the Plan and all actions taken in connection herewith and therewith shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws, except as superseded by applicable federal law.

Section 13.Validity. If any provision of this Agreement is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein.

Section 14.Section 409A Amendment. This Agreement is intended to be exempt from Code Section 409A and this Agreement shall be administered and interpreted in accordance with such intent. The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Agreement without the consent of the Participant in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A; and the Participant hereby acknowledges and consents to such rights of the Committee.

Section 15.Clawback. This Agreement, the RSUs and any Shares issued under this Agreement, and any amount or benefit received under the Plan, shall be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of any applicable Company or Subsidiary clawback policy (the “Policy”) or any applicable law, as may be in effect from time to time. The Participant hereby acknowledges and consents to the Company’s or a Subsidiary’s application, implementation and enforcement of (a) the Policy and any similar policy established by the Company or a Subsidiary that may apply to the Participant, whether adopted prior to or following the date of this Agreement, and (b) any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, and agrees that the Company or a Subsidiary may take such actions as may be necessary to effectuate the Policy, any similar policy and applicable law, without further consideration or action.

* * * * *

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its name and on its behalf, and the Participant acknowledges understanding and acceptance of, and agrees to, the terms of this Agreement, all as of the Grant Date. This Agreement and any amendments or supplements hereto may be executed in counterparts, each of which shall constitute an original, but taken together shall constitute a single contract. Signature may be in electronic format, including by electronic acknowledgment.

	HEARTLAND FINANCIAL USA, INC.
By:	/s/ Mark Murtha
Print Name:	Mark Murtha
Print Title:	EVP Human Resources

	PARTICIPANT
By:	Via Electronic Acknowledgment
Print Name:

EXHIBIT A

Performance Targets

EX-10.3

Exhibit 10.3

HEARTLAND FINANCIAL USA, INC,

2012 LONG-TERM INCENTIVE PLAN

TIME-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT

The Participant specified below is hereby granted a restricted stock unit award by HEARTLAND FINANCIAL USA, INC.(the “Company”), under the HEARTLAND FINANCIAL USA, INC. 2012 LONG-TERM INCENTIVE PLAN(the “Plan”). The restricted stock units awarded by this Award Agreement (this “Agreement”) shall be subject to the terms of the Plan and the terms set forth in this Agreement. All capitalized terms used in this Agreement and not otherwise defined have the meaning assigned to them in the Plan.

Section 1.Award. The Company hereby grants to the Participant an award of restricted stock units (each such unit, an “RSU”), where each RSU represents the right of the Participant to receive one Share in the future, subject to the terms of this Agreement and the Plan. For purposes of this Agreement:

The “Participant” is	_______________________________________________.
The “Grant Date” is	_______________________________________________.
The number of RSUs is	_______________________________________________.

Section 2.Vesting of RSU.

(a)The RSUs shall vest with respect to one-third (1/3) of the RSUs (rounded down to the nearest whole number) on the first, second, and third anniversary of the Grant Date (and shall be fully vested on the third anniversary); provided that the Participant’s Termination of Service has not occurred prior to the vesting date. A “Termination of Service” shall mean the Participant’s cessation of employment with the Company.

(b)Notwithstanding the foregoing provisions of this Section 2, the RSUs shall become fully vested immediately upon (i) the Participant’s Disability, or (ii) the Participant’s death.

(c)Notwithstanding the foregoing provisions of this Section 2,if the Participant’s Termination of Service occurs due to a Qualifying Retirement, all RSUs shall become vested as of the date of such Termination of Service due to Qualifying Retirement. For such purposes, a “Qualifying Retirement” means a voluntary Termination of Services by the Participant on or after the date the Participant reaches the age of 62, and provided that (A) the Participant has provided at least five (5) years of full-time equivalent services to the Company or a Subsidiary through the date of such Termination of Services; (B) the Participant covenants that the Participant shall not engage in any full-time employment with any entity thereafter (although Participant shall be entitled to engage in part-time employment, including services as a member of a board of directors or similar body, with an entity that does not compete with the Company or any Subsidiary) unless such employment has been approved in writing by the Chair of the Committee;(C) the

Participant executes a general release and waiver of claims against the Company at the time of such Termination of Services; and (D) the Participant executes a confidentiality, non-solicitation, and non-competition agreement with the Company at the time of such Termination of Service.  Consistent with Section 5.2 of the Plan, any question regarding whether a voluntary Termination of Service constitutes a Qualifying Retirement shall be determined by the Committee and the decision of the Committee shall be final and binding upon the Participant.

(d)If there is a Change in Control (1) all RSUs that have not been previously forfeited shall become fully vested if the obligations under this Agreement are not assumed by the Company or the successor in such Change in Control, and (2) all RSUs that have not been previously forfeited shall become fully vested upon an Involuntary Termination within two years after the Change in Control.

(e)Except as set forth in Section 2(b),Section 2(c) and Section 2(d) above, upon the Participant’s Termination of Service, Participant shall forfeit all RSUs that have not vested as of such Termination of Service and Participant shall have no further rights under this Agreement.

Section 3.Settlement of RSUs. Delivery of Shares or other amounts under this Agreement and the Plan shall be subject to the following:

(a)Delivery of Shares. The Company shall deliver to the Participant one Share free and clear of any restrictions in settlement of each of the vested and unrestricted RSUs within 30 days after such RSU becomes vested. Only whole Shares shall be issued, with any fractional RSUs rounded down to the nearest whole Share.

(b)Compliance with Applicable Laws.  Notwithstanding any other term of this Agreement or the Plan, the Company shall have no obligation to deliver any Shares or make any other distribution of benefits under this Agreement or the Plan unless such delivery or distribution complies with all applicable laws and the applicable rules of any securities exchange or similar entity.

(c)Certificates Not Required.  To the extent that this Agreement and the Plan provide for the issuance of Shares, such issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any securities exchange or similar entity.

Section 4.Withholding.  All deliveries of Shares pursuant to this Award shall be subject to withholding of all applicable taxes. The Company shall have the right to require the Participant (or if applicable, permitted assigns, heirs and Designated Beneficiaries) to remit to the Company an amount sufficient to satisfy any tax requirements prior to the delivery date of any Shares in connection with this Agreement.  Except as may be provided otherwise by the Committee, such withholding obligations may be satisfied at the election of the Participant (a) through debit of a deposit account held by the Participant at a Heartland affiliated bank, or (b) through the surrender of Shares to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such Shares under clause (b) may not be used to satisfy more than the Company’s minimum statutory withholding obligation.

Section 5.Non-Transferability of RSUs. No RSU granted pursuant to this Agreement is transferable except as designated by the Participant by will or by the laws of descent and distribution or pursuant to a domestic relations order. Except as provided in the immediately preceding sentence, this Agreement shall not be assigned, transferred, pledged, hypothecated or otherwise disposed of by the Participant in any way whether by operation of law or otherwise, and shall not be subject to execution, attachment or similar process.  Any attempt at assignment, transfer, pledge, hypothecation or other disposition of this Agreement contrary to the provisions hereof, or the levy of any attachment or similar process upon this Agreement or the RSUs it represents, shall be null and void and without effect.

Section 6.No Rights as Stockholder. The Participant shall not have any rights of a Stockholder with respect to the RSUs, including but not limited to, dividend or voting rights, prior to the settlement of the RSUs pursuant to Section 3(a) above and issuance of a stock certificate or its equivalent as provided herein.

Section 7.Heirs and Successors.  This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring all or substantially all of the Company’s assets or business. If any rights of the Participant or benefits distributable to the Participant under this Agreement have not been settled or distributed at the time of the Participant’s death, such rights shall be settled for and such benefits shall be distributed to the Designated Beneficiary in accordance with the provisions of this Agreement and the Plan. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form as the Committee may require. The Participant’s designation of beneficiary may be amended or revoked from time to time by the Participant in accordance with any procedures established by the Committee. If a Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any benefits that would have been provided to the Participant shall be provided to the legal representative of the estate of the Participant. If a Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the provision of the Designated Beneficiary’s benefits under this Agreement, then any benefits that would have been provided to the Designated Beneficiary shall be provided to the legal representative of the estate of the Designated Beneficiary.

Section 8.Administration.  The authority to manage and control the operation and administration of this Agreement and the Plan shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan. Any interpretation of this Agreement or the Plan by the Committee and any decision made by the Committee with respect to this Agreement or the Plan shall be final and binding on all persons.

Section 9.Plan Governs. Notwithstanding anything in this Agreement to the contrary, this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the Human Resources Department of the Company. This Agreement shall be subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time. Notwithstanding any term of this Agreement to the contrary, in the event of any discrepancy between the corporate records of the Company and this Agreement, the corporate records of the Company shall control.

Section 10.Not an Employment Contract. Neither the RSUs granted under this Agreement nor this Agreement shall confer upon the Participant any rights with respect to continuance of employment or other service with the Company or a Subsidiary, nor shall they interfere in any way with any right the Company or a Subsidiary may otherwise have to terminate or modify the terms of the Participant’s employment or other service at any time.

Section 11.Amendment.  Without limitation of Section 14 and Section 15 below, this Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended in writing by the Participant and the Company without the consent of any other person.

Section 12.Governing Law. This Agreement, the Plan and all actions taken in connection herewith and therewith shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws, except as superseded by applicable federal law.

Section 13.Validity. If any provision of this Agreement is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein.

Section 14.Section 409A Amendment. This Agreement is intended to be exempt from Code Section 409A and this Agreement shall be administered and interpreted in accordance with such intent. The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Agreement without the consent of the Participant in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A; and the Participant hereby acknowledges and consents to such rights of the Committee.

Section 15.Clawback. This Agreement, the RSUs and any Shares received under this Agreement, and any amount or benefit received under the Plan shall be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of any applicable Company or Subsidiary clawback policy (the “Policy”) or any applicable law, as may be in effect from time to time. The Participant hereby acknowledges and consents to the Company’s or a Subsidiary’s application, implementation and enforcement of (a) the Policy and any similar policy established by the Company or a Subsidiary that may apply to the Participant, whether adopted prior to or following the date of this Agreement, and (b) any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, and agrees that the Company or a Subsidiary may take such actions as may be necessary to effectuate the Policy, any similar policy and applicable law, without further consideration or action.

* * * * *

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its name and on its behalf, and the Participant acknowledges understanding and acceptance of, and agrees to, the terms of this Agreement, all as of the Grant Date. This Agreement and any amendments or supplements hereto may be executed in counterparts, each of which shall constitute an original, but taken together shall constitute a single contract.  Signature may be in electronic format, including by electronic acknowledgement.

	HEARTLAND FINANCIAL USA, INC.
By:	/s/ Mark Murtha
Print Name:	Mark Murtha
Print Title:	EVP Human Resources

	PARTICIPANT
By:	Via Electronic Acknowledgment
Print Name:

EX-31.1

Exhibit 31.1

I, Lynn B. Fuller, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Heartland Financial USA, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting, and;
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	May 6, 2016
/s/ Lynn B. Fuller
Lynn B. Fuller
Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Bryan R. McKeag, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Heartland Financial USA, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting, and;
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	May 6, 2016
/s/ Bryan R. McKeag
Bryan R. McKeag
Executive Vice President
Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Heartland Financial USA, Inc. (the “Company”) on Form 10-Q for the quarter ending March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report), I, Lynn B. Fuller, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Lynn B. Fuller
Lynn B. Fuller
Chief Executive Officer
Date:	May 6, 2016

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Heartland Financial USA, Inc. (the “Company”) on Form 10-Q for the quarter ending March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report), I, Bryan R. McKeag, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Bryan R. McKeag
Bryan R. McKeag
Executive Vice President
Chief Financial Officer
Date:	May 6, 2016

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 05, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	HEARTLAND FINANCIAL USA INC
Entity Central Index Key	0000920112
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		24,521,747

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks	$ 124,060	$ 237,841
Federal funds sold and other short-term investments	9,168	20,958
Cash and cash equivalents	133,228	258,799
Time deposits in other financial institutions	2,355	2,355
Securities:
Available for sale, at fair value (cost of $1,680,299 at March 31, 2016, and $1,584,703 at December 31, 2015)	1,690,516	1,578,434
Held to maturity, at cost (fair value of $289,446 at March 31, 2016, and $294,513 at December 31, 2015)	271,300	279,117
Other investments, at cost	22,325	21,443
Loans held for sale	76,565	74,783
Loans and leases receivable:
Held to maturity	5,503,005	5,001,486
Allowance for loan and lease losses	(49,738)	(48,685)
Loans and leases receivable, net	5,453,267	4,952,801
Premises, furniture and equipment, net	160,899	146,259
Premises, furniture and equipment held for sale	3,889	3,889
Other real estate, net	11,338	11,524
Goodwill	127,699	97,852
Other intangible assets, net	61,420	56,945
Cash surrender value on life insurance	110,834	110,297
Other assets	128,144	100,256
TOTAL ASSETS	8,253,779	7,694,754
Deposits:
Demand	2,079,521	1,914,141
Savings	3,702,431	3,367,479
Time	1,142,368	1,124,203
Total deposits	6,924,320	6,405,823
Short-term borrowings	325,741	293,898
Other borrowings	265,760	263,214
Accrued expenses and other liabilities	68,415	68,646
TOTAL LIABILITIES	7,584,236	7,031,581
STOCKHOLDERS' EQUITY:
Common stock (par value $1 per share; 30,000,000 shares authorized at both March 31, 2016, and December 31, 2015; issued 24,519,928 shares at March 31, 2016, and 22,435,693 shares at December 31, 2015)	24,520	22,436
Capital surplus	273,310	216,436
Retained earnings	366,014	348,630
Accumulated other comprehensive income (loss)	1,924	(6,027)
Treasury stock at cost (65 shares at March 31, 2016, and 0 shares at December 31, 2015)	(2)	0
TOTAL STOCKHOLDERS' EQUITY	669,543	663,173
TOTAL LIABILITIES AND EQUITY	8,253,779	7,694,754
Series C Senior Non-Cumulative Perpetual Convertible Preferred Stock
STOCKHOLDERS' EQUITY:
Preferred stock	0	81,698
Series D Senior Non-Cumulative Perpetual Convertible Preferred Stock
STOCKHOLDERS' EQUITY:
Preferred stock	$ 3,777	$ 0

XML

Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Cost of available for sale securities	$ 1,680,299	$ 1,584,703
Fair value of held to maturity securities	$ 289,446	$ 294,513
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	24,519,928	22,435,693
Treasury stock shares	65	0
Series C Senior Non-Cumulative Perpetual Convertible Preferred Stock
Preferred stock, par value (in dollars per share)	$ 1	$ 1
Preferred stock, shares outstanding	0	81,698
Series D Senior Non-Cumulative Perpetual Convertible Preferred Stock
Preferred stock, par value (in dollars per share)	$ 1	$ 0
Preferred stock, shares authorized	3,000	0
Preferred stock, shares issued	3,000	0
Preferred stock, shares outstanding	3,000	0

XML

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
INTEREST INCOME:
Interest and fees on loans and leases	$ 68,425	$ 53,049
Interest on securities:
Taxable	8,735	7,132
Nontaxable	3,510	2,916
Interest on federal funds sold	10	1
Interest on interest bearing deposits in other financial institutions	4	4
TOTAL INTEREST INCOME	80,684	63,102
INTEREST EXPENSE:
Interest on deposits	4,173	4,172
Interest on short-term borrowings	329	198
Interest on other borrowings (includes $506 and $564 of interest expense related to derivatives reclassified from accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015, respectively.	3,475	4,802
TOTAL INTEREST EXPENSE	7,977	9,172
NET INTEREST INCOME	72,707	53,930
Provision for loan and lease losses	2,067	1,671
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES	70,640	52,259
NONINTEREST INCOME:
Service charges and fees	7,162	5,404
Loan servicing income	1,268	1,041
Trust fees	3,813	3,631
Brokerage and insurance commissions	1,022	1,087
Securities gains, net (includes $3,756 and $4,353 of net security gains reclassified from accumulated other comprehensive income for the three months ended March 31, 2016 and 2015, respectively.	3,526	4,353
Net gains on sale of loans held for sale	11,065	13,742
Income on bank owned life insurance	522	524
Other noninterest income	1,200	881
TOTAL NONINTEREST INCOME	29,578	30,663
NONINTEREST EXPENSES:
Salaries and employee benefits	41,714	36,638
Occupancy	5,003	4,259
Furniture and equipment	2,113	2,106
Professional fees	7,010	6,044
FDIC insurance assessments	1,168	956
Advertising	1,284	1,181
Intangible assets amortization	1,895	631
Other real estate and loan collection expenses	572	465
Loss on sales/valuations of assets, net	313	353
Other noninterest expenses	9,237	6,981
TOTAL NONINTEREST EXPENSES	70,309	59,614
INCOME BEFORE INCOME TAXES	29,909	23,308
Income taxes (includes $1,212 and $1,413 of income tax expense reclassified from accumulated other comprehensive income for the three months ended March 31, 2016 and 2015, respectively.	9,900	7,599
NET INCOME	20,009	15,709
Preferred dividends	(168)	(204)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$ 19,841	$ 15,505
EARNINGS PER COMMON SHARE - BASIC (in dollars per share)	$ 0.84	$ 0.77
EARNINGS PER COMMON SHARE - DILUTED (in dollars per share)	0.82	0.76
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share)	$ 0.10	$ 0.10

XML

Consolidated Statements of Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Interest expense related to derivatives reclassified from accumulated other comprehensive income (loss)	$ 3,475	$ 4,802
Net security gains reclassified from accumulated other comprehensive income	3,526	4,353
Income tax expense reclassified from accumulated other comprehensive income	9,900	7,599
Reclassification out of Accumulated Other Comprehensive Income | Accumulated Net Gain (Loss) from Derivatives
Interest expense related to derivatives reclassified from accumulated other comprehensive income (loss)	506	554
Reclassification out of Accumulated Other Comprehensive Income | Accumulated Net Unrealized Investment Gain (Loss)
Net security gains reclassified from accumulated other comprehensive income	3,756	4,353
Reclassification out of Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income (Loss)
Income tax expense reclassified from accumulated other comprehensive income	$ 1,212	$ 1,413

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
NET INCOME	$ 20,009	$ 15,709
Securities:
Net change in unrealized gain on securities	20,067	11,478
Reclassification adjustment for net gains realized in net income	(3,756)	(4,353)
Net change in non-credit related other than temporary impairment	7	24
Income taxes	(6,524)	(2,859)
Other comprehensive income on securities	9,794	4,290
Derivatives used in cash flow hedging relationships:
Net change in unrealized loss on derivatives	(3,423)	(1,454)
Reclassification adjustment for net loss on derivatives realized in net income	506	564
Income taxes	1,074	327
Other comprehensive loss on cash flow hedges	(1,843)	(563)
Other comprehensive income	7,951	3,727
TOTAL COMPREHENSIVE INCOME	$ 27,960	$ 19,436

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 20,009	$ 15,709
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization	7,713	5,747
Provision for loan and lease losses	2,067	1,671
Net amortization of premium on securities	7,846	6,949
Securities gains, net	(3,526)	(4,353)
Stock based compensation	1,087	1,139
Write downs and losses on repossessed assets, net	313	353
Loans originated for sale	(227,823)	(311,140)
Proceeds on sales of loans held for sale	234,516	287,768
Net gains on sale of loans held for sale	(8,475)	(11,056)
Decrease in accrued interest receivable	787	3,234
(Increase) decrease in prepaid expenses	598	(513)
Increase in accrued interest payable	637	627
Capitalization of servicing rights	(2,590)	(2,818)
Other, net	(9,855)	(11,472)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES	23,304	(18,155)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of securities available for sale	303,448	289,466
Proceeds from the sale of securities held to maturity	4,057	0
Proceeds from the sale of other investments	2,830	5,489
Proceeds from the maturity of and principal paydowns on securities available for sale	35,379	37,479
Proceeds from the maturity of and principal paydowns on securities held to maturity	3,254	208
Purchase of securities available for sale	(362,764)	(232,422)
Purchase of other investments	(226)	(2,004)
Net increase in loans and leases	78,502	25,684
Capital expenditures	(898)	(2,919)
Net cash and cash equivalents received in acquisition	8,084	7,103
Proceeds from the sale of equipment	0	13
Proceeds on sale of OREO and other repossessed assets	2,384	2,312
NET CASH PROVIDED BY INVESTING ACTIVITIES	74,050	130,409
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits and savings accounts	1,759	90,075
Net decrease in time deposit accounts	(131,373)	(25,618)
Net increase (decrease) in short-term borrowings	1,077	(31,765)
Proceeds from short term FHLB advances	5,000	60,000
Repayments of short term FHLB advances	(10,000)	(124,000)
Proceeds from other borrowings	0	4,000
Repayments of other borrowings	(5,501)	(44,488)
Redemption of preferred stock	(81,698)	0
Purchase of treasury stock	(1,227)	(1,780)
Proceeds from issuance of common stock	563	832
Excess tax benefits on exercised stock options	1,100	612
Dividends paid	(2,625)	(2,261)
NET CASH USED BY FINANCING ACTIVITIES	(222,925)	(74,393)
Net increase (decrease) in cash and cash equivalents	(125,571)	37,861
Cash and cash equivalents at beginning of year	258,799	73,871
CASH AND CASH EQUIVALENTS AT END OF PERIOD	133,228	111,732
Supplemental disclosures:
Cash paid for income/franchise taxes	2,305	840
Cash paid for interest	7,340	8,545
Loans transferred to OREO	442	2,371
Purchases of securities available for sale, accrued, not paid	0	5,149
Sales of securities available for sale, accrued, not settled	17,189	0
Stock consideration granted for acquisition	$ 57,433	$ 53,052

XML

Consolidated Statements of Changes in Equity (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Capital Surplus	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock
Balance at beginning of period at Dec. 31, 2014	$ 496,317	$ 81,698	$ 18,511	$ 95,816	$ 298,764	$ 1,528	$ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income	19,436				15,709	3,727
Cash dividends declared:
Series C Preferred, $2.50 per share	(204)				(204)
Common, $0.10 per share	(2,057)				(2,057)
Purchase of shares of common stock	(1,780)						(1,780)
Issuance of shares of common stock	54,496		2,075	50,687			1,734
Stock based compensation	1,139			1,139
Balance at end of period at Mar. 31, 2015	567,347	81,698	20,586	147,642	312,212	5,255	(46)
Balance at beginning of period at Dec. 31, 2015	663,173	81,698	22,436	216,436	348,630	(6,027)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income	27,960				20,009	7,951
Cash dividends declared:
Series C Preferred, $2.50 per share	(168)				(168)
Common, $0.10 per share	(2,457)				(2,457)
Redemption of Series C preferred stock	(81,698)	(81,698)
Issuance of Series D preferred stock	3,777	3,777
Purchase of shares of common stock	(1,227)						(1,227)
Issuance of shares of common stock	59,096		2,084	55,787			1,225
Stock based compensation	1,087			1,087
Balance at end of period at Mar. 31, 2016	$ 669,543	$ 3,777	$ 24,520	$ 273,310	$ 366,014	$ 1,924	$ (2)

XML

Consolidated Statements of Changes in Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Stockholders' Equity [Abstract]
Cash dividends per share preferred stock (in dollars per share)	$ 2.50	$ 2.50
Cash dividends per share common stock (in dollars per share)	$ 0.10	$ 0.10
Shares of common stock purchased	20,070	24,886
Shares of common stock issued	2,104,305	2,098,833

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

BASIS OF PRESENTATION

The interim unaudited consolidated financial statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended December 31, 2015, included in the Form 10-K of Heartland Financial USA, Inc. ("Heartland") filed with the Securities and Exchange Commission ("SEC") on March 11, 2016. Accordingly, footnote disclosures which would substantially duplicate the disclosure contained in the audited consolidated financial statements have been omitted.

The financial information of Heartland included herein has been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments), that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the interim period ended March 31, 2016, are not necessarily indicative of the results expected for the year ending December 31, 2016.

Earnings Per Share

Basic earnings per share is determined using net income available to common stockholders and weighted average common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average common shares and assumed incremental common shares issued. Amounts used in the determination of basic and diluted earnings per share for the three months ended March 31, 2016 and 2015, are shown in the table below:

	Three Months Ended March 31, 2016
(Dollars and number of shares in thousands, except per share data)	2016			2015
Net income attributable to Heartland	$	20,009		$	15,709
Preferred dividends	(168		)	(204		)
Net income available to common stockholders	$	19,841		$	15,505
Weighted average common shares outstanding for basic earnings per share	23,657			20,215
Assumed incremental common shares issued upon exercise of stock options and non-vested restricted stock units	460			278
Weighted average common shares for diluted earnings per share	24,117			20,493
Earnings per common share — basic	$	0.84		$	0.77
Earnings per common share — diluted	$	0.82		$	0.76
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	57			—

Stock-Based Compensation

Heartland may grant, through its Nominating and Compensation Committee (the "Compensation Committee"), non-qualified and incentive stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and cash incentive awards, under its 2012 Long-Term Incentive Plan (the "Plan"). The Plan, which was approved by stockholders in May 2012 and replaced Heartland's 2005 Long-Term Incentive Plan with respect to grants after such approval, reserved 162,868 shares of common stock at March 31, 2016, for issuance under future awards that may be granted under the Plan to employees and directors of, and service providers to, Heartland or its subsidiaries.

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, "Compensation-Stock Compensation" requires the measurement of the cost of employee services received in exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the award is based upon its fair value estimated on the date of grant and recognized in the consolidated statements of income over the vesting period of the award. The fair market value of restricted stock and restricted stock units is based on the fair value of the underlying shares of common stock on the date of grant. The fair value of stock options is estimated on the date of grant using the Black-Scholes model.

The amount of tax benefit related to the exercise, vesting, and forfeiture of equity-based awards reflected in additional paid-in-capital, not taxes payable, was $1.1 million and $612,000 during the three months ended March 31, 2016 and 2015, respectively.

Restricted Stock Units

The Plan permits the Compensation Committee to grant restricted stock units ("RSUs"). In the first quarter of 2016, the Compensation Committee granted time-based RSUs with respect to 72,644 shares of common stock, and in the first quarter of 2015, the Compensation Committee granted time-based RSUs with respect to 78,220 shares of common stock to selected officers. The time-based RSUs represent the right, without payment, to receive shares of Heartland common stock at a specified date in the future. The time-based RSUs granted in 2016 vest over three years in equal installments on the first, second and third anniversaries of the grant date. The time-based RSUs granted in 2015 vest over five years in equal installments on the third, fourth, and fifth anniversaries of the grant date. The time-based RSUs will be settled in common stock upon vesting, and will not be entitled to dividends until vested. The time-based RSUs may also vest upon death or disability, upon a change in control or upon a "qualified retirement" (as defined in the RSU agreement). The retiree is required to sign a non-solicitation and non-compete agreement as a condition to vesting.

In addition to the time-based RSUs referenced in the preceding paragraph, the Compensation Committee granted performance-based RSUs with respect to 35,516 shares of common stock in the first quarter of 2016, and 39,075 shares of common stock in the first quarter of 2015. These performance-based RSUs are earned based on satisfaction of performance targets for the fiscal years ended December 31, 2016, and December 31, 2015, respectively, and then fully vest two years after the end of the performance period. For the grants awarded in 2016, the portion of the RSUs earned based on performance vests on December 31, 2018, and for the grants awarded in 2015, the portion of the RSUs earned based on performance vests on December 31, 2017, subject to employment on the respective vesting dates. The performance-based RSUs vest to the extent that they are earned upon death or disability, upon a change in control or upon a "qualified retirement."

The Compensation Committee also granted performance-based RSUs with respect to 11,408 shares of common stock in the first quarter of 2016. These performance-based RSUs will be earned based on satisfaction of performance targets for the three-year performance period ended December 31, 2018. These performance-based RSUs will vest in 2019 after measurement of performance in relation to the performance targets. The performance-based RSUs vest to the extent that they are earned upon death or disability, upon a change in control or upon a "qualified retirement."

The Compensation Committee also grants RSUs under the Plan to directors as part of their compensation, to new management level employees at commencement of employment, and to other employees and service providers as incentives. During the three months ended March 31, 2016, and March 31, 2015, 150 and 300 RSUs, respectively, were granted to directors and new employees.

A summary of the RSUs outstanding as of March 31, 2016 and 2015, and changes during the three months ended March 31, 2016 and 2015, follows:

	2016				2015
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Outstanding at January 1	353,195		$	25.53	396,555		$	21.48
Granted	119,718		29.05		117,595		27.87
Vested	(83,982	)	20.79		(126,847	)	16.66
Forfeited	(2,078	)	27.17		(2,531	)	23.82
Outstanding at March 31	386,853		$	27.53	384,772		$	25.00

Total compensation costs recorded for RSUs were $1.1 million for both three month periods ended March 31, 2016 and 2015. As of March 31, 2016, there were $5.2 million of total unrecognized compensation costs related to the 2005 and 2012 Long-Term Incentive Plans for RSUs which are expected to be recognized through 2019.

Options

Although the Plan provides authority to the Compensation Committee to grant stock options, no options were granted during the first three months of 2016 and 2015. Prior to 2009, options were typically granted annually with an expiration date ten years after the date of grant. Vesting was generally over a five-year service period with equal portions of a grant becoming exercisable at three years, four years, and five years after the date of grant. A summary of the stock options outstanding as of March 31, 2016 and 2015, and changes during the three months ended March 31, 2016 and 2015, follows:

	2016				2015
	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at January 1	125,950		$	24.08	215,851		$	23.85
Granted	—		—		—		—
Exercised	(19,750	)	21.60		(32,400	)	20.85
Forfeited	(1,250	)	21.60		(1,500	)	21.00
Outstanding at March 31	104,950		$	24.58	181,951		$	24.37
Options exercisable at March 31	104,950		$	24.58	181,951		$	24.37

AtMarch 31, 2016, the vested options totaled 104,950 shares with a weighted average exercise price of $24.58 per share and a weighted average remaining contractual life of 1.15 years. The intrinsic value (the difference between the market price and the aggregate exercise price) for the vested options as of March 31, 2016, was $652,000. The intrinsic value for the total of all options exercised during the three months ended March 31, 2016, was $155,000.

The exercise price of stock options granted is established by the Compensation Committee, but the exercise price for the stock options may not be less than the fair market value of the shares on the date that the option is granted or, if greater, the par value of a share of stock. Each option granted is exercisable in full at any time or from time to time, subject to vesting provisions, as determined by the Compensation Committee and as provided in the option agreement, but such time may not exceed ten years from the grant date. Cash received from options exercised was $427,000 for the three months ended March 31, 2016, and $676,000 for the three months ended March 31, 2015.

Total compensation costs recorded for options were $0 for both three month periods ended March 31, 2016 and 2015. There are no unrecorded compensation costs related to options at March 31, 2016. No stock options vested during the three-month periods ended March 31, 2016 and 2015.

Subsequent Events

Heartland had no subsequent events through the filing date of this quarterly report on Form 10-Q with the SEC.

Effect of New Financial Accounting Standards

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The amendment clarifies the principles for recognizing revenue and develops a common revenue standard. The amendment outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” In applying the revenue model to contracts within its scope, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB Codification. The standard also requires significantly expanded disclosures about revenue recognition. The amendment is effective for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early application is not permitted. Heartland intends to adopt the accounting standard during the first quarter of 2018, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In November 2014, the FASB issued ASU 2014-16, "Derivatives and Hedging (Topic 815): Determining Whether a Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity." The amendment clarifies how current guidance should be interpreted in evaluating the characteristics and risks of a host contract in a hybrid financial instrument issued in the form of a share. One criterion requires evaluating whether the nature of the host contract is more akin to debt or to equity and whether the economic characteristics and risks of the embedded derivative feature are "clearly and closely related" to the host contract. In making that evaluation, an issuer or investor must consider all terms and features in a hybrid financial instrument including the embedded derivative feature that is being evaluated for separate accounting or may consider all terms and features in the hybrid financial instrument except for the embedded derivative feature that is being evaluated for separate accounting. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. Heartland adopted this standard on January 1, 2016, and the adoption of this standard did not have a material impact on its results of operations, financial position, and liquidity.

In January 2015, the FASB issued ASU 2015-01, "Income Statement-Extraordinary and Unusual Items." The amendment eliminates from U.S. GAAP the concept of extraordinary items. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. This amended guidance will prohibit separate disclosure of extraordinary items in the income statement. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Entities may apply the amendment prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. Heartland adopted this standard on January 1, 2016, and the adoption of this standard did not have a material impact on the results of operations, financial position, and liquidity.

In April 2015, the FASB issued ASU 2015-05, "Intangibles-Goodwill and Other-Internal-Use Software." The amendment intends to provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer's accounting for service contracts. As a result, all software licenses within the scope of this guidance will be accounted for consistently with other licenses of intangible assets. This amendment is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Entities can elect to adopt the standard either retrospectively or prospectively to all cloud computing arrangements entered into or materially modified after the adoption date. Early adoption is permitted. Heartland adopted this standard on January 1, 2016 and the adoption did not have a material impact on the results of operations, financial position, and liquidity.

In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments." The amendment eliminates the requirement of Topic 805, Business Combinations, to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. Measurement-period adjustments are calculated as if they were known at the acquisition date, but are recognized in the reporting period in which they are determined. Prior period information is not revised. Additional disclosures are required about the impact on current period income statement line items of adjustments that would have been recognized in prior periods if prior period information had been revised. This amendment is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted if financial statements have not been issued. Heartland adopted this standard effective September 30, 2015. The adoption of this standard did not have a material impact on the results of operations, financial position, and liquidity.

In January 2016, the FASB issued guidance ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities." The amendments in ASU 2016-01 to Subtopic 825-10, Financial Instruments, contain the following elements: (1) requires equity investments to be measured at fair value with changes in fair value recognized in net income; (2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (3) eliminates the requirement for public entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (4) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (5) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (6) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements; (7) clarifies that the entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity's other deferred tax assets. The amendments are effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Except for the early application of the amendment noted in item (5) above, early adoption of the amendments in this update is not permitted. Heartland intends to adopt the accounting standard in 2018, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." Topic 842 requires a lessee to recognize a lease liability and a right of use asset for each lease, with the exception of short term leases, at the commencement date of the lease and disclose key information about the leasing arrangement. Accounting requirements applied by lessors is largely unchanged. The amendment is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and will be applied on a modified retrospective basis. Heartland intends to adopt the accounting standard in 2019, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718)." The amendments in this ASU simplify several aspects of the accounting for share-based payments, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted for any interim or annual period prior to the effective date. An entity that elects early adoption must adopt all of the amendments in the same period. Heartland intends to adopt this ASU in 2017, as required, and believes the adoption will not have an impact on its results of operations, financial position, and liquidity.

XML

Acquisitions

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Acquisitions

ACQUISITIONS

CIC Bancshares, Inc.

On February 5, 2016, Heartland completed the acquisition of CIC Bancshares, Inc., parent company of Centennial Bank, headquartered in Denver, Colorado. The purchase price was approximately $76.9 million, which was paid by delivery of 2,003,235 shares of Heartland common stock and cash of $15.7 million. In addition, Heartland issued a new series of convertible preferred stock with a fair value of $3.8 million and assumed convertible notes and subordinated debt totaling approximately $7.9 million. Simultaneous with the closing of the transaction, Centennial Bank merged into Heartland's Summit Bank & Trust, with the resulting institution operating under the name, Centennial Bank and Trust. As of the close date, the transaction included, at fair value, total assets of $772.6 million, total loans of $581.5 million, and total deposits of $648.1 million. The transaction was a tax-free reorganization with respect to the stock consideration received by the stockholders of CIC Bancshares, Inc.

The assets and liabilities of CIC Bancshares, Inc. were recorded on the consolidated balance sheet at estimated fair value on the acquisition date. The following table represents, in thousands, the amounts recorded on the consolidated balance sheet as of February 5, 2016:

	As of February 5, 2016
Fair value of consideration paid:
Common Stock (2,003,235 shares)	$	57,433
Preferred Stock (3,000 shares)	3,777
Cash	15,672
Total consideration paid	76,882
Fair value of assets acquired:
Cash and due from banks	23,756
Securities:
Securities available for sale	92,831
Other securities	3,486
Loans held to maturity	581,477
Premises, furniture and equipment, net	16,450
Other real estate, net	1,934
Other intangible assets, net	6,576
Other assets	16,276
Total assets	742,786
Fair value of liabilities assumed:
Deposits	648,111
Short term borrowings	35,766
Other borrowings	7,924
Other liabilities	3,951
Total liabilities assumed	695,752
Fair value of net assets acquired	47,034
Goodwill resulting from acquisition	$	29,848

Heartland recognized $29.8 million of goodwill in conjunction with the acquisition of CIC Bancshares, Inc., which is calculated as the excess of both the consideration exchanged and the liabilities assumed as compared to the fair value of identifiable assets acquired. Goodwill resulted from the expected operational synergies, enhanced market area, cross-selling opportunities and expanded business lines. See Note 6 for further information on goodwill.

Pro Forma Information (unaudited): The following pro forma information presents the results of operations for the years ended December 31, 2015, and December 31, 2014, as if the CIC Bancshares, Inc. acquisition occurred on January 1, 2014:

(Dollars in thousands, except per share data), unaudited	For the Years Ended
	December 31, 2015		December 31, 2014
Net interest income	$	259,531	$	221,808
Net income available to common shareholders	$	59,491	$	41,004
Basic earnings per share	$	2.63	$	2.00
Diluted earnings per share	$	2.58	$	1.96

The above pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the merged companies that would have been achieved had the acquisition occurred at January 1, 2014, nor are they intended to represent or be indicative of future results of operations. The pro forma results do not include expected operating cost savings as a result of the acquisition. These pro forma results require significant estimates and judgments particularly with respect to valuation and accretion of income associated with the acquired loans.

Heartland incurred $551,000 of pre-tax merger related expenses in 2016 associated with the Centennial Bank acquisition. The merger expenses are reflected on the consolidated statements of income for the applicable period and are reported primarily in the categories of professional fees and other noninterest expenses.

Acquired loans were preliminarily recorded at fair value based on a discounted cash flow valuation methodology that considers, among other things, projected default rates, loss given defaults and recovery rates. No allowance for credit losses was carried over from the acquisition. The balance of nonaccrual loans on the acquisition date was $1.6 million.

Premier Valley Bank

On November 30, 2015, Heartland completed the purchase of Premier Valley Bank in Fresno, California. The purchase price was approximately $95.5 million, which was paid by delivery of 1,758,543 shares of Heartland common stock and cash of $28.5 million. The transaction included, at fair value, total assets of $692.7 million, loans of $389.8 million, and deposits of $622.7 million. Premier Valley Bank continues to operate under its current name and management team as Heartland's tenth, wholly-owned state-chartered bank. The transaction was a tax-free reorganization with respect to the stock consideration received by the stockholders of Premier Valley Bank.

Heartland recognized $41.0 million of goodwill in conjunction with the acquisition of Premier Valley Bank, which is calculated as the excess of both the consideration exchanged and the liabilities assumed as compared to the fair value of identifiable assets acquired. Goodwill resulted from the expected operational synergies, enhanced market area, cross-selling opportunities and expanded business lines. See Note 6 for further information on goodwill.

First Scottsdale Bank, N.A.

On September 11, 2015, Heartland completed the purchase of First Scottsdale Bank, N.A., in Scottsdale, Arizona, in an all cash transaction valued at approximately $17.7 million. Simultaneous with the closing of the transaction, First Scottsdale Bank, N.A., merged into Heartland's Arizona Bank & Trust subsidiary. The transaction included, at fair value, total assets of $81.2 million, loans of $54.7 million, and deposits of $65.9 million on the acquisition date.

Community Bancorporation of New Mexico, Inc.

On August 21, 2015, Heartland acquired Community Bancorporation of New Mexico, Inc., parent company of Community Bank in Santa Fe, New Mexico, in an all cash transaction valued at approximately $11.1 million. Simultaneous with the closing of the transaction, Community Bank merged into Heartland's New Mexico Bank & Trust subsidiary. The transaction included, at fair value, total assets of $166.3 million, loans of $99.5 million, and deposits of $147.4 million on the acquisition date. Also included in this transaction is one bank building with a fair value of $3.4 million that Heartland intends to sell. The bank building is part of the balance of premises, furniture and equipment held for sale on the consolidated balance sheet.

Community Banc-Corp of Sheboygan, Inc.

On January 16, 2015, Heartland completed the acquisition of Community Banc-Corp of Sheboygan, Inc., parent company of Community Bank & Trust in Sheboygan, Wisconsin. Under the terms of the merger agreement for this transaction, the aggregate purchase price was based upon 155% of the December 31, 2014, adjusted tangible book value, as defined in the merger agreement, of Community Banc-Corp of Sheboygan, Inc. The purchase price was approximately $53.1 million, which was paid by delivery of 1,970,720 shares of Heartland common stock. The transaction included, at fair value, total assets of $506.8 million, including loans of $395.0 million, and deposits of $433.9 million. Simultaneous with the close of the transaction, Community Bank & Trust merged into Heartland’s Wisconsin Bank & Trust subsidiary. The transaction was a tax-free reorganization with respect to the stock consideration received by the stockholders of Community Banc-Corp of Sheboygan, Inc.

Heartland recognized goodwill of $18.6 million in conjunction with the acquisition of Community Banc-Corp of Sheboygan, Inc., which is calculated as the excess of both the consideration exchanged and the liabilities assumed as compared to the fair value of identifiable assets acquired. See Note 6 for further information on goodwill.

XML

Securities

3 Months Ended

Mar. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Securities

SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of March 31, 2016, and December 31, 2015, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2016
U.S. government corporations and agencies	$	6,479	$	140	$	—		$	6,619
Mortgage-backed securities	1,386,707		14,448		(12,468		)	1,388,687
Obligations of states and political subdivisions	273,147		8,008		(152		)	281,003
Corporate debt securities	816		15		(1		)	830
Total debt securities	1,667,149		22,611		(12,621		)	1,677,139
Equity securities	13,150		227		—			13,377
Total	$	1,680,299	$	22,838	$	(12,621	)	$	1,690,516
December 31, 2015
U.S. government corporations and agencies	$	25,847	$	22	$	(103	)	$	25,766
Mortgage-backed securities	1,254,452		9,134		(20,884		)	1,242,702
Obligations of states and political subdivisions	290,522		6,547		(1,087		)	295,982
Corporate debt securities	740		106		—			846
Total debt securities	1,571,561		15,809		(22,074		)	1,565,296
Equity securities	13,142		40		(44		)	13,138
Total	$	1,584,703	$	15,849	$	(22,118	)	$	1,578,434

At March 31, 2016, and December 31, 2015, the amortized cost of the available for sale securities is net of $0 and $237,000 of credit related other-than-temporary impairment ("OTTI"), respectively.

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of March 31, 2016, and December 31, 2015, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2016
Mortgage-backed securities	$	—	$	—	$	—		$	—
Obligations of states and political subdivisions	271,300		18,492		(346		)	289,446
Total	$	271,300	$	18,492	$	(346	)	$	289,446
December 31, 2015
Mortgage-backed securities	$	4,369	$	306	$	—		$	4,675
Obligations of states and political subdivisions	274,748		15,595		(505		)	289,838
Total	$	279,117	$	15,901	$	(505	)	$	294,513

At March 31, 2016, the amortized cost of the held to maturity securities is net of $0 of credit related OTTI and $0 of non-credit related OTTI. At December 31, 2015, the amortized cost of the held to maturity securities was net of $1.5 million of credit related OTTI and $40,000 of non-credit related OTTI.

Approximately 79% of Heartland's mortgage-backed securities are issuances of government-sponsored enterprises.

The amortized cost and estimated fair value of debt securities available for sale at March 31, 2016, by contractual maturity are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	1,265	$	1,273
Due in 1 to 5 years	12,836		13,115
Due in 5 to 10 years	67,214		69,250
Due after 10 years	199,127		204,814
Total debt securities	280,442		288,452
Mortgage-backed securities	1,386,707		1,388,687
Equity securities	13,150		13,377
Total investment securities	$	1,680,299	$	1,690,516

The amortized cost and estimated fair value of debt securities held to maturity at March 31, 2016, by contractual maturity are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	4,266	$	4,336
Due in 1 to 5 years	13,714		14,499
Due in 5 to 10 years	68,786		73,224
Due after 10 years	184,534		197,387
Total debt securities	271,300		289,446
Mortgage-backed securities	—		—
Total investment securities	$	271,300	$	289,446

As of March 31, 2016 and December 31, 2015, securities with a fair value of $811.7 million and $855.8 million, respectively, were pledged to secure public and trust deposits, short-term borrowings and for other purposes as required by law.

Gross gains and losses realized related to the sales of securities available for sale for the three-month period ended March 31, 2016 and 2015, are summarized as follows, in thousands:

	Three Months Ended March 31,
	2016		2015
Proceeds from sales	$	303,448	$	289,466
Gross security gains	4,558		4,622
Gross security losses	682		269

The following tables summarize, in thousands, the amount of unrealized losses, defined as the amount by which cost or amortized cost exceeds fair value, and the related fair value of investments with unrealized losses in Heartland's securities portfolio as of March 31, 2016, and December 31, 2015. The investments were segregated into two categories: those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months. The reference point for determining how long an investment was in an unrealized loss position was March 31, 2015, andDecember 31, 2014, respectively. Securities for which Heartland has taken credit-related OTTI write-downs are categorized as being "less than 12 months" or "12 months or longer" in a continuous loss position based on the point in time that the fair value declined to below the cost basis and not the period of time since the credit-related OTTI write-down.

Securities available for sale	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2016
U.S. government corporations and agencies	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities	517,907		(8,323		)	130,640		(4,145		)	648,547		(12,468		)
Obligations of states and political subdivisions	10,003		(82		)	6,619		(70		)	16,622		(152		)
Corporate debt securities	500		(1		)	—		—			500		(1		)
Total debt securities	528,410		(8,406		)	137,259		(4,215		)	665,669		(12,621		)
Equity securities	—		—			—		—			—		—
Total temporarily impaired securities	$	528,410	$	(8,406	)	$	137,259	$	(4,215	)	$	665,669	$	(12,621	)
December 31, 2015
U.S. government corporations and agencies	$	22,359	$	(103	)	$	—	$	—		$	22,359	$	(103	)
Mortgage-backed securities	724,330		(15,523		)	139,562		(5,361		)	863,892		(20,884		)
Obligations of states and political subdivisions	68,482		(896		)	7,460		(191		)	75,942		(1,087		)
Corporate debt securities	—		—			—		—			—		—
Total debt securities	815,171		(16,522		)	147,022		(5,552		)	962,193		(22,074		)
Equity securities	6,566		(44		)	—		—			6,566		(44		)
Total temporarily impaired securities	$	821,737	$	(16,566	)	$	147,022	$	(5,552	)	$	968,759	$	(22,118	)

Securities held to maturity	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2016
Mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
Obligations of states and political subdivisions	1,363		(18		)	5,717		(328		)	7,080		(346		)
Total temporarily impaired securities	$	1,363	$	(18	)	$	5,717	$	(328	)	$	7,080	$	(346	)
December 31, 2015
Mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
Obligations of states and political subdivisions	3,646		(12		)	18,033		(493		)	21,679		(505		)
Total temporarily impaired securities	$	3,646	$	(12	)	$	18,033	$	(493	)	$	21,679	$	(505	)

Heartland reviews the investment securities portfolio on a quarterly basis to monitor its exposure to OTTI. A determination as to whether a security's decline in fair value is other-than-temporary takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors Heartland may consider in the OTTI analysis include the length of time the security has been in an unrealized loss position, changes in security ratings, financial condition of the issuer, as well as security and industry specific economic conditions. In addition, with regard to debt securities, Heartland may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral. For certain debt securities in unrealized loss positions, Heartland prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

Heartland previously recorded $981,000 of OTTI on three private label mortgage-backed securities in March 2012. The other-than-temporary credit-related losses were $797,000 in the held to maturity category and $184,000 in the available for sale category. During 2015, Heartland recorded additional credit-related OTTI on two of the private label mortgage-backed securities that previously had OTTI credit losses. The underlying collateral on these securities experienced an increased level of defaults and a slowing of voluntary prepayments causing the present value of the forward expected cash flows, using prepayment and default vectors, to be below the amortized cost basis of the securities. Based on Heartland's evaluation, a $769,000 OTTI attributable to credit-related losses was recorded in December 2015. The credit-related OTTI was $716,000, of which $200,000 was reclassified from previous non-credit related OTTI in the held to maturity category. Credit-related OTTI was $53,000 in the available for sale category.

In the first quarter of 2016, Heartland sold the mortgage-backed securities in the held to maturity portfolio because the credit quality of the securities showed further deterioration, and it was unlikely Heartland would recover the remaining basis of the securities prior to maturity. The significant deterioration of the credit quality of these securities was inconsistent with Heartland's original intent upon purchase and classification of these held to maturity securities. The carrying value of these securities was $4.4 million, and the associated realized gross gains were $89,000, and the realized gross losses were $439,000.

The remaining unrealized losses on Heartland's mortgage-backed securities are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities. The losses are not related to concerns regarding the underlying credit of the issuers or the underlying collateral. It is expected that the securities will not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates or widening market spreads and not credit quality, and because Heartland has the intent and ability to hold these investments until a market price recovery or to maturity and does not believe it will be required to sell the securities before maturity, these investments are not considered other-than-temporarily impaired.

Unrealized losses on Heartland's obligations of states and political subdivisions are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities. Management monitors the published credit ratings of these securities and the stability of the underlying municipalities. Because the decline in fair value is attributable to changes in interest rates or widening market spreads due to insurance company downgrades and not underlying credit quality, and because Heartland has the intent and ability to hold these investments until a market price recovery or to maturity and does not believe it will be required to sell the securities before maturity, these investments are not considered other-than-temporarily impaired.

There were no gross realized gains and $85,000 of gross realized losses on the sale of available for sale securities with OTTI write-downs for the period ended March 31, 2016. Additionally, there were no gross realized gains and $439,000 of gross realized losses on the sale of held to maturity securities with OTTI write-downs for the period ended March 31, 2016. There were no gross realized gains or losses on the sale of available for sale or held to maturity securities with OTTI write-downs for the period ended March 31, 2015.

The following table shows the detail of OTTI write-downs on debt securities included in earnings and the related changes in other accumulated comprehensive income ("AOCI") for the same securities, in thousands:

	Three Months Ended March 31,
	2016			2015
Recorded as part of gross realized losses:
Credit related OTTI	$	—		$	—
Intent to sell OTTI	—			—
Total recorded as part of gross realized losses	—			—
Recorded directly to AOCI for non-credit related impairment:
Residential mortgage backed securities	—			—
Reduction of non-credit related impairment related to security sales	(120		)	—
Accretion of non-credit related impairment	(7		)	(24		)
Total changes to AOCI for non-credit related impairment	(127		)	(24		)
Total OTTI losses (accretion) recorded on debt securities, net	$	(127	)	$	(24	)

Included in other securities at March 31, 2016, and December 31, 2015, were shares of stock in each Federal Home Loan Bank (the "FHLB") of Des Moines, Chicago, Dallas, San Francisco and Topeka at an amortized cost of $15.7 million and $14.3 million, respectively.

XML

Loans and Leases

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Loans and Leases

LOANS AND LEASES

Loans and leases as of March 31, 2016, and December 31, 2015, were as follows, in thousands:

	March 31, 2016			December 31, 2015
Loans and leases receivable held to maturity:
Commercial	$	1,295,504		$	1,279,214
Commercial real estate	2,555,268			2,326,360
Agricultural and agricultural real estate	471,271			471,870
Residential real estate	753,666			539,555
Consumer	430,699			386,867
Gross loans and leases receivable held to maturity	5,506,408			5,003,866
Unearned discount	(640		)	(488		)
Deferred loan fees	(2,763		)	(1,892		)
Total net loans and leases receivable held to maturity	5,503,005			5,001,486
Allowance for loan and lease losses	(49,738		)	(48,685		)
Loans and leases receivable, net	$	5,453,267		$	4,952,801

Heartland has certain lending policies and procedures in place that are designed to provide for an acceptable level of credit risk. The board of directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the board with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies, nonperforming loans and potential problem loans. Diversification in the loan portfolio is also a means of managing risk associated with fluctuations in economic conditions.

The commercial and commercial real estate loan portfolio includes a wide range of business loans, including lines of credit for working capital and operational purposes and term loans for the acquisition of equipment and real estate. Although most loans are made on a secured basis, loans may be made on an unsecured basis where warranted by the overall financial condition of the borrower. Terms of commercial business loans generally range from one to five years. Commercial loans and leases are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The collateral that Heartland requires for most of these loans and leases is based upon the discounted market value of the collateral. The primary repayment risks of commercial loans and leases are that the cash flow of the borrowers may be unpredictable, and the collateral securing these loans may fluctuate in value. Heartland seeks to minimize these risks in a variety of ways. The underwriting analysis includes credit verification, analysis of global cash flows, appraisals and a review of the financial condition of the borrower. Personal guarantees are frequently required as a tertiary form of repayment. In addition, when underwriting loans for commercial real estate, careful consideration is given to the property's operating history, future operating projections, current and projected occupancy, location and physical condition. Heartland also utilizes government guaranteed lending through the U.S. Small Business Administration and the U.S. Department of Agriculture's Rural Development Business and Industry Program to assist customers with longer-term funding and to reduce risk.

Agricultural loans, many of which are secured by crops, machinery and real estate, are provided to finance capital improvements and farm operations as well as acquisitions of livestock and machinery. Agricultural loans present unique credit risks relating to adverse weather conditions, loss of livestock due to disease or other factors, declines in market prices for agricultural products and the impact of government regulations. The ultimate repayment of agricultural loans is dependent upon the profitable operation or management of the agricultural entity. In underwriting agricultural loans, lending personnel work closely with their customers to review budgets and cash flow projections for the ensuing crop year. These budgets and cash flow projections are monitored closely during the year and reviewed with the customers at least annually. Lending personnel also work closely with governmental agencies, including the Farm Service Agency, to help agricultural customers obtain credit enhancement products such as loan guarantees or interest assistance.

Heartland originates first-lien, adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a single family residential property. These loans are principally collateralized by owner-occupied properties and are amortized over 10 to 30 years. Heartland typically sells longer-term, low-rate, residential mortgage loans in the secondary market with servicing rights retained. This practice allows Heartland to better manage interest rate risk and liquidity risk. The Heartland bank subsidiaries participate in lending programs sponsored by U.S. government agencies such as Veterans Administration and Federal Home Administration when justified by market conditions. As of March 31, 2016, Heartland had $2.2 million of loans secured by residential real estate property that were in the process of foreclosure.

Consumer lending includes motor vehicle, home improvement, home equity and small personal credit lines. Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than one-to-four-family residential mortgage loans. Consumer loan collections are dependent on the borrower's continuing financial stability, and are therefore more likely to be affected by adverse personal circumstances. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate. Heartland's consumer finance subsidiaries, Citizens Finance Co. and Citizens Finance of Illinois Co., typically lend to borrowers with past credit problems or limited credit histories, and these loans comprise approximately 19% of Heartland's total consumer loan portfolio.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Heartland’s policy is to discontinue the accrual of interest income on any loan or lease when, in the opinion of management, there is a reasonable doubt as to the timely collection of the interest and principal, normally when a loan or lease is 90 days past due. When interest accruals are deemed uncollectible, interest credited to income in the current year is reversed and interest accrued in prior years is charged to the allowance for loan and lease losses. Nonaccrual loans and leases are returned to an accrual status when, in the opinion of management, the financial position of the borrower indicates that there is no longer any reasonable doubt as to the timely payment of interest and principal.

Under Heartland’s credit practices, a loan is impaired when, based on current information and events, it is probable that Heartland will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loan impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except where more practical, impairment is measured at the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent.

The following table shows the balance in the allowance for loan and lease losses at March 31, 2016, and December 31, 2015, and the related loan balances, disaggregated on the basis of impairment methodology, in thousands. Loans evaluated under ASC 310-10-35 include loans on nonaccrual status and troubled debt restructurings, which are individually evaluated for impairment, and other impaired loans deemed to have similar risk characteristics. All other loans are collectively evaluated for impairment under ASC 450-20. Heartland has made no significant changes to the accounting for the allowance for loan and lease losses policy during 2016.

	Allowance For Loan and Lease Losses						Gross Loans and Leases Receivable Held to Maturity
	Ending Balance Under ASC 310-10-35		Ending Balance Under ASC 450-20		Total		Ending Balance Evaluated for Impairment Under ASC 310-10-35		Ending Balance Evaluated for Impairment Under ASC 450-20		Total
March 31, 2016
Commercial	$	984	$	15,390	$	16,374	$	11,018	$	1,284,486	$	1,295,504
Commercial real estate	1,252		19,243		20,495		44,082		2,511,186		2,555,268
Agricultural and agricultural real estate	—		4,028		4,028		13,593		457,678		471,271
Residential real estate	311		1,540		1,851		19,345		734,321		753,666
Consumer	1,247		5,743		6,990		5,963		424,736		430,699
Total	$	3,794	$	45,944	$	49,738	$	94,001	$	5,412,407	$	5,506,408
December 31, 2015
Commercial	$	471	$	15,624	$	16,095	$	6,919	$	1,272,295	$	1,279,214
Commercial real estate	698		18,834		19,532		45,442		2,280,918		2,326,360
Agricultural and agricultural real estate	—		3,887		3,887		4,612		467,258		471,870
Residential real estate	393		1,541		1,934		17,790		521,765		539,555
Consumer	1,206		6,031		7,237		5,458		381,409		386,867
Total	$	2,768	$	45,917	$	48,685	$	80,221	$	4,923,645	$	5,003,866

The following table presents nonaccrual loans, accruing loans past due 90 days or more and troubled debt restructured loans at March 31, 2016, and December 31, 2015, in thousands. There were no nonaccrual leases, accruing leases past due 90 days or more or restructured leases at March 31, 2016, and December 31, 2015.

	March 31, 2016		December 31, 2015
Nonaccrual loans	$	46,316	$	37,874
Nonaccrual troubled debt restructured loans	1,434		1,781
Total nonaccrual loans	$	47,750	$	39,655
Accruing loans past due 90 days or more	$	639	$	—
Performing troubled debt restructured loans	$	10,711	$	11,075

The following table provides information on troubled debt restructured loans that were modified during the three months ended March 31, 2016, and March 31, 2015, dollars in thousands:

	Three Months Ended March 31,
	2016					2015
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial	—	$	—	$	—	—	$	—	$	—
Commercial real estate	—	—		—		1	3,992		3,992
Total commercial and commercial real estate	—	—		—		1	3,992		3,992
Agricultural and agricultural real estate	—	—		—		—	—		—
Residential real estate	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	3,992	$	3,992

The pre-modification and post-modification recorded investment represents amounts as of the date of loan modification. Since the modifications on these loans have been only interest rate concessions and term extensions, not principal reductions, the pre-modification and post-modification recorded investment amounts are the same. At March 31, 2016, there were no commitments to extend credit to any of the borrowers with an existing troubled debt restructuring.

Heartland had no troubled debt restructured loans for which there was a payment default during the three months ended March 31, 2016, and March 31, 2015, that had been modified during the twelve-month period prior to default.

Heartland's internal rating system is a series of grades reflecting management's risk assessment, based on its analysis of the borrower's financial condition. The "pass" category consists of all loans that are not in the "nonpass" category, categorized into a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the pass category is monitored for early identification of credit deterioration. The "nonpass" category consists of special mention, substandard, doubtful and loss loans. The "special mention" rating is attached to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten the borrower's capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. These credits are closely monitored for improvement or deterioration. The "substandard" rating is assigned to loans that are inadequately protected by the current sound net worth and paying capacity of the borrower and may be further at risk due to deterioration in the value of collateral pledged. Well-defined weaknesses jeopardize liquidation of the debt. These loans are still considered collectible; however, a distinct possibility exists that Heartland will sustain some loss if deficiencies are not corrected. Substandard loans may exhibit some or all of the following weaknesses: deteriorating trends, lack of earnings, inadequate debt service capacity, excessive debt and/or lack of liquidity. The "doubtful" rating is assigned to loans where identified weaknesses make collection or liquidation in full, on the basis of existing facts, conditions and values, highly questionable and improbable. These borrowers are usually in default, lack liquidity and capital, as well as resources necessary to remain an operating entity. Specific pending events, such as capital injections, liquidations or perfection of liens on additional collateral, may strengthen the credit, thus deferring classification of the loan as loss until the exact status can be determined. The "loss" rating is assigned to loans considered uncollectible. As of March 31, 2016, Heartland had $80,000 of loans classified as doubtful and no loans classified as loss. Loans are placed on "nonaccrual" when management does not expect to collect payments of principal and interest in full or when principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection.

The following table presents loans and leases by credit quality indicator at March 31, 2016, and December 31, 2015, in thousands:

	Pass		Nonpass		Total
March 31, 2016
Commercial	$	1,128,858	$	166,646	$	1,295,504
Commercial real estate	2,339,414		215,854		2,555,268
Total commercial and commercial real estate	3,468,272		382,500		3,850,772
Agricultural and agricultural real estate	426,929		44,342		471,271
Residential real estate	725,773		27,893		753,666
Consumer	420,267		10,432		430,699
Total gross loans and leases receivable held to maturity	$	5,041,241	$	465,167	$	5,506,408
December 31, 2015
Commercial	$	1,106,276	$	172,938	$	1,279,214
Commercial real estate	2,107,474		218,886		2,326,360
Total commercial and commercial real estate	3,213,750		391,824		3,605,574
Agricultural and agricultural real estate	435,745		36,125		471,870
Residential real estate	515,195		24,360		539,555
Consumer	377,173		9,694		386,867
Total gross loans and leases receivable held to maturity	$	4,541,863	$	462,003	$	5,003,866

The nonpass category in the table above is comprised of approximately 57% special mention loans and 43% substandard loans as of March 31, 2016. The percent of nonpass loans on nonaccrual status as of March 31, 2016, was 10%. As of December 31, 2015, the nonpass category in the table above was comprised of approximately 68% special mention loans and 32% substandard loans. The percent of nonpass loans on nonaccrual status as of December 31, 2015, was 8%. Loans delinquent 30 to 89 days as a percent of total loans were 0.45% at March 31, 2016, compared to 0.31% at December 31, 2015. Changes in credit risk are monitored on a continuous basis and changes in risk ratings are made when identified. All impaired loans are reviewed at least annually.

The following table sets forth information regarding Heartland's accruing and nonaccrual loans and leases at March 31, 2016, and December 31, 2015, in thousands:

	Accruing Loans and Leases
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual		Total Loans and Leases
March 31, 2016
Commercial	$	1,565	$	396	$	—	$	1,961	$	1,288,064	$	5,479	$	1,295,504
Commercial real estate	3,413		212		89		3,714		2,529,840		21,714		2,555,268
Total commercial and commercial real estate	4,978		608		89		5,675		3,817,904		27,193		3,850,772
Agricultural and agricultural real estate	12,600		423		—		13,023		457,459		789		471,271
Residential real estate	1,753		192		550		2,495		734,977		16,194		753,666
Consumer	3,434		544		—		3,978		423,147		3,574		430,699
Total gross loans and leases receivable held to maturity	$	22,765	$	1,767	$	639	$	25,171	$	5,433,487	$	47,750	$	5,506,408
December 31, 2015
Commercial	$	2,005	$	608	$	—	$	2,613	$	1,273,678	$	2,923	$	1,279,214
Commercial real estate	3,549		2,077		—		5,626		2,302,052		18,682		2,326,360
Total commercial and commercial real estate	5,554		2,685		—		8,239		3,575,730		21,605		3,605,574
Agricultural and agricultural real estate	143		54		—		197		470,455		1,218		471,870
Residential real estate	1,900		115		—		2,015		523,915		13,625		539,555
Consumer	3,964		933		—		4,897		378,763		3,207		386,867
Total gross loans and leases receivable held to maturity	$	11,561	$	3,787	$	—	$	15,348	$	4,948,863	$	39,655	$	5,003,866

The majority of Heartland's impaired loans are those that are nonaccrual or have had their terms restructured in a troubled debt restructuring. The following tables present, by category of loan, impaired loans, the unpaid contractual loan balances at March 31, 2016, and December 31, 2015; the outstanding loan balances recorded on the consolidated balance sheets at March 31, 2016, and December 31, 2015; any related allowance recorded for those loans as of March 31, 2016, and December 31, 2015; the average outstanding loan balances recorded on the consolidated balance sheets during the three months ended March 31, 2016, and year ended December 31, 2015; and the interest income recognized on the impaired loans during the three months ended March 31, 2016, and year ended December 31, 2015, in thousands:

	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
March 31, 2016
Impaired loans with a related allowance:
Commercial	$	4,766	$	4,766	$	984	$	2,137	$	35
Commercial real estate	4,297		4,203		1,252		4,210		25
Total commercial and commercial real estate	9,063		8,969		2,236		6,347		60
Agricultural and agricultural real estate	—		—		—		—		—
Residential real estate	2,868		2,873		311		2,917		4
Consumer	3,258		3,258		1,247		3,208		9
Total impaired loans with a related allowance	$	15,189	$	15,100	$	3,794	$	12,472	$	73
Impaired loans without a related allowance:
Commercial	$	6,277	$	6,252	$	—	$	9,849	$	143
Commercial real estate	43,157		39,879		—		46,872		384
Total commercial and commercial real estate	49,434		46,131		—		56,721		527
Agricultural and agricultural real estate	13,593		13,593		—		7,422		251
Residential real estate	16,610		16,472		—		17,173		32
Consumer	2,706		2,705		—		2,970		9
Total impaired loans without a related allowance	$	82,343	$	78,901	$	—	$	84,286	$	819
Total impaired loans held to maturity:
Commercial	$	11,043	$	11,018	$	984	$	11,986	$	178
Commercial real estate	47,454		44,082		1,252		51,082		409
Total commercial and commercial real estate	58,497		55,100		2,236		63,068		587
Agricultural and agricultural real estate	13,593		13,593		—		7,422		251
Residential real estate	19,478		19,345		311		20,090		36
Consumer	5,964		5,963		1,247		6,178		18
Total impaired loans held to maturity	$	97,532	$	94,001	$	3,794	$	96,758	$	892

	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
December 31, 2015
Impaired loans with a related allowance:
Commercial	$	1,192	$	1,160	$	471	$	524	$	12
Commercial real estate	2,697		2,697		698		2,539		19
Total commercial and commercial real estate	3,889		3,857		1,169		3,063		31
Agricultural and agricultural real estate	—		—		—		2,823		—
Residential real estate	2,210		2,125		393		2,524		16
Consumer	3,111		3,111		1,206		2,877		33
Total impaired loans with a related allowance	$	9,210	$	9,093	$	2,768	$	11,287	$	80
Impaired loans without a related allowance:
Commercial	$	5,784	$	5,759	$	—	$	7,511	$	515
Commercial real estate	46,099		42,745		—		38,444		1,395
Total commercial and commercial real estate	51,883		48,504		—		45,955		1,910
Agricultural and agricultural real estate	4,612		4,612		—		2,287		175
Residential real estate	15,802		15,665		—		10,186		145
Consumer	2,347		2,347		—		2,403		38
Total impaired loans without a related allowance	$	74,644	$	71,128	$	—	$	60,831	$	2,268
Total impaired loans held to maturity:
Commercial	$	6,976	$	6,919	$	471	$	8,035	$	527
Commercial real estate	48,796		45,442		698		40,983		1,414
Total commercial and commercial real estate	55,772		52,361		1,169		49,018		1,941
Agricultural and agricultural real estate	4,612		4,612		—		5,110		175
Residential real estate	18,012		17,790		393		12,710		161
Consumer	5,458		5,458		1,206		5,280		71
Total impaired loans held to maturity	$	83,854	$	80,221	$	2,768	$	72,118	$	2,348

On February 5, 2016, Heartland acquired CIC Bancshares, Inc., parent company of Centennial Bank, in Denver, Colorado. As of February 5, 2016, Centennial Bank had loans of $594.9 million, and the estimated fair value of the loans acquired was $581.5 million.

On November 30, 2015, Heartland acquired Premier Valley Bank in Fresno, California. As of November 30, 2015, Premier Valley Bank had loans of $400.5 million, and the estimated fair value of the loans acquired was $389.8 million.

On September 11, 2015, Heartland acquired First Scottsdale Bank, N.A. in Scottsdale, Arizona. As of September 11, 2015, First Scottsdale Bank, N.A. had loans of $56.5 million, and the estimated fair value of the loans acquired was $54.7 million.

On August 21, 2015, Heartland acquired Community Bancorporation of New Mexico, Inc., parent company of Community Bank of Santa Fe, New Mexico. As of August 21, 2015, Community Bank had loans of $103.7 million, and the estimated fair value of the loans acquired was $99.5 million.

On January 16, 2015, Heartland acquired Community Banc-Corp of Sheboygan, Inc., parent company of Community Bank & Trust in Sheboygan, Wisconsin. As of January 16, 2015, Community Bank & Trust had loans of $413.4 million, and the estimated fair value of the loans acquired was $395.0 million.

The acquisitions of Community Banc-Corp of Sheboygan, Inc., Community Bancorporation of New Mexico, Inc., First Scottsdale Bank, N.A., Premier Valley Bank and CIC Bancshares, Inc. were accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date, but the purchaser cannot carry over the related allowance for loan and lease losses. Purchased loans are accounted for under ASC 310-30, “Loans and Debt Securities with Deteriorated Credit Quality,” when the loans have evidence of credit deterioration since origination, and when at the date of the acquisition, it is probable that Heartland will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration at the purchase date include statistics such as past due and nonaccrual status. Generally, acquired loans that meet Heartland’s definition for nonaccrual status fall within the scope of ASC 310-30. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference which is included in the carrying value of the loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in cash flows result in a reversal of the provision for loan and lease losses to the extent of prior charges, or a reclassification of the difference from nonaccretable to accretable with a positive impact on future interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

The carrying amount of the acquired loans at March 31, 2016 and December 31, 2015, consisted of purchased impaired and nonimpaired loans as summarized in the following table, in thousands:

	March 31, 2016						December 31, 2015
	Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans		Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans
Commercial	$	2,545	$	184,963	$	187,508	$	—	$	159,393	$	159,393
Commercial real estate	5,997		723,390		729,387		7,716		494,010		501,726
Agricultural and agricultural real estate	—		1,296		1,296		—		2,985		2,985
Residential real estate	715		293,176		293,891		—		85,549		85,549
Consumer loans	—		69,837		69,837		—		33,644		33,644
Total Loans	$	9,257	$	1,272,662	$	1,281,919	$	7,716	$	775,581	$	783,297

Changes in accretable yield on acquired loans with evidence of credit deterioration at the date of acquisition for the three months ended March 31, 2016, and March 31, 2015, were as follows, in thousands:

Balance at December 31, 2015	$	557
Original yield discount, net, at date of acquisitions	19
Accretion	273
Reclassification from nonaccretable difference (1)	(2		)
Balance at March 31, 2016	$	305
(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.

Balance at December 31, 2014	$	—
Original yield discount, net, at date of acquisitions	352
Accretion	—
Reclassification from nonaccretable difference (1)	—
Balance at March 31, 2015	$	352
(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.

On the acquisition dates, the preliminary estimate of the contractually required payments receivable for all loans with evidence of credit deterioration since origination was $21.0 million, and the estimated fair value of the loans was $13.1 million. At March 31, 2016, a majority of these loans were valued based upon the liquidation value of the underlying collateral, because the expected cash flows are primarily based on the liquidation of underlying collateral, and the timing and amount of the cash flows could not be reasonably estimated. At March 31, 2016, there was an allowance for loan and lease losses of $205,000 related to these ASC 310-30 loans.

On the acquisition dates, the preliminary estimate of the contractually required payments receivable for all nonimpaired loans acquired in the acquisitions was $1.55 billion, and the estimated fair value of the loans was $1.51 billion.

XML

Allowance for Loan and Lease Losses

3 Months Ended

Mar. 31, 2016

Allowance for Loan and Lease Losses [Abstract]

Allowance for Loan and Lease Losses

ALLOWANCE FOR LOAN AND LEASE LOSSES

Changes in the allowance for loan and lease losses for the three months ended March 31, 2016, and March 31, 2015, were as follows, in thousands:

	Commercial			Commercial Real Estate			Agricultural		Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2015	$	16,095		$	19,532		$	3,887	$	1,934		$	7,237		$	—	$	48,685
Charge-offs	(98		)	(312		)	—		(37		)	(1,158		)	—		(1,605		)
Recoveries	176			146			3		20			246			—		591
Provision	201			1,129			138		(66		)	665			—		2,067
Balance at March 31, 2016	$	16,374		$	20,495		$	4,028	$	1,851		$	6,990		$	—	$	49,738

	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2014	$	11,909		$	15,898		$	3,295		$	3,741		$	6,606		$	—	$	41,449
Charge-offs	(274		)	(333		)	(276		)	(58		)	(1,063		)	—		(2,004		)
Recoveries	320			126			22			37			233			—		738
Provision	(267		)	944			175			25			794			—		1,671
Balance at March 31, 2015	$	11,688		$	16,635		$	3,216		$	3,745		$	6,570		$	—	$	41,854

Management allocates the allowance for loan and lease losses by pools of risk within each loan portfolio. The allocation of the allowance for loan and lease losses by loan portfolio is made for analytical purposes and is not necessarily indicative of the trend of future loan and lease losses in any particular category. The total allowance for loan and lease losses is available to absorb losses from any segment of the loan portfolio.

XML

Goodwill, Core Deposit Premium and Other Intangible Assets

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Core Deposit Premium and Other Intangible Assets

GOODWILL, CORE DEPOSIT PREMIUM AND OTHER INTANGIBLE ASSETS

Heartland had goodwill of $127.7 million at March 31, 2016, and $97.9 million at December 31, 2015. Heartland conducts its annual internal assessment of the goodwill both collectively and at its subsidiaries as of September 30.

Heartland recorded $29.8 million of goodwill in connection with the acquisition of CIC Bancshares, Inc., parent company of Centennial Bank, based in Denver, Colorado on February 5, 2016. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland recognized core deposit intangibles of $6.4 million that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes. In addition, Heartland recognized commercial servicing rights of $190,000.

Heartland recorded $41.0 million of goodwill in connection with the acquisition of Premier Valley Bank, based in Fresno, California on November 30, 2015. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland recognized core deposit intangibles of $8.0 million that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes. In addition, Heartland recognized commercial servicing rights of $616,000.

Heartland recorded $2.5 million of goodwill in connection with the acquisition of First Scottsdale Bank, N.A., based in Scottsdale, Arizona on September 11, 2015. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland also recognized core deposit intangibles of $357,000 that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes.

Heartland recorded $213,000 of goodwill in connection with the acquisition of Community Bancorporation of New Mexico, Inc., parent company of Community Bank in Santa Fe, New Mexico, based in Santa Fe, New Mexico on August 21, 2015. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland also recognized core deposit intangibles of $1.7 million that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes.

Heartland recorded $18.6 million of goodwill in connection with the acquisition of Community Banc-Corp of Sheboygan, Inc., the parent company of Community Bank & Trust, based in Sheboygan, Wisconsin on January 16, 2015. The goodwill associated with this transaction is not deductible for tax purposes. As part of this acquisition, Heartland recognized core deposit intangibles of $6.0 million that are expected to be amortized over a period of 10 years on an accelerated basis. The core deposit intangibles associated with this transaction are not deductible for tax purposes. In addition, Heartland recognized commercial servicing rights of $4.3 million.

Goodwill related to the CIC Bancshares, Inc., Premier Valley Bank, First Scottsdale Bank, N.A., Community Bancorporation of New Mexico, Inc. and Community Banc-Corp of Sheboygan, Inc., resulted from expected operational synergies, increased market presence, cross-selling opportunities, and expanded business lines.

Other intangible assets consist of core deposit intangibles, mortgage servicing rights, customer relationship intangible, and commercial servicing rights. The gross carrying amount of other intangible assets and the associated accumulated amortization at March 31, 2016, and December 31, 2015, are presented in the table below, in thousands:

	March 31, 2016						December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	43,504	$	17,345	$	26,159	$	37,118	$	15,460	$	21,658
Mortgage servicing rights	46,818		16,368		30,450		45,744		15,430		30,314
Customer relationship intangible	1,176		825		351		1,177		815		362
Commercial servicing rights	6,071		1,611		4,460		5,685		1,074		4,611
Total	$	97,569	$	36,149	$	61,420	$	89,724	$	32,779	$	56,945

The following table shows the estimated future amortization expense for amortizable intangible assets, in thousands:

	Core Deposit Intangibles		Mortgage Servicing Rights		Customer Relationship Intangible		Commercial Servicing Rights		Total
Nine months ending December 31, 2016	$	3,716	$	6,778	$	31	$	720	$	11,245
Year ending December 31,
2017	4,419		5,918		40		931		11,308
2018	3,909		5,073		39		837		9,858
2019	3,426		4,227		38		638		8,329
2020	2,982		3,382		36		455		6,855
2021	2,463		2,536		35		392		5,426
Thereafter	5,244		2,536		132		487		8,399
Total	$	26,159	$	30,450	$	351	$	4,460	$	61,420

Projections of amortization expense for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of March 31, 2016. Heartland's actual experience may be significantly different depending upon changes in mortgage interest rates and market conditions. Mortgage loans serviced for others were $4.11 billion and $4.06 billion as of March 31, 2016, and December 31, 2015, respectively. Custodial escrow balances maintained in connection with the mortgage loan servicing portfolio were approximately $25.0 million and $19.2 million as of March 31, 2016 and December 31, 2015, respectively. The fair value of Heartland's mortgage servicing rights was estimated at $38.9 million at March 31, 2016, and $40.9 million at December 31, 2015.

Heartland's mortgage servicing rights portfolio is comprised of loans serviced for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Government National Mortgage Association. The servicing rights portfolio is separated into 15- and 30-year tranches.

The fair value of mortgage servicing rights is calculated based upon a discounted cash flow analysis. Cash flow assumptions, including prepayment speeds, servicing costs and escrow earnings are considered in the calculation. The average constant prepayment rate was12.09%and10.65%for theMarch 31, 2016, andDecember 31, 2015, valuations, respectively. The discount rate was9.26%and9.25%for theMarch 31, 2016, andDecember 31, 2015, valuations, respectively. The average capitalization rate for the firstthreemonths of 2016 ranged from88to135basis points compared to the range of65to138basis points for 2015. Fees collected for the servicing of mortgage loans for others were $2.9 million and $2.5 million for the three months ended March 31, 2016, and March 31, 2015, respectively.

The following table summarizes, in thousands, the changes in capitalized mortgage servicing rights for the three months ended March 31, 2016, and March 31, 2015:

	2016			2015
Balance at January 1	$	30,314		$	24,984
Originations	2,395			2,686
Amortization	(2,259		)	(2,175		)
Balance at March 31	$	30,450		$	25,495
Fair value of mortgage servicing rights	$	38,944		$	34,492
Mortgage servicing rights, net to servicing portfolio	0.74		%	0.71		%

Heartland's commercial servicing rights portfolio was initially acquired with the Community Banc-Corp of Sheboygan, Inc. transaction that closed on January 16, 2015. Heartland also acquired commercial servicing rights portfolios with the Premier Valley Bank transaction that closed on November 30, 2015, and the CIC Bancshares, Inc. transaction that closed on February 5, 2016. The commercial servicing portfolio is comprised of loans serviced for the Small Business Administration and United States Department of Agriculture, which totaled $189.9 million. Fees collected for the servicing of commercial loans for others were $80,000 for the period ended March 31, 2016.

The fair value of each commercial servicing rights portfolio is calculated based upon a discounted cash flow analysis. Cash flow assumptions, including prepayment speeds and servicing costs, are considered in the calculation. The range of average constant prepayment rates for the portfolio valuations for the firstthreemonths of 2016was 7.14% to 8.10% compared to 7.33% to 8.10% as of December 31, 2015. The discount rate range was 11.74% to 13.49% for the March 31, 2016, valuations compared to 12.35% to 13.49% for the December 31, 2015, valuations. The capitalization rate for 2016 ranged from 3.10 to 4.45 basis points compared to 1.80 to 4.45 basis points for 2015. The total fair value of Heartland's commercial servicing rights was estimated at $4.9 million as of March 31, 2016.

The following table summarizes, in thousands, the changes in capitalized commercial servicing rights for the three months ended March 31, 2016, and March 31, 2015:

	2016			2015
Balance at January 1	$	4,611		$	—
Purchased commercial servicing rights	190			4,255
Originations	195			132
Amortization	(536		)	(215		)
Balance at March 31	$	4,460		$	4,172
Fair value of commercial servicing rights	$	4,899		$	4,429
Commercial servicing rights, net to servicing portfolio	2.35		%	2.87		%

Mortgage and commercial servicing rights are initially recorded at fair value in net gains on sale of loans held for sale when they are acquired through loan sales. Fair value is based on market prices for comparable servicing contracts, when available, or based on a valuation model that calculates the present value of estimated future net servicing income.

Mortgage and commercial servicing rights are subsequently measured using the amortization method, which requires the asset to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing rights are evaluated for impairment based upon the fair value of the assets as compared to the carrying amount. Impairment is recognized through a valuation allowance for specific tranches to the extent that fair value is less than carrying amount. At March 31, 2016, and December 31, 2015, no valuation allowance was required for any of Heartland's servicing rights.

XML

Derivative Financial Instruments

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

DERIVATIVE FINANCIAL INSTRUMENTS

Heartland uses derivative financial instruments as part of its interest rate risk management strategy. As part of the strategy, Heartland considers the use of interest rate swaps, caps, floors, collars, and certain interest rate lock commitments and forward sales of securities related to mortgage banking activities. Heartland's current strategy includes the use of interest rate swaps, interest rate lock commitments and forward sales of mortgage securities. In addition, Heartland is facilitating back-to-back loan swaps to assist customers in managing interest rate risk. Heartland's objectives are to add stability to its net interest margin and to manage its exposure to movements in interest rates. The contract or notional amount of a derivative is used to determine, along with the other terms of the derivative, the amounts to be exchanged between the counterparties. Heartland is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. Heartland minimizes this risk by entering into derivative contracts with counterparties that meet Heartland’s credit standards, and the contracts contain collateral provisions protecting the at-risk party. Heartland has not experienced any losses from nonperformance by these counterparties. Heartland monitors counterparty risk in accordance with the provisions of ASC 815.

In addition, interest rate-related derivative instruments generally contain language outlining collateral pledging requirements for each counterparty. Collateral must be posted when the market value exceeds certain threshold limits which are determined by credit ratings of each counterparty. Heartland was required to pledge $7.7 million and $5.3 million of cash as collateral at March 31, 2016, and December 31, 2015, respectively. Heartland's counterparties were required to pledge $0 at March 31, 2016, and $79,000 at December 31, 2015, respectively.

Heartland's derivative and hedging instruments are recorded at fair value on the consolidated balance sheets. See Note 8, “Fair Value,” for additional fair value information and disclosures.

Cash Flow Hedges

Heartland has variable rate funding which creates exposure to variability in interest payments due to changes in interest rates. To manage the interest rate risk related to the variability of interest payments, Heartland has entered into various interest rate swap agreements. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are received or made on Heartland's variable-rate liabilities. For the three months ended March 31, 2016, the change in net unrealized losses on cash flow hedges reflects changes in the fair value of the swaps and reclassification from accumulated other comprehensive income to interest expense totaling $506,000. For the next twelve months, Heartland estimates that cash payments and reclassification from accumulated other comprehensive income to interest expense will total $2.0 million.

Heartland executed an interest rate swap transaction on April 5, 2011, with an effective date of April 20, 2011, and an expiration date of April 20, 2016, to effectively convert $15.0 million of its newly issued variable rate amortizing debt to fixed rate debt. For accounting purposes, this swap transaction is designated as a cash flow hedge of the changes in cash flows attributable to changes in one-month LIBOR, the benchmark interest rate being hedged, associated with the interest payments made on an amount of Heartland's debt principal equal to the then-outstanding swap notional amount. At inception, Heartland asserted that the underlying principal balance would remain outstanding throughout the hedge transaction, making it probable that sufficient LIBOR-based interest payments would exist through the maturity date of the swap.

Heartland entered into five forward starting interest rate swap transactions to effectively convert Heartland Financial Statutory Trust IV, V, and VII, which total $65.0 million, as well as Morrill Statutory Trust I and II, which total $20.0 million, from variable rate subordinated debentures to fixed rate debt. For accounting purposes, these five swap transactions are designated as cash flow hedges of the changes in cash flows attributable to changes in LIBOR, the benchmark interest rate being hedged, associated with the interest payments made on $85.0 million of Heartland's subordinated debentures that reset quarterly on a specified reset date. At inception, Heartland asserted that the underlying principal balance would remain outstanding throughout the hedge transaction, making it probable that sufficient LIBOR-based interest payments would exist through the maturity date of the swaps.

During the first quarter of 2015, Heartland entered into two additional forward starting interest rate swaps. The first forward starting interest rate swap transaction relates to Heartland's $20.0 million Statutory Trust VI, which will convert from a fixed interest rate subordinated debenture to a variable interest rate subordinated debenture. The effective date of the interest rate swap transaction is June 15, 2017, and Heartland Statutory Trust VI will effectively remain at a fixed interest rate. The forward-starting swap transaction expires on June 15, 2024. The second forward starting interest rate swap is effective on March 1, 2017, and will replace the current interest rate swap related to Heartland Statutory Trust VII upon its expiration on March 1, 2017.

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments designated as cash flow hedges at March 31, 2016, and December 31, 2015, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category	Receive Rate		Weighted Average Pay Rate		Maturity
March 31, 2016
Interest rate swap	$	8,580	$	(14	)	Other Liabilities	3.182	%	5.140	%	04/20/2016
Interest rate swap	25,000		(1,374		)	Other Liabilities	0.642	%	2.255	%	03/17/2021
Interest rate swap	20,000		(507		)	Other Liabilities	0.635	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,891		)	Other Liabilities	0.617	%	3.355	%	01/07/2020
Interest rate swap	10,000		(223		)	Other Liabilities	0.630	%	1.674	%	03/26/2019
Interest rate swap	10,000		(219		)	Other Liabilities	0.642	%	1.658	%	03/18/2019
Interest rate swap (1)	20,000		(1,044		)	Other Liabilities	—	%	2.390	%	06/15/2024
Interest rate swap (2)	20,000		(1,085		)	Other Liabilities	—	%	2.352	%	03/01/2024
December 31, 2015
Interest rate swap	$	8,947	$	(57	)	Other Liabilities	3.152	%	5.140	%	04/20/2016
Interest rate swap	25,000		(713		)	Other Liabilities	0.526	%	2.255	%	03/17/2021
Interest rate swap	20,000		(600		)	Other Liabilities	0.414	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,582		)	Other Liabilities	0.323	%	3.355	%	01/07/2020
Interest rate swap	10,000		(83		)	Other Liabilities	0.603	%	1.674	%	03/26/2019
Interest rate swap	10,000		(83		)	Other Liabilities	0.526	%	1.658	%	03/18/2019
Interest rate swap (1)	20,000		(146		)	Other Liabilities	—	%	2.390	%	06/15/2024
Interest rate swap (2)	20,000		(176		)	Other Liabilities	—	%	2.352	%	03/01/2024
(1) This swap is a forward starting swap with a weighted average pay rate of 2.390% beginning on June 15, 2017. No interest payments are required related to this swap until September 15, 2017.
(2) This swap is a forward starting swap with a weighted average pay rate of 2.352% beginning on March 1, 2017. No interest payments are required on this swap until June 1, 2017.

The table below identifies the gains and losses recognized on Heartland's derivative instruments designated as cash flow hedges for the three months ended March 31, 2016, and March 31, 2015, in thousands:

	Effective Portion							Ineffective Portion
	Recognized in OCI			Reclassified from AOCI into Income				Recognized in Income on Derivatives
	Amount of Gain (Loss)			Category	Amount of Gain (Loss)			Category	Amount of Gain (Loss)
Three Months Ended March 31, 2016
Interest rate swap	$	43		Interest Expense	$	(44	)	Other Income	$	—
Interest rate swap	(661		)	Interest Expense	(109		)	Other Income	—
Interest rate swap	93			Interest Expense	(142		)	Other Income	—
Interest rate swap	(309		)	Interest Expense	(155		)	Other Income	—
Interest rate swap	(140		)	Interest Expense	(27		)	Other Income	—
Interest rate swap	(136		)	Interest Expense	(29		)	Other Income	—
Interest rate swap	(898		)	Interest Expense	—			Other Income	—
Interest rate swap	(909		)	Interest Expense	—			Other Income	—
Three Months Ended March 31, 2015
Interest rate swap	$	39		Interest Expense	$	(57	)	Other Income	$	—
Interest rate swap	(376		)	Interest Expense	(126		)	Other Income	—
Interest rate swap	45			Interest Expense	(151		)	Other Income	—
Interest rate swap	(184		)	Interest Expense	(160		)	Other Income	—
Interest rate swap	(108		)	Interest Expense	(35		)	Other Income	—
Interest rate swap	(106		)	Interest Expense	(35		)	Other Income	—
Interest rate swap	(93		)	Interest Expense	—			Other Income	—
Interest rate swap	(107		)	Interest Expense	—			Other Income	—

Fair Value Hedge

Heartland uses interest rate swaps to convert certain long term fixed rate loans to floating rates to hedge interest rate risk exposure. Heartland uses hedge accounting in accordance with ASC 815, with the unrealized gains and losses, representing the change in fair value of the derivative and the change in fair value of the risk being hedged on the related loan, being recorded in the consolidated statements of income. The ineffective portions of the unrealized gains or losses, if any, are recorded in interest income and interest expense in the consolidated statements of income. Heartland uses statistical regression to assess hedge effectiveness, both at the inception of the hedge as well as on a continual basis. The regression analysis involves regressing the periodic change in fair value of the hedging instrument against the periodic changes in the fair value of the asset being hedged due to changes in the hedge risk.

During the second quarter of 2015, Heartland entered into an interest rate swap, paying a fixed interest rate of 3.40% to the counterparty and receiving a variable interest rate from the same counterparty based on one month LIBOR plus .88% calculated on a notional amount of $13.8 million. In the fourth quarter of 2015, Heartland acquired undesignated interest rate swaps with the Premier Valley Bank transaction. These swaps were classified as undesignated interest rate swaps at December 31, 2015. During the first quarter of 2016, Heartland was able to designate some of these interest rate swaps with long term fixed rate loans and now classifies these interest rate swaps as fair value hedges and uses hedge accounting in accordance with ASC 815. Heartland was required to pledge $6.5 million of cash and securities as collateral as of March 31, 2016.

The table below identifies the notional amount, fair value and balance sheet category of Heartland's fair value hedges at March 31, 2016 and December 31, 2015, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category
March 31, 2016
Fair value hedges	$	41,391	$	(4,053	)	Other Liabilities
December 31, 2015
Fair value hedges	$	13,805	$	(621	)	Other Liabilities

The table below identifies the gains and losses recognized on Heartland's fair value hedges for the three month periods ended March 31, 2016, and March 31, 2015, in thousands:

	Amount of Gain (Loss)			Category
Three Months Ended March 31, 2016
Fair value hedges	$	(1,222	)	Interest Income
Three Months Ended March 31, 2015
Fair value hedges	$	—		Interest Income

Embedded Derivatives

Heartland acquired fixed rate loans with embedded derivatives in the Premier Valley Bank transaction during the fourth quarter of 2015. The loans contain terms that affect the cash flows or value of the loan similar to a derivative instrument, and therefore are considered to contain an embedded derivative. The embedded derivatives are bifurcated from the loans because the terms of the derivative instrument are not clearly and closely related to the loans. The embedded derivatives are recorded at fair value on the consolidated balance sheets as a part of other assets, and changes in the fair value are a component of noninterest income. The table below identifies the notional amount, fair value and balance sheet category of Heartland's embedded derivatives at March 31, 2016 and December 31, 2015, in thousands:

	Notional Amount		Fair Value		Balance Sheet Category	Income Statement Category	Year-to-Date Gain (Loss) Recognized
March 31, 2016
Embedded derivatives	$	14,903	$	1,846	Other assets	Other noninterest income	$	272
December 31, 2015
Embedded derivatives	$	15,020	$	1,574	Other assets	Other noninterest income	$	—

In conjunction with the CIC Bancshares, Inc., transaction on February 5, 2016, Heartland acquired convertible subordinated debt. The subordinated debt has a face value of $2.0 million, and the embedded conversion option allows the holder to convert the debt to equity in any increment. The conversion option is bifurcated from the debt because the terms of the conversion option are not clearly and closely related to the terms of the debt. The total number of shares to be issued upon conversion is 73,394. The embedded conversion option is reported at fair value on the consolidated balance sheets using the Black-Scholes model. The following table identifies, in thousands, the notional amount, fair value, balance sheet category and income statement category for the change in fair value of the convertible debt option as of March 31, 2016:

	Notional Amount		Fair Value			Balance Sheet Category	Income Statement Category	Year-to-Date Gain (Loss) Recognized
March 31, 2016
Embedded conversion option	$	2,000	$	(422	)	Other Liabilities	Other noninterest income	$	(100	)

Back-To-Back Loan Swaps

During 2015, Heartland began entering into interest rate swap loan relationships with customers to meet their financing needs. Upon entering into these loan swaps, Heartland enters into offsetting positions with counterparties in order to minimize interest rate risk. These back-to-back loan swaps qualify as free standing financial derivatives with the fair values reported in other assets and other liabilities on the consolidated balance sheets. Heartland was required to post $780,000 and $0 as of March 31, 2016 and December 31, 2015, respectively, as collateral related to these back-to-back swaps. Any gains and losses on these back-to-back swaps are recorded in noninterest income on the consolidated statement of income, and for the three months ended March 31, 2016, no gain or loss was recognized. The table below identifies the balance sheet category and fair values of Heartland's derivative instruments designated as loan swaps at March 31, 2016 and December 31, 2015, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category	Weighted Average Receive Rate		Weighted Average Pay Rate
March 31, 2016
Receive fixed-pay floating interest rate swap	$	33,028	$	2,356		Other Assets	4.97	%	3.16	%
Pay fixed-receive floating interest rate swap	33,028		(2,356		)	Other Liabilities	3.16	%	4.97	%
December 31, 2015
Receive fixed-pay floating interest rate swap	15,782		663			Other Assets	5.08	%	3.07	%
Pay fixed-receive floating interest rate swap	15,782		(663		)	Other Liabilities	3.07	%	5.08	%

Other Free Standing Derivatives

Heartland has entered into interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans and mortgage backed securities that are considered derivative instruments. Heartland enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on the commitments to fund the loans as well as on residential mortgage loans available for sale. The fair value of these commitments is recorded on the consolidated balance sheets, with the changes in fair value recorded in the consolidated statements of income as a component of gains on sale of loans held for sale. These derivative contracts are designated as free standing derivative contracts and are not designated against specific assets and liabilities on the consolidated balance sheets or forecasted transactions and therefore do not qualify for hedge accounting treatment.

Heartland acquired undesignated interest rate swaps with the Premier Valley Bank transaction in the fourth quarter of 2015. These swaps were entered into primarily for the benefit of customers seeking to manage their interest rate risk and are not designated against specific assets or liabilities on the consolidated balance sheet or forecasted transactions and therefore do not qualify for hedge accounting in accordance with ASC 815. These swaps are carried at fair value on the consolidated balance sheets as a component of other liabilities, with changes in the fair value recorded as a component of noninterest income.

The table below identifies the balance sheet category and fair values of Heartland's other free standing derivative instruments not designated as hedging instruments at March 31, 2016, and December 31, 2015, in thousands:

	Balance Sheet Category	Notional Amount		Fair Value
March 31, 2016
Interest rate lock commitments (mortgage)	Other Assets	$	153,073	$	6,956
Forward commitments	Other Assets	61,000		343
Forward commitments	Other Liabilities	258,183		(1,623		)
Undesignated interest rate swaps	Other Liabilities	23,005		(2,159		)
December 31, 2015
Interest rate lock commitments (mortgage)	Other Assets	$	99,665	$	3,168
Forward commitments	Other Assets	118,378		523
Forward commitments	Other Liabilities	136,709		(315		)
Undesignated interest rate swaps	Other Liabilities	50,975		(3,677		)

The table below identifies the income statement category of the gains and losses recognized in income on Heartland's other free standing derivative instruments not designated as hedging instruments for the three months ended March 31, 2016, and March 31, 2015, in thousands:

	Income Statement Category	Gain (Loss) Recognized
Three Months Ended March 31, 2016
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	4,727
Forward commitments	Gains on sale of loans held for sale	(1,489		)
Undesignated interest rate swaps	Other noninterest income	(316		)
Three Months Ended March 31, 2015
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	5,544
Forward commitments	Gains on sale of loans held for sale	(125		)
Undesignated interest rate swaps	Other noninterest income	—

XML

Fair Value

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value

FAIR VALUE

Heartland utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, trading securities and derivatives are recorded in the consolidated balance sheets at fair value on a recurring basis. Additionally, from time to time, Heartland may be required to record at fair value other assets on a nonrecurring basis such as loans held for sale, loans held to maturity and certain other assets including, but not limited to, mortgage servicing rights, commercial servicing rights and other real estate owned. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.

Fair Value Hierarchy

Under ASC 820, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 — Valuation is based upon quoted prices for identical instruments in active markets.

Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, or similar instruments in markets that are not active, and model-based valuation techniques for all significant assumptions are observable in the market.

Level 3 — Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring or non-recurring basis.

Assets

Securities Available for Sale and Held to Maturity

Securities available for sale are recorded at fair value on a recurring basis. Securities held to maturity are generally recorded at cost and are recorded at fair value only to the extent a decline in fair value is determined to be other-than-temporary. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury securities. Level 2 securities include U.S. government and agency securities, mortgage-backed securities and private collateralized mortgage obligations, municipal bonds and corporate debt securities. Level 3 securities consist primarily of Z-TRANCHE mortgage-backed securities and corporate debt securities. On a quarterly basis, a secondary independent pricing service is used for a sample of securities to validate the pricing from Heartland's primary pricing service.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or fair value on an aggregate basis. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, Heartland classifies loans held for sale subjected to nonrecurring fair value adjustments as Level 2.

Loans Held to Maturity

Heartland does not record loans held to maturity at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310. The fair value of impaired loans is measured using one of the following impairment methods: 1) the present value of expected future cash flows discounted at the loan's effective interest rate or 2) the observable market price of the loan or 3) the fair value of the collateral if the loan is collateral dependent. In accordance with ASC 820, impaired loans measured at fair value are classified as nonrecurring Level 3 in the fair value hierarchy.

Premises, furniture and equipment held for sale

Heartland values premises, furniture and equipment held for sale based on third-party appraisals less estimated disposal costs. Heartland considers third party appraisals, as well as independent fair value assessments from realtors or persons involved in selling bank premises, furniture and equipment, in determining the fair value of particular properties. Accordingly, the valuation of premises, furniture and equipment held for sale is subject to significant external and internal judgment. Heartland periodically reviews premises, furniture and equipment held for sale to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. Premises, furniture and equipment held for sale are classified as nonrecurring Level 3 in the fair value hierarchy.

Mortgage Servicing Rights

Mortgage servicing rights assets represent the value associated with servicing residential real estate loans that have been sold to outside investors with servicing retained. Heartland uses the amortization method (i.e., the lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, to determine the carrying value of its mortgage servicing rights. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates, prepayment speeds and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. Mortgage servicing rights are subject to impairment testing. The carrying values of these rights are reviewed quarterly for impairment based upon the calculation of fair value as performed by an outside third party. For purposes of measuring impairment, the rights are stratified into certain risk characteristics including note type and note term. If the valuation model reflects a fair value less than the carrying value, mortgage servicing rights are adjusted to fair value through a valuation allowance. Heartland classifies mortgage servicing rights as nonrecurring with Level 3 measurement inputs.

Commercial Servicing Rights

Commercial servicing rights assets represent the value associated with servicing commercial loans that have been sold to the Small Business Administration and the United States Department of Agriculture with servicing retained by Heartland. Heartland uses the amortization method (i.e., the lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, to determine the carrying value of its commercial servicing rights. The fair value for servicing assets is determined through market prices for comparable servicing contracts, when available, or through a valuation model that calculates the present value of estimated future net servicing income. Inputs utilized include discount rates, prepayment speeds and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. Commercial servicing rights are subject to impairment testing, and the carrying values of these rights are reviewed quarterly for impairment based upon the calculation of fair value as performed by an outside third party. If the valuation model reflects a fair value less than the carrying value, commercial servicing rights are adjusted to fair value through a valuation allowance. Heartland classifies commercial servicing rights as nonrecurring with Level 3 measurement inputs.

Derivative Financial Instruments

Heartland's current interest rate risk strategy includes interest rate swaps. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. To comply with the provisions of ASC 820, Heartland incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, Heartland has considered the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although Heartland has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2016, and December 31, 2015, Heartland has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, Heartland has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Interest rate lock commitments

Heartland uses an internal valuation model that relies on internally developed inputs to estimate the fair value of its interest rate lock commitments which is based on unobservable inputs that reflect management's assumptions and specific information about each borrower. Interest rate lock commitments are classified in Level 3 of the fair value hierarchy.

Forward commitments

The fair value of forward commitments are estimated using an internal valuation model, which includes current trade pricing for similar financial instruments in active markets that Heartland has the ability to access and are classified in Level 2 of the fair value hierarchy.

Other Real Estate Owned

Other real estate owned ("OREO") represents property acquired through foreclosures and settlements of loans. Property acquired is carried at the fair value of the property at the time of acquisition (representing the property's cost basis), plus any acquisition costs, or the estimated fair value of the property, less disposal costs. Heartland considers third party appraisals, as well as independent fair value assessments from realtors or persons involved in selling OREO, in determining the fair value of particular properties. Accordingly, the valuation of OREO is subject to significant external and internal judgment. Heartland periodically reviews OREO to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. OREO is classified as nonrecurring Level 3 of the fair value hierarchy.

The table below presents Heartland's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2016, and December 31, 2015, in thousands, aggregated by the level in the fair value hierarchy within which those measurements fall:

	Total Fair Value		Level 1		Level 2		Level 3
March 31, 2016
Assets
Securities available for sale
U.S. government corporations and agencies	$	6,619	$	531	$	6,088	$	—
Mortgage-backed securities	1,388,687		—		1,386,913		1,774
Obligations of states and political subdivisions	281,003		—		281,003		—
Corporate debt securities	830		—		500		330
Equity securities	13,377		—		13,377		—
Derivative financial instruments(1)	4,202		—		4,202		—
Interest rate lock commitments	6,956		—		—		6,956
Forward commitments	343		—		343		—
Total assets at fair value	$	1,702,017	$	531	$	1,692,426	$	9,060
Liabilities
Derivative financial instruments(2)	$	15,347	$	—	$	15,347	$	—
Forward commitments	1,623		—		1,623		—
Total liabilities at fair value	$	16,970	$	—	$	16,970	$	—
December 31, 2015
Assets
Securities available for sale
U.S. government corporations and agencies	$	25,766	$	519	$	25,247	$	—
Mortgage-backed securities	1,242,702		—		1,240,663		2,039
Obligations of states and political subdivisions	295,982		—		295,982		—
Corporate debt securities	846		—		—		846
Equity securities	13,138		—		13,138		—
Derivative financial instruments(1)	2,237		—		2,237		—
Interest rate lock commitments	3,168		—		—		3,168
Forward commitments	523		—		523		—
Total assets at fair value	$	1,584,362	$	519	$	1,577,790	$	6,053
Liabilities
Derivative financial instruments(2)	$	8,401	$	—	$	8,401	$	—
Forward commitments	315		—		315		—
Total liabilities at fair value	$	8,716	$	—	$	8,716	$	—
(1) Includes embedded derivatives and loans swaps
(2) Includes cash flow hedges, fair value hedges, loan swaps, embedded conversion options and free standing derivative instruments

The tables below present Heartland's assets that are measured at fair value on a nonrecurring basis, in thousands:

	Fair Value Measurements at March 31, 2016
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	1,344	$	—	$	—	$	1,344	$	—
Commercial real estate	2,609		—		—		2,609		—
Agricultural and agricultural real estate	—		—		—		—		—
Residential real estate	3,168		—		—		3,168		—
Consumer	2,010		—		—		2,010		—
Total collateral dependent impaired loans	$	9,131	$	—	$	—	$	9,131	$	—
Other real estate owned	$	11,338	$	—	$	—	$	11,338	$	237
Premises, furniture and equipment held for sale	$	3,889	$	—	$	—	$	3,889	$	—

	Fair Value Measurements at December 31, 2015
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	597	$	—	$	—	$	597	$	82
Commercial real estate	1,522		—		—		1,522		86
Agricultural and agricultural real estate	—		—		—		—		—
Residential real estate	2,330		—		—		2,330		104
Consumer	1,905		—		—		1,905		—
Total collateral dependent impaired loans	$	6,354	$	—	$	—	$	6,354	$	272
Other real estate owned	$	11,524	$	—	$	—	$	11,524	$	5,520
Premises, furniture and equipment held for sale	$	3,889	$	—	$	—	$	3,889	$	—

The following tables present additional quantitative information about assets measured at fair value and for which Heartland has utilized Level 3 inputs to determine fair value, in thousands:

	Fair Value at 3/31/16		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	1,774	Discounted cash flows	Pretax discount rate	7.50 - 9.50%
				Actual defaults	22.07 - 34.19% (31.03%)
				Actual deferrals	10.67 - 20.53% (13.21%)
Corporate debt securities	330		Discounted cash flows	Bank analysis	(1)
Interest rate lock commitments	6,956		Discounted cash flows	Closing ratio	(2)
Premises, furniture and equipment held for sale	3,889		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Other real estate owned	11,338		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Collateral dependent impaired loans:
Commercial	1,344		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Commercial real estate	2,609		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Agricultural and agricultural real estate	—		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Residential real estate	3,168		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Consumer	2,010		Modified appraised value	Third party valuation	(3)
				Valuation discount	(3)
(1) The unobservable input is the bank analysis market using Moody's Global Bank Rating Methodology. The analysis takes into consideration various performance metrics as well as yield on the debt securities and credit risk analysis.
(2) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at March 31, 2016, was 88%.
(3) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

	Fair Value at 12/31/15		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	2,039	Discounted cash flows	Pretax discount rate	7.50 - 9.50%
				Actual defaults	22.20 - 33.55% (30.60%)
				Actual deferrals	10.75 - 21.82% (13.36%)
Corporate debt securities	846		Discounted cash flows	Bank analysis	(1)
Interest rate lock commitments	3,168		Discounted cash flows	Closing ratio	(2)
Premises, furniture and equipment held for sale	3,889		Modified appraised value	Third party appraisal	(3)
Other real estate owned	11,524		Modified appraised value	Disposal costs	(3)
				Third party appraisal	(3)
				Appraisal discount	(3)
Collateral dependent impaired loans:
Commercial	597		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Commercial real estate	1,522		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Agricultural and agricultural real estate	—		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Residential real estate	2,330		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Consumer	1,905		Modified appraised value	Third party valuation	(3)
				Valuation discount	(3)
(1) The unobservable input is the bank analysis market using Moody's Global Bank Rating Methodology. The analysis takes into consideration various performance metrics as well as yield on the debt securities and credit risk analysis.
(2) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at December 31, 2015, was 86%.
(3) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

The changes in fair value of the Z-TRANCHE, a Level 3 asset, that is measured on a recurring basis are summarized in the following table, in thousands:

	For the Three Months Ended March 31, 2016			For the Year Ended December 31, 2015
Balance at January 1,	$	2,039		$	4,947
Total gains (losses):
Included in earnings	—			(3,038		)
Included in other comprehensive income	(265		)	982
Purchases, sales and settlements:
Purchases	—			6
Sales	—			(736		)
Settlements	—			(122		)
Balance at period end	$	1,774		$	2,039

The changes in fair value of the corporate debt securities, Level 3 assets, that are measured on a recurring basis is summarized in the following table, in thousands:

	For the Three Months Ended March 31, 2016			For the Year Ended December 31, 2015
Balance at January 1,	$	846		$	—
Total gains (losses):
Included in earnings	121			—
Included in other comprehensive income	(91		)	106
Purchases, acquired, sales and settlements:
Purchases	—			—
Acquired	—			740
Sales	(546		)	—
Settlements	—			—
Balance at period end	$	330		$	846

The changes in fair value of the interest rate lock commitments, which are Level 3 financial instruments and are measured on a recurring basis, are summarized in the following table, in thousands:

	For the Three Months Ended March 31, 2016			For the Year Ended December 31, 2015
Balance at January 1,	$	3,168		$	2,496
Total gains (losses) included in earnings	4,727			288
Issuances	138			5,428
Settlements	(1,077		)	(5,044		)
Balance at period end	$	6,956		$	3,168

Gains included in gains (losses) on sale of loans held for sale attributable to interest rate lock commitments held at March 31, 2016, and December 31, 2015, were $7.0 million and $3.2 million, respectively.

The tables below summarize the estimated fair value of Heartland's financial instruments as defined by ASC 825 as of March 31, 2016, and December 31, 2015, in thousands. The carrying amounts in the following tables are recorded in the consolidated balance sheets under the indicated captions. In accordance with ASC 825, the assets and liabilities that are not financial instruments are not included in the disclosure, such as the value of the mortgage servicing rights, premises, furniture and equipment, premises, furniture and equipment held for sale, goodwill and other intangibles and other liabilities.

Heartland does not believe that the estimated information presented herein is representative of the earnings power or value of Heartland. The following analysis, which is inherently limited in depicting fair value, also does not consider any value associated with either existing customer relationships or the ability of Heartland to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

					Fair Value Measurements at March 31, 2016
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	133,228	$	133,228	$	133,228	$	—	$	—
Time deposits in other financial institutions	2,355		2,355		2,355		—		—
Securities:
Available for sale	1,690,516		1,690,516		531		1,687,881		2,104
Held to maturity	271,300		289,446		—		289,446		—
Other investments	22,325		22,325		—		22,090		235
Loans held for sale	76,565		76,565		—		76,565		—
Loans, net:
Commercial	1,278,343		1,271,778		—		1,270,434		1,344
Commercial real estate	2,533,220		2,533,017		—		2,530,408		2,609
Agricultural and agricultural real estate	467,844		473,559		—		473,559		—
Residential real estate	750,219		749,749		—		746,581		3,168
Consumer	423,641		428,805		—		426,795		2,010
Total Loans, net	5,453,267		5,456,908		—		5,447,777		9,131
Derivative financial instruments (1)	4,202		4,202		—		4,202		—
Interest rate lock commitments	6,956		6,956		—		—		6,956
Forward commitments	343		343		—		343		—
Financial liabilities:
Deposits
Demand deposits	2,079,521		2,079,521		—		2,079,521		—
Savings deposits	3,702,431		3,702,431		—		3,702,431		—
Time deposits	1,142,368		1,142,368		—		1,142,368		—
Short term borrowings	325,741		325,741		—		325,741		—
Other borrowings	265,760		267,812		—		267,812		—
Derivative financial instruments (2)	15,347		15,347		—		15,347		—
Forward commitments	1,623		1,623		—		1,623		—
(1) Includes embedded derivatives and loan swaps
(2) Includes cash flow hedges, fair value hedges, loan swaps, embedded conversion options and free standing derivative instruments

					Fair Value Measurements at December 31, 2015
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	258,799	$	258,799	$	258,799	$	—	$	—
Time deposits in other financial institutions	2,355		2,355		2,355		—		—
Securities:
Available for sale	1,578,434		1,578,434		519		1,575,030		2,885
Held to maturity	279,117		294,513		—		294,513		—
Other investments	21,443		21,443		—		21,208		235
Loans held for sale	74,783		74,783		—		74,783		—
Loans, net:
Commercial	1,262,612		1,257,355		—		1,256,758		597
Commercial real estate	2,305,908		2,304,716		—		2,303,194		1,522
Agricultural and agricultural real estate	468,533		469,485		—		469,485		—
Residential real estate	536,190		531,931		—		529,601		2,330
Consumer	379,558		382,579		—		380,674		1,905
Total Loans, net	4,952,801		4,946,066		—		4,939,712		6,354
Derivative financial instruments (1)	2,237		2,237		—		2,237		—
Interest rate lock commitments	3,168		3,168		—		—		3,168
Forward commitments	523		523		—		523		—
Financial liabilities:
Deposits
Demand deposits	1,914,141		1,914,141		—		1,914,141		—
Savings deposits	3,367,479		3,367,479		—		3,367,479		—
Time deposits	1,124,203		1,124,203		—		1,124,203		—
Short term borrowings	293,898		293,898		—		293,898		—
Other borrowings	263,214		281,271		—		281,271		—
Derivative financial instruments (2)	8,401		8,401		—		8,401		—
Forward commitments	315		315		—		315		—
(1) Includes embedded derivatives and loan swaps
(2) Includes cash flow hedges, fair value hedges, loan swaps and free standing derivative instruments

Cash and Cash Equivalents — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Time Deposits in Other Financial Institutions — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Securities —For securities either held to maturity, available for sale or trading, fair value equals quoted market price if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. For Level 3 securities, Heartland utilizes independent pricing provided by third party vendors or brokers.

Other Investments — Fair value measurement of other investments, which consists primarily of FHLB stock, are based on their redeemable value, which is at cost due to the restrictions placed on their transferability. The market for these securities is restricted to the issuer of the stock and subject to impairment evaluation.

Loans and Leases — The fair value of loans is estimated using an entrance price concept by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of impaired loans is measured using the fair value of the underlying collateral. The fair value of loans held for sale is estimated using quoted market prices.

Interest Rate Lock Commitments — The fair value of interest rate lock commitments is estimated using an internal valuation model, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated closing ratio based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment group.

Forward Commitments — The fair value of these instruments is estimated using an internal valuation model, which includes current trade pricing for similar financial instruments.

Derivative Financial Instruments — The fair value of all derivatives is estimated based on the amount that Heartland would pay or would be paid to terminate the contract or agreement, using current rates and prices, and, when appropriate, the current creditworthiness of the counter-party.

Deposits — The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. If the fair value of the fixed maturity certificates of deposit is calculated at less than the carrying amount, the carrying value of these deposits is reported as the fair value.

Short-term and Other Borrowings—Rates currently available to Heartland for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Commitments to Extend Credit, Unused Lines of Credit and Standby Letters of Credit — Based upon management's analysis of the off balance sheet financial instruments, there are no significant unrealized gains or losses associated with these financial instruments based upon review of the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.

XML

Segment Reporting

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segment Reporting

SEGMENT REPORTING

Heartland has identified two operating segments for purposes of financial reporting: community and other banking, and retail mortgage banking. These segments were determined based on the products and services provided or the type of customers served and are consistent with the information used by Heartland's key decision makers to make operating decisions and to assess Heartland's performance. The following tables present financial information from Heartland's operating segments for the three months ended March 31, 2016, and March 31, 2015, in thousands.

	Three Months Ended March 31,
	2016						2015
	Community and Other Banking		Retail Mortgage Banking		Total		Community and Other Banking		Retail Mortgage Banking		Total
Net interest income	$	71,583	$	1,124	$	72,707	$	52,889	$	1,041	$	53,930
Provision for loan losses	2,067		—		2,067		1,671		—		1,671
Total noninterest income	18,537		11,041		29,578		17,061		13,602		30,663
Total noninterest expense	59,739		10,570		70,309		47,459		12,155		59,614
Income before taxes	$	28,314	$	1,595	$	29,909	$	20,820	$	2,488	$	23,308
Average Loans, for the period	$	5,296,191	$	61,911	$	5,358,102	$	4,189,966	$	77,627	$	4,267,593
Segment Assets, at period end	$	8,141,960	$	111,819	$	8,253,779	$	6,365,682	$	140,594	$	6,506,276

XML

Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Earnings Per Share

Earnings Per Share

Basic earnings per share is determined using net income available to common stockholders and weighted average common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average common shares and assumed incremental common shares issued.

Stock-Based Compensation

Stock-Based Compensation

Heartland may grant, through its Nominating and Compensation Committee (the "Compensation Committee"), non-qualified and incentive stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and cash incentive awards, under its 2012 Long-Term Incentive Plan (the "Plan"). The Plan, which was approved by stockholders in May 2012 and replaced Heartland's 2005 Long-Term Incentive Plan with respect to grants after such approval, reserved 162,868 shares of common stock at March 31, 2016, for issuance under future awards that may be granted under the Plan to employees and directors of, and service providers to, Heartland or its subsidiaries.

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, "Compensation-Stock Compensation" requires the measurement of the cost of employee services received in exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the award is based upon its fair value estimated on the date of grant and recognized in the consolidated statements of income over the vesting period of the award. The fair market value of restricted stock and restricted stock units is based on the fair value of the underlying shares of common stock on the date of grant. The fair value of stock options is estimated on the date of grant using the Black-Scholes model.

Effect of New Financial Accounting Standards

Effect of New Financial Accounting Standards

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The amendment clarifies the principles for recognizing revenue and develops a common revenue standard. The amendment outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” In applying the revenue model to contracts within its scope, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB Codification. The standard also requires significantly expanded disclosures about revenue recognition. The amendment is effective for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early application is not permitted. Heartland intends to adopt the accounting standard during the first quarter of 2018, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In November 2014, the FASB issued ASU 2014-16, "Derivatives and Hedging (Topic 815): Determining Whether a Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity." The amendment clarifies how current guidance should be interpreted in evaluating the characteristics and risks of a host contract in a hybrid financial instrument issued in the form of a share. One criterion requires evaluating whether the nature of the host contract is more akin to debt or to equity and whether the economic characteristics and risks of the embedded derivative feature are "clearly and closely related" to the host contract. In making that evaluation, an issuer or investor must consider all terms and features in a hybrid financial instrument including the embedded derivative feature that is being evaluated for separate accounting or may consider all terms and features in the hybrid financial instrument except for the embedded derivative feature that is being evaluated for separate accounting. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. Heartland adopted this standard on January 1, 2016, and the adoption of this standard did not have a material impact on its results of operations, financial position, and liquidity.

In January 2015, the FASB issued ASU 2015-01, "Income Statement-Extraordinary and Unusual Items." The amendment eliminates from U.S. GAAP the concept of extraordinary items. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. This amended guidance will prohibit separate disclosure of extraordinary items in the income statement. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Entities may apply the amendment prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. Heartland adopted this standard on January 1, 2016, and the adoption of this standard did not have a material impact on the results of operations, financial position, and liquidity.

In April 2015, the FASB issued ASU 2015-05, "Intangibles-Goodwill and Other-Internal-Use Software." The amendment intends to provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer's accounting for service contracts. As a result, all software licenses within the scope of this guidance will be accounted for consistently with other licenses of intangible assets. This amendment is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Entities can elect to adopt the standard either retrospectively or prospectively to all cloud computing arrangements entered into or materially modified after the adoption date. Early adoption is permitted. Heartland adopted this standard on January 1, 2016 and the adoption did not have a material impact on the results of operations, financial position, and liquidity.

In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments." The amendment eliminates the requirement of Topic 805, Business Combinations, to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. Measurement-period adjustments are calculated as if they were known at the acquisition date, but are recognized in the reporting period in which they are determined. Prior period information is not revised. Additional disclosures are required about the impact on current period income statement line items of adjustments that would have been recognized in prior periods if prior period information had been revised. This amendment is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted if financial statements have not been issued. Heartland adopted this standard effective September 30, 2015. The adoption of this standard did not have a material impact on the results of operations, financial position, and liquidity.

In January 2016, the FASB issued guidance ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities." The amendments in ASU 2016-01 to Subtopic 825-10, Financial Instruments, contain the following elements: (1) requires equity investments to be measured at fair value with changes in fair value recognized in net income; (2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (3) eliminates the requirement for public entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (4) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (5) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (6) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements; (7) clarifies that the entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity's other deferred tax assets. The amendments are effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Except for the early application of the amendment noted in item (5) above, early adoption of the amendments in this update is not permitted. Heartland intends to adopt the accounting standard in 2018, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." Topic 842 requires a lessee to recognize a lease liability and a right of use asset for each lease, with the exception of short term leases, at the commencement date of the lease and disclose key information about the leasing arrangement. Accounting requirements applied by lessors is largely unchanged. The amendment is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and will be applied on a modified retrospective basis. Heartland intends to adopt the accounting standard in 2019, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity.

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718)." The amendments in this ASU simplify several aspects of the accounting for share-based payments, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted for any interim or annual period prior to the effective date. An entity that elects early adoption must adopt all of the amendments in the same period. Heartland intends to adopt this ASU in 2017, as required, and believes the adoption will not have an impact on its results of operations, financial position, and liquidity.

XML

Basis of Presentation (Tables)

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

Amounts used in the determination of basic and diluted earnings per share for the three months ended March 31, 2016 and 2015, are shown in the table below:

	Three Months Ended March 31, 2016
(Dollars and number of shares in thousands, except per share data)	2016			2015
Net income attributable to Heartland	$	20,009		$	15,709
Preferred dividends	(168		)	(204		)
Net income available to common stockholders	$	19,841		$	15,505
Weighted average common shares outstanding for basic earnings per share	23,657			20,215
Assumed incremental common shares issued upon exercise of stock options and non-vested restricted stock units	460			278
Weighted average common shares for diluted earnings per share	24,117			20,493
Earnings per common share — basic	$	0.84		$	0.77
Earnings per common share — diluted	$	0.82		$	0.76
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	57			—

Summary of Status of RSUs

A summary of the RSUs outstanding as of March 31, 2016 and 2015, and changes during the three months ended March 31, 2016 and 2015, follows:

	2016				2015
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Outstanding at January 1	353,195		$	25.53	396,555		$	21.48
Granted	119,718		29.05		117,595		27.87
Vested	(83,982	)	20.79		(126,847	)	16.66
Forfeited	(2,078	)	27.17		(2,531	)	23.82
Outstanding at March 31	386,853		$	27.53	384,772		$	25.00

Summary of Status of Stock Options

A summary of the stock options outstanding as of March 31, 2016 and 2015, and changes during the three months ended March 31, 2016 and 2015, follows:

	2016				2015
	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at January 1	125,950		$	24.08	215,851		$	23.85
Granted	—		—		—		—
Exercised	(19,750	)	21.60		(32,400	)	20.85
Forfeited	(1,250	)	21.60		(1,500	)	21.00
Outstanding at March 31	104,950		$	24.58	181,951		$	24.37
Options exercisable at March 31	104,950		$	24.58	181,951		$	24.37

XML

Acquisitions (Tables)

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The assets and liabilities of CIC Bancshares, Inc. were recorded on the consolidated balance sheet at estimated fair value on the acquisition date. The following table represents, in thousands, the amounts recorded on the consolidated balance sheet as of February 5, 2016:

	As of February 5, 2016
Fair value of consideration paid:
Common Stock (2,003,235 shares)	$	57,433
Preferred Stock (3,000 shares)	3,777
Cash	15,672
Total consideration paid	76,882
Fair value of assets acquired:
Cash and due from banks	23,756
Securities:
Securities available for sale	92,831
Other securities	3,486
Loans held to maturity	581,477
Premises, furniture and equipment, net	16,450
Other real estate, net	1,934
Other intangible assets, net	6,576
Other assets	16,276
Total assets	742,786
Fair value of liabilities assumed:
Deposits	648,111
Short term borrowings	35,766
Other borrowings	7,924
Other liabilities	3,951
Total liabilities assumed	695,752
Fair value of net assets acquired	47,034
Goodwill resulting from acquisition	$	29,848

Business Acquisition, Pro Forma Information

The following pro forma information presents the results of operations for the years ended December 31, 2015, and December 31, 2014, as if the CIC Bancshares, Inc. acquisition occurred on January 1, 2014:

(Dollars in thousands, except per share data), unaudited	For the Years Ended
	December 31, 2015		December 31, 2014
Net interest income	$	259,531	$	221,808
Net income available to common shareholders	$	59,491	$	41,004
Basic earnings per share	$	2.63	$	2.00
Diluted earnings per share	$	2.58	$	1.96

XML

Securities (Tables)

3 Months Ended

Mar. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Schedule of Available for Sale Securities

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of March 31, 2016, and December 31, 2015, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2016
U.S. government corporations and agencies	$	6,479	$	140	$	—		$	6,619
Mortgage-backed securities	1,386,707		14,448		(12,468		)	1,388,687
Obligations of states and political subdivisions	273,147		8,008		(152		)	281,003
Corporate debt securities	816		15		(1		)	830
Total debt securities	1,667,149		22,611		(12,621		)	1,677,139
Equity securities	13,150		227		—			13,377
Total	$	1,680,299	$	22,838	$	(12,621	)	$	1,690,516
December 31, 2015
U.S. government corporations and agencies	$	25,847	$	22	$	(103	)	$	25,766
Mortgage-backed securities	1,254,452		9,134		(20,884		)	1,242,702
Obligations of states and political subdivisions	290,522		6,547		(1,087		)	295,982
Corporate debt securities	740		106		—			846
Total debt securities	1,571,561		15,809		(22,074		)	1,565,296
Equity securities	13,142		40		(44		)	13,138
Total	$	1,584,703	$	15,849	$	(22,118	)	$	1,578,434

Schedule of Held to Maturity Securities

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of March 31, 2016, and December 31, 2015, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2016
Mortgage-backed securities	$	—	$	—	$	—		$	—
Obligations of states and political subdivisions	271,300		18,492		(346		)	289,446
Total	$	271,300	$	18,492	$	(346	)	$	289,446
December 31, 2015
Mortgage-backed securities	$	4,369	$	306	$	—		$	4,675
Obligations of states and political subdivisions	274,748		15,595		(505		)	289,838
Total	$	279,117	$	15,901	$	(505	)	$	294,513

Investments Classified by Contractual Maturity Date

The amortized cost and estimated fair value of debt securities available for sale at March 31, 2016, by contractual maturity are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	1,265	$	1,273
Due in 1 to 5 years	12,836		13,115
Due in 5 to 10 years	67,214		69,250
Due after 10 years	199,127		204,814
Total debt securities	280,442		288,452
Mortgage-backed securities	1,386,707		1,388,687
Equity securities	13,150		13,377
Total investment securities	$	1,680,299	$	1,690,516

The amortized cost and estimated fair value of debt securities held to maturity at March 31, 2016, by contractual maturity are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	4,266	$	4,336
Due in 1 to 5 years	13,714		14,499
Due in 5 to 10 years	68,786		73,224
Due after 10 years	184,534		197,387
Total debt securities	271,300		289,446
Mortgage-backed securities	—		—
Total investment securities	$	271,300	$	289,446

Schedule of Realized Gross Gains (Losses)

Gross gains and losses realized related to the sales of securities available for sale for the three-month period ended March 31, 2016 and 2015, are summarized as follows, in thousands:

	Three Months Ended March 31,
	2016		2015
Proceeds from sales	$	303,448	$	289,466
Gross security gains	4,558		4,622
Gross security losses	682		269

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value

The following tables summarize, in thousands, the amount of unrealized losses, defined as the amount by which cost or amortized cost exceeds fair value, and the related fair value of investments with unrealized losses in Heartland's securities portfolio as of March 31, 2016, and December 31, 2015. The investments were segregated into two categories: those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months. The reference point for determining how long an investment was in an unrealized loss position was March 31, 2015, andDecember 31, 2014, respectively. Securities for which Heartland has taken credit-related OTTI write-downs are categorized as being "less than 12 months" or "12 months or longer" in a continuous loss position based on the point in time that the fair value declined to below the cost basis and not the period of time since the credit-related OTTI write-down.

Securities available for sale	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2016
U.S. government corporations and agencies	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities	517,907		(8,323		)	130,640		(4,145		)	648,547		(12,468		)
Obligations of states and political subdivisions	10,003		(82		)	6,619		(70		)	16,622		(152		)
Corporate debt securities	500		(1		)	—		—			500		(1		)
Total debt securities	528,410		(8,406		)	137,259		(4,215		)	665,669		(12,621		)
Equity securities	—		—			—		—			—		—
Total temporarily impaired securities	$	528,410	$	(8,406	)	$	137,259	$	(4,215	)	$	665,669	$	(12,621	)
December 31, 2015
U.S. government corporations and agencies	$	22,359	$	(103	)	$	—	$	—		$	22,359	$	(103	)
Mortgage-backed securities	724,330		(15,523		)	139,562		(5,361		)	863,892		(20,884		)
Obligations of states and political subdivisions	68,482		(896		)	7,460		(191		)	75,942		(1,087		)
Corporate debt securities	—		—			—		—			—		—
Total debt securities	815,171		(16,522		)	147,022		(5,552		)	962,193		(22,074		)
Equity securities	6,566		(44		)	—		—			6,566		(44		)
Total temporarily impaired securities	$	821,737	$	(16,566	)	$	147,022	$	(5,552	)	$	968,759	$	(22,118	)

Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value

Securities held to maturity	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2016
Mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
Obligations of states and political subdivisions	1,363		(18		)	5,717		(328		)	7,080		(346		)
Total temporarily impaired securities	$	1,363	$	(18	)	$	5,717	$	(328	)	$	7,080	$	(346	)
December 31, 2015
Mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
Obligations of states and political subdivisions	3,646		(12		)	18,033		(493		)	21,679		(505		)
Total temporarily impaired securities	$	3,646	$	(12	)	$	18,033	$	(493	)	$	21,679	$	(505	)

OTTI Write-downs Included in Earnings and AOCI

The following table shows the detail of OTTI write-downs on debt securities included in earnings and the related changes in other accumulated comprehensive income ("AOCI") for the same securities, in thousands:

	Three Months Ended March 31,
	2016			2015
Recorded as part of gross realized losses:
Credit related OTTI	$	—		$	—
Intent to sell OTTI	—			—
Total recorded as part of gross realized losses	—			—
Recorded directly to AOCI for non-credit related impairment:
Residential mortgage backed securities	—			—
Reduction of non-credit related impairment related to security sales	(120		)	—
Accretion of non-credit related impairment	(7		)	(24		)
Total changes to AOCI for non-credit related impairment	(127		)	(24		)
Total OTTI losses (accretion) recorded on debt securities, net	$	(127	)	$	(24	)

XML

Loans and Leases (Tables)

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Schedule of Loans and Leases

Loans and leases as of March 31, 2016, and December 31, 2015, were as follows, in thousands:

	March 31, 2016			December 31, 2015
Loans and leases receivable held to maturity:
Commercial	$	1,295,504		$	1,279,214
Commercial real estate	2,555,268			2,326,360
Agricultural and agricultural real estate	471,271			471,870
Residential real estate	753,666			539,555
Consumer	430,699			386,867
Gross loans and leases receivable held to maturity	5,506,408			5,003,866
Unearned discount	(640		)	(488		)
Deferred loan fees	(2,763		)	(1,892		)
Total net loans and leases receivable held to maturity	5,503,005			5,001,486
Allowance for loan and lease losses	(49,738		)	(48,685		)
Loans and leases receivable, net	$	5,453,267		$	4,952,801

Allowance for Loan and Lease Losses, Based on Impairment Methodology

The following table shows the balance in the allowance for loan and lease losses at March 31, 2016, and December 31, 2015, and the related loan balances, disaggregated on the basis of impairment methodology, in thousands. Loans evaluated under ASC 310-10-35 include loans on nonaccrual status and troubled debt restructurings, which are individually evaluated for impairment, and other impaired loans deemed to have similar risk characteristics. All other loans are collectively evaluated for impairment under ASC 450-20. Heartland has made no significant changes to the accounting for the allowance for loan and lease losses policy during 2016.

	Allowance For Loan and Lease Losses						Gross Loans and Leases Receivable Held to Maturity
	Ending Balance Under ASC 310-10-35		Ending Balance Under ASC 450-20		Total		Ending Balance Evaluated for Impairment Under ASC 310-10-35		Ending Balance Evaluated for Impairment Under ASC 450-20		Total
March 31, 2016
Commercial	$	984	$	15,390	$	16,374	$	11,018	$	1,284,486	$	1,295,504
Commercial real estate	1,252		19,243		20,495		44,082		2,511,186		2,555,268
Agricultural and agricultural real estate	—		4,028		4,028		13,593		457,678		471,271
Residential real estate	311		1,540		1,851		19,345		734,321		753,666
Consumer	1,247		5,743		6,990		5,963		424,736		430,699
Total	$	3,794	$	45,944	$	49,738	$	94,001	$	5,412,407	$	5,506,408
December 31, 2015
Commercial	$	471	$	15,624	$	16,095	$	6,919	$	1,272,295	$	1,279,214
Commercial real estate	698		18,834		19,532		45,442		2,280,918		2,326,360
Agricultural and agricultural real estate	—		3,887		3,887		4,612		467,258		471,870
Residential real estate	393		1,541		1,934		17,790		521,765		539,555
Consumer	1,206		6,031		7,237		5,458		381,409		386,867
Total	$	2,768	$	45,917	$	48,685	$	80,221	$	4,923,645	$	5,003,866

Schedule of Financing Receivables, Non Accrual Status

The following table presents nonaccrual loans, accruing loans past due 90 days or more and troubled debt restructured loans at March 31, 2016, and December 31, 2015, in thousands. There were no nonaccrual leases, accruing leases past due 90 days or more or restructured leases at March 31, 2016, and December 31, 2015.

	March 31, 2016		December 31, 2015
Nonaccrual loans	$	46,316	$	37,874
Nonaccrual troubled debt restructured loans	1,434		1,781
Total nonaccrual loans	$	47,750	$	39,655
Accruing loans past due 90 days or more	$	639	$	—
Performing troubled debt restructured loans	$	10,711	$	11,075

Troubled Debt Restructuring on Loans Modified

The following table provides information on troubled debt restructured loans that were modified during the three months ended March 31, 2016, and March 31, 2015, dollars in thousands:

	Three Months Ended March 31,
	2016					2015
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial	—	$	—	$	—	—	$	—	$	—
Commercial real estate	—	—		—		1	3,992		3,992
Total commercial and commercial real estate	—	—		—		1	3,992		3,992
Agricultural and agricultural real estate	—	—		—		—	—		—
Residential real estate	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	3,992	$	3,992

Financing Receivable Credit Quality Indicators

The following table presents loans and leases by credit quality indicator at March 31, 2016, and December 31, 2015, in thousands:

	Pass		Nonpass		Total
March 31, 2016
Commercial	$	1,128,858	$	166,646	$	1,295,504
Commercial real estate	2,339,414		215,854		2,555,268
Total commercial and commercial real estate	3,468,272		382,500		3,850,772
Agricultural and agricultural real estate	426,929		44,342		471,271
Residential real estate	725,773		27,893		753,666
Consumer	420,267		10,432		430,699
Total gross loans and leases receivable held to maturity	$	5,041,241	$	465,167	$	5,506,408
December 31, 2015
Commercial	$	1,106,276	$	172,938	$	1,279,214
Commercial real estate	2,107,474		218,886		2,326,360
Total commercial and commercial real estate	3,213,750		391,824		3,605,574
Agricultural and agricultural real estate	435,745		36,125		471,870
Residential real estate	515,195		24,360		539,555
Consumer	377,173		9,694		386,867
Total gross loans and leases receivable held to maturity	$	4,541,863	$	462,003	$	5,003,866

Past Due Financing Receivables

The following table sets forth information regarding Heartland's accruing and nonaccrual loans and leases at March 31, 2016, and December 31, 2015, in thousands:

	Accruing Loans and Leases
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual		Total Loans and Leases
March 31, 2016
Commercial	$	1,565	$	396	$	—	$	1,961	$	1,288,064	$	5,479	$	1,295,504
Commercial real estate	3,413		212		89		3,714		2,529,840		21,714		2,555,268
Total commercial and commercial real estate	4,978		608		89		5,675		3,817,904		27,193		3,850,772
Agricultural and agricultural real estate	12,600		423		—		13,023		457,459		789		471,271
Residential real estate	1,753		192		550		2,495		734,977		16,194		753,666
Consumer	3,434		544		—		3,978		423,147		3,574		430,699
Total gross loans and leases receivable held to maturity	$	22,765	$	1,767	$	639	$	25,171	$	5,433,487	$	47,750	$	5,506,408
December 31, 2015
Commercial	$	2,005	$	608	$	—	$	2,613	$	1,273,678	$	2,923	$	1,279,214
Commercial real estate	3,549		2,077		—		5,626		2,302,052		18,682		2,326,360
Total commercial and commercial real estate	5,554		2,685		—		8,239		3,575,730		21,605		3,605,574
Agricultural and agricultural real estate	143		54		—		197		470,455		1,218		471,870
Residential real estate	1,900		115		—		2,015		523,915		13,625		539,555
Consumer	3,964		933		—		4,897		378,763		3,207		386,867
Total gross loans and leases receivable held to maturity	$	11,561	$	3,787	$	—	$	15,348	$	4,948,863	$	39,655	$	5,003,866

Impaired Loans Not Covered by Loss Share Agreements

The following tables present, by category of loan, impaired loans, the unpaid contractual loan balances at March 31, 2016, and December 31, 2015; the outstanding loan balances recorded on the consolidated balance sheets at March 31, 2016, and December 31, 2015; any related allowance recorded for those loans as of March 31, 2016, and December 31, 2015; the average outstanding loan balances recorded on the consolidated balance sheets during the three months ended March 31, 2016, and year ended December 31, 2015; and the interest income recognized on the impaired loans during the three months ended March 31, 2016, and year ended December 31, 2015, in thousands:

	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
March 31, 2016
Impaired loans with a related allowance:
Commercial	$	4,766	$	4,766	$	984	$	2,137	$	35
Commercial real estate	4,297		4,203		1,252		4,210		25
Total commercial and commercial real estate	9,063		8,969		2,236		6,347		60
Agricultural and agricultural real estate	—		—		—		—		—
Residential real estate	2,868		2,873		311		2,917		4
Consumer	3,258		3,258		1,247		3,208		9
Total impaired loans with a related allowance	$	15,189	$	15,100	$	3,794	$	12,472	$	73
Impaired loans without a related allowance:
Commercial	$	6,277	$	6,252	$	—	$	9,849	$	143
Commercial real estate	43,157		39,879		—		46,872		384
Total commercial and commercial real estate	49,434		46,131		—		56,721		527
Agricultural and agricultural real estate	13,593		13,593		—		7,422		251
Residential real estate	16,610		16,472		—		17,173		32
Consumer	2,706		2,705		—		2,970		9
Total impaired loans without a related allowance	$	82,343	$	78,901	$	—	$	84,286	$	819
Total impaired loans held to maturity:
Commercial	$	11,043	$	11,018	$	984	$	11,986	$	178
Commercial real estate	47,454		44,082		1,252		51,082		409
Total commercial and commercial real estate	58,497		55,100		2,236		63,068		587
Agricultural and agricultural real estate	13,593		13,593		—		7,422		251
Residential real estate	19,478		19,345		311		20,090		36
Consumer	5,964		5,963		1,247		6,178		18
Total impaired loans held to maturity	$	97,532	$	94,001	$	3,794	$	96,758	$	892

	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
December 31, 2015
Impaired loans with a related allowance:
Commercial	$	1,192	$	1,160	$	471	$	524	$	12
Commercial real estate	2,697		2,697		698		2,539		19
Total commercial and commercial real estate	3,889		3,857		1,169		3,063		31
Agricultural and agricultural real estate	—		—		—		2,823		—
Residential real estate	2,210		2,125		393		2,524		16
Consumer	3,111		3,111		1,206		2,877		33
Total impaired loans with a related allowance	$	9,210	$	9,093	$	2,768	$	11,287	$	80
Impaired loans without a related allowance:
Commercial	$	5,784	$	5,759	$	—	$	7,511	$	515
Commercial real estate	46,099		42,745		—		38,444		1,395
Total commercial and commercial real estate	51,883		48,504		—		45,955		1,910
Agricultural and agricultural real estate	4,612		4,612		—		2,287		175
Residential real estate	15,802		15,665		—		10,186		145
Consumer	2,347		2,347		—		2,403		38
Total impaired loans without a related allowance	$	74,644	$	71,128	$	—	$	60,831	$	2,268
Total impaired loans held to maturity:
Commercial	$	6,976	$	6,919	$	471	$	8,035	$	527
Commercial real estate	48,796		45,442		698		40,983		1,414
Total commercial and commercial real estate	55,772		52,361		1,169		49,018		1,941
Agricultural and agricultural real estate	4,612		4,612		—		5,110		175
Residential real estate	18,012		17,790		393		12,710		161
Consumer	5,458		5,458		1,206		5,280		71
Total impaired loans held to maturity	$	83,854	$	80,221	$	2,768	$	72,118	$	2,348

Summary of Purchased Impaired and Nonimpaired Loans

The carrying amount of the acquired loans at March 31, 2016 and December 31, 2015, consisted of purchased impaired and nonimpaired loans as summarized in the following table, in thousands:

	March 31, 2016						December 31, 2015
	Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans		Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans
Commercial	$	2,545	$	184,963	$	187,508	$	—	$	159,393	$	159,393
Commercial real estate	5,997		723,390		729,387		7,716		494,010		501,726
Agricultural and agricultural real estate	—		1,296		1,296		—		2,985		2,985
Residential real estate	715		293,176		293,891		—		85,549		85,549
Consumer loans	—		69,837		69,837		—		33,644		33,644
Total Loans	$	9,257	$	1,272,662	$	1,281,919	$	7,716	$	775,581	$	783,297

Changes in Accretable Yield on Acquired Loans

Changes in accretable yield on acquired loans with evidence of credit deterioration at the date of acquisition for the three months ended March 31, 2016, and March 31, 2015, were as follows, in thousands:

Balance at December 31, 2015	$	557
Original yield discount, net, at date of acquisitions	19
Accretion	273
Reclassification from nonaccretable difference (1)	(2		)
Balance at March 31, 2016	$	305
(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.

Balance at December 31, 2014	$	—
Original yield discount, net, at date of acquisitions	352
Accretion	—
Reclassification from nonaccretable difference (1)	—
Balance at March 31, 2015	$	352
(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.

XML

Allowance for Loan and Lease Losses (Tables)

3 Months Ended

Mar. 31, 2016

Allowance for Loan and Lease Losses [Abstract]

Changes in the Allowance for Loan and Leases Losses

Changes in the allowance for loan and lease losses for the three months ended March 31, 2016, and March 31, 2015, were as follows, in thousands:

	Commercial			Commercial Real Estate			Agricultural		Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2015	$	16,095		$	19,532		$	3,887	$	1,934		$	7,237		$	—	$	48,685
Charge-offs	(98		)	(312		)	—		(37		)	(1,158		)	—		(1,605		)
Recoveries	176			146			3		20			246			—		591
Provision	201			1,129			138		(66		)	665			—		2,067
Balance at March 31, 2016	$	16,374		$	20,495		$	4,028	$	1,851		$	6,990		$	—	$	49,738

	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2014	$	11,909		$	15,898		$	3,295		$	3,741		$	6,606		$	—	$	41,449
Charge-offs	(274		)	(333		)	(276		)	(58		)	(1,063		)	—		(2,004		)
Recoveries	320			126			22			37			233			—		738
Provision	(267		)	944			175			25			794			—		1,671
Balance at March 31, 2015	$	11,688		$	16,635		$	3,216		$	3,745		$	6,570		$	—	$	41,854

XML

Goodwill, Core Deposit Premium and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Gross Carrying Amount and Accumulated Amortization of Other Intangible Assets

The gross carrying amount of other intangible assets and the associated accumulated amortization at March 31, 2016, and December 31, 2015, are presented in the table below, in thousands:

	March 31, 2016						December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	43,504	$	17,345	$	26,159	$	37,118	$	15,460	$	21,658
Mortgage servicing rights	46,818		16,368		30,450		45,744		15,430		30,314
Customer relationship intangible	1,176		825		351		1,177		815		362
Commercial servicing rights	6,071		1,611		4,460		5,685		1,074		4,611
Total	$	97,569	$	36,149	$	61,420	$	89,724	$	32,779	$	56,945

Schedule of Estimated Future Amortization Expense of Amortizable Intangible Assets

The following table shows the estimated future amortization expense for amortizable intangible assets, in thousands:

	Core Deposit Intangibles		Mortgage Servicing Rights		Customer Relationship Intangible		Commercial Servicing Rights		Total
Nine months ending December 31, 2016	$	3,716	$	6,778	$	31	$	720	$	11,245
Year ending December 31,
2017	4,419		5,918		40		931		11,308
2018	3,909		5,073		39		837		9,858
2019	3,426		4,227		38		638		8,329
2020	2,982		3,382		36		455		6,855
2021	2,463		2,536		35		392		5,426
Thereafter	5,244		2,536		132		487		8,399
Total	$	26,159	$	30,450	$	351	$	4,460	$	61,420

Summary of Changes in Servicing Rights

The following table summarizes, in thousands, the changes in capitalized commercial servicing rights for the three months ended March 31, 2016, and March 31, 2015:

	2016			2015
Balance at January 1	$	4,611		$	—
Purchased commercial servicing rights	190			4,255
Originations	195			132
Amortization	(536		)	(215		)
Balance at March 31	$	4,460		$	4,172
Fair value of commercial servicing rights	$	4,899		$	4,429
Commercial servicing rights, net to servicing portfolio	2.35		%	2.87		%

The following table summarizes, in thousands, the changes in capitalized mortgage servicing rights for the three months ended March 31, 2016, and March 31, 2015:

	2016			2015
Balance at January 1	$	30,314		$	24,984
Originations	2,395			2,686
Amortization	(2,259		)	(2,175		)
Balance at March 31	$	30,450		$	25,495
Fair value of mortgage servicing rights	$	38,944		$	34,492
Mortgage servicing rights, net to servicing portfolio	0.74		%	0.71		%

XML

Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Balance Sheet Category and Fair Values of Derivative Instruments

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments designated as cash flow hedges at March 31, 2016, and December 31, 2015, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category	Receive Rate		Weighted Average Pay Rate		Maturity
March 31, 2016
Interest rate swap	$	8,580	$	(14	)	Other Liabilities	3.182	%	5.140	%	04/20/2016
Interest rate swap	25,000		(1,374		)	Other Liabilities	0.642	%	2.255	%	03/17/2021
Interest rate swap	20,000		(507		)	Other Liabilities	0.635	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,891		)	Other Liabilities	0.617	%	3.355	%	01/07/2020
Interest rate swap	10,000		(223		)	Other Liabilities	0.630	%	1.674	%	03/26/2019
Interest rate swap	10,000		(219		)	Other Liabilities	0.642	%	1.658	%	03/18/2019
Interest rate swap (1)	20,000		(1,044		)	Other Liabilities	—	%	2.390	%	06/15/2024
Interest rate swap (2)	20,000		(1,085		)	Other Liabilities	—	%	2.352	%	03/01/2024
December 31, 2015
Interest rate swap	$	8,947	$	(57	)	Other Liabilities	3.152	%	5.140	%	04/20/2016
Interest rate swap	25,000		(713		)	Other Liabilities	0.526	%	2.255	%	03/17/2021
Interest rate swap	20,000		(600		)	Other Liabilities	0.414	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,582		)	Other Liabilities	0.323	%	3.355	%	01/07/2020
Interest rate swap	10,000		(83		)	Other Liabilities	0.603	%	1.674	%	03/26/2019
Interest rate swap	10,000		(83		)	Other Liabilities	0.526	%	1.658	%	03/18/2019
Interest rate swap (1)	20,000		(146		)	Other Liabilities	—	%	2.390	%	06/15/2024
Interest rate swap (2)	20,000		(176		)	Other Liabilities	—	%	2.352	%	03/01/2024
(1) This swap is a forward starting swap with a weighted average pay rate of 2.390% beginning on June 15, 2017. No interest payments are required related to this swap until September 15, 2017.
(2) This swap is a forward starting swap with a weighted average pay rate of 2.352% beginning on March 1, 2017. No interest payments are required on this swap until June 1, 2017.

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments designated as loan swaps at March 31, 2016 and December 31, 2015, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category	Weighted Average Receive Rate		Weighted Average Pay Rate
March 31, 2016
Receive fixed-pay floating interest rate swap	$	33,028	$	2,356		Other Assets	4.97	%	3.16	%
Pay fixed-receive floating interest rate swap	33,028		(2,356		)	Other Liabilities	3.16	%	4.97	%
December 31, 2015
Receive fixed-pay floating interest rate swap	15,782		663			Other Assets	5.08	%	3.07	%
Pay fixed-receive floating interest rate swap	15,782		(663		)	Other Liabilities	3.07	%	5.08	%

The table below identifies the notional amount, fair value and balance sheet category of Heartland's fair value hedges at March 31, 2016 and December 31, 2015, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category
March 31, 2016
Fair value hedges	$	41,391	$	(4,053	)	Other Liabilities
December 31, 2015
Fair value hedges	$	13,805	$	(621	)	Other Liabilities

Gains (Losses) on Derivative Instruments

The table below identifies the gains and losses recognized on Heartland's derivative instruments designated as cash flow hedges for the three months ended March 31, 2016, and March 31, 2015, in thousands:

	Effective Portion							Ineffective Portion
	Recognized in OCI			Reclassified from AOCI into Income				Recognized in Income on Derivatives
	Amount of Gain (Loss)			Category	Amount of Gain (Loss)			Category	Amount of Gain (Loss)
Three Months Ended March 31, 2016
Interest rate swap	$	43		Interest Expense	$	(44	)	Other Income	$	—
Interest rate swap	(661		)	Interest Expense	(109		)	Other Income	—
Interest rate swap	93			Interest Expense	(142		)	Other Income	—
Interest rate swap	(309		)	Interest Expense	(155		)	Other Income	—
Interest rate swap	(140		)	Interest Expense	(27		)	Other Income	—
Interest rate swap	(136		)	Interest Expense	(29		)	Other Income	—
Interest rate swap	(898		)	Interest Expense	—			Other Income	—
Interest rate swap	(909		)	Interest Expense	—			Other Income	—
Three Months Ended March 31, 2015
Interest rate swap	$	39		Interest Expense	$	(57	)	Other Income	$	—
Interest rate swap	(376		)	Interest Expense	(126		)	Other Income	—
Interest rate swap	45			Interest Expense	(151		)	Other Income	—
Interest rate swap	(184		)	Interest Expense	(160		)	Other Income	—
Interest rate swap	(108		)	Interest Expense	(35		)	Other Income	—
Interest rate swap	(106		)	Interest Expense	(35		)	Other Income	—
Interest rate swap	(93		)	Interest Expense	—			Other Income	—
Interest rate swap	(107		)	Interest Expense	—			Other Income	—

The table below identifies the gains and losses recognized on Heartland's fair value hedges for the three month periods ended March 31, 2016, and March 31, 2015, in thousands:

	Amount of Gain (Loss)			Category
Three Months Ended March 31, 2016
Fair value hedges	$	(1,222	)	Interest Income
Three Months Ended March 31, 2015
Fair value hedges	$	—		Interest Income

Balance Sheet Category and Fair Values of Embedded Derivatives

The table below identifies the notional amount, fair value and balance sheet category of Heartland's embedded derivatives at March 31, 2016 and December 31, 2015, in thousands:

	Notional Amount		Fair Value		Balance Sheet Category	Income Statement Category	Year-to-Date Gain (Loss) Recognized
March 31, 2016
Embedded derivatives	$	14,903	$	1,846	Other assets	Other noninterest income	$	272
December 31, 2015
Embedded derivatives	$	15,020	$	1,574	Other assets	Other noninterest income	$	—

The following table identifies, in thousands, the notional amount, fair value, balance sheet category and income statement category for the change in fair value of the convertible debt option as of March 31, 2016:

	Notional Amount		Fair Value			Balance Sheet Category	Income Statement Category	Year-to-Date Gain (Loss) Recognized
March 31, 2016
Embedded conversion option	$	2,000	$	(422	)	Other Liabilities	Other noninterest income	$	(100	)

Schedule of Other Derivatives Not Designated as Hedging Instruments, Balance Sheet and Income Category

The table below identifies the balance sheet category and fair values of Heartland's other free standing derivative instruments not designated as hedging instruments at March 31, 2016, and December 31, 2015, in thousands:

	Balance Sheet Category	Notional Amount		Fair Value
March 31, 2016
Interest rate lock commitments (mortgage)	Other Assets	$	153,073	$	6,956
Forward commitments	Other Assets	61,000		343
Forward commitments	Other Liabilities	258,183		(1,623		)
Undesignated interest rate swaps	Other Liabilities	23,005		(2,159		)
December 31, 2015
Interest rate lock commitments (mortgage)	Other Assets	$	99,665	$	3,168
Forward commitments	Other Assets	118,378		523
Forward commitments	Other Liabilities	136,709		(315		)
Undesignated interest rate swaps	Other Liabilities	50,975		(3,677		)

The table below identifies the income statement category of the gains and losses recognized in income on Heartland's other free standing derivative instruments not designated as hedging instruments for the three months ended March 31, 2016, and March 31, 2015, in thousands:

	Income Statement Category	Gain (Loss) Recognized
Three Months Ended March 31, 2016
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	4,727
Forward commitments	Gains on sale of loans held for sale	(1,489		)
Undesignated interest rate swaps	Other noninterest income	(316		)
Three Months Ended March 31, 2015
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	5,544
Forward commitments	Gains on sale of loans held for sale	(125		)
Undesignated interest rate swaps	Other noninterest income	—

XML

Fair Value (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The table below presents Heartland's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2016, and December 31, 2015, in thousands, aggregated by the level in the fair value hierarchy within which those measurements fall:

	Total Fair Value		Level 1		Level 2		Level 3
March 31, 2016
Assets
Securities available for sale
U.S. government corporations and agencies	$	6,619	$	531	$	6,088	$	—
Mortgage-backed securities	1,388,687		—		1,386,913		1,774
Obligations of states and political subdivisions	281,003		—		281,003		—
Corporate debt securities	830		—		500		330
Equity securities	13,377		—		13,377		—
Derivative financial instruments(1)	4,202		—		4,202		—
Interest rate lock commitments	6,956		—		—		6,956
Forward commitments	343		—		343		—
Total assets at fair value	$	1,702,017	$	531	$	1,692,426	$	9,060
Liabilities
Derivative financial instruments(2)	$	15,347	$	—	$	15,347	$	—
Forward commitments	1,623		—		1,623		—
Total liabilities at fair value	$	16,970	$	—	$	16,970	$	—
December 31, 2015
Assets
Securities available for sale
U.S. government corporations and agencies	$	25,766	$	519	$	25,247	$	—
Mortgage-backed securities	1,242,702		—		1,240,663		2,039
Obligations of states and political subdivisions	295,982		—		295,982		—
Corporate debt securities	846		—		—		846
Equity securities	13,138		—		13,138		—
Derivative financial instruments(1)	2,237		—		2,237		—
Interest rate lock commitments	3,168		—		—		3,168
Forward commitments	523		—		523		—
Total assets at fair value	$	1,584,362	$	519	$	1,577,790	$	6,053
Liabilities
Derivative financial instruments(2)	$	8,401	$	—	$	8,401	$	—
Forward commitments	315		—		315		—
Total liabilities at fair value	$	8,716	$	—	$	8,716	$	—
(1) Includes embedded derivatives and loans swaps
(2) Includes cash flow hedges, fair value hedges, loan swaps, embedded conversion options and free standing derivative instruments

Fair Value Measurements, Nonrecurring

The tables below present Heartland's assets that are measured at fair value on a nonrecurring basis, in thousands:

	Fair Value Measurements at March 31, 2016
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	1,344	$	—	$	—	$	1,344	$	—
Commercial real estate	2,609		—		—		2,609		—
Agricultural and agricultural real estate	—		—		—		—		—
Residential real estate	3,168		—		—		3,168		—
Consumer	2,010		—		—		2,010		—
Total collateral dependent impaired loans	$	9,131	$	—	$	—	$	9,131	$	—
Other real estate owned	$	11,338	$	—	$	—	$	11,338	$	237
Premises, furniture and equipment held for sale	$	3,889	$	—	$	—	$	3,889	$	—

	Fair Value Measurements at December 31, 2015
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	597	$	—	$	—	$	597	$	82
Commercial real estate	1,522		—		—		1,522		86
Agricultural and agricultural real estate	—		—		—		—		—
Residential real estate	2,330		—		—		2,330		104
Consumer	1,905		—		—		1,905		—
Total collateral dependent impaired loans	$	6,354	$	—	$	—	$	6,354	$	272
Other real estate owned	$	11,524	$	—	$	—	$	11,524	$	5,520
Premises, furniture and equipment held for sale	$	3,889	$	—	$	—	$	3,889	$	—

Fair Value Inputs, Assets, Quantitative Information

The following tables present additional quantitative information about assets measured at fair value and for which Heartland has utilized Level 3 inputs to determine fair value, in thousands:

	Fair Value at 3/31/16		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	1,774	Discounted cash flows	Pretax discount rate	7.50 - 9.50%
				Actual defaults	22.07 - 34.19% (31.03%)
				Actual deferrals	10.67 - 20.53% (13.21%)
Corporate debt securities	330		Discounted cash flows	Bank analysis	(1)
Interest rate lock commitments	6,956		Discounted cash flows	Closing ratio	(2)
Premises, furniture and equipment held for sale	3,889		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Other real estate owned	11,338		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Collateral dependent impaired loans:
Commercial	1,344		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Commercial real estate	2,609		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Agricultural and agricultural real estate	—		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Residential real estate	3,168		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Consumer	2,010		Modified appraised value	Third party valuation	(3)
				Valuation discount	(3)
(1) The unobservable input is the bank analysis market using Moody's Global Bank Rating Methodology. The analysis takes into consideration various performance metrics as well as yield on the debt securities and credit risk analysis.
(2) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at March 31, 2016, was 88%.
(3) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

	Fair Value at 12/31/15		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	2,039	Discounted cash flows	Pretax discount rate	7.50 - 9.50%
				Actual defaults	22.20 - 33.55% (30.60%)
				Actual deferrals	10.75 - 21.82% (13.36%)
Corporate debt securities	846		Discounted cash flows	Bank analysis	(1)
Interest rate lock commitments	3,168		Discounted cash flows	Closing ratio	(2)
Premises, furniture and equipment held for sale	3,889		Modified appraised value	Third party appraisal	(3)
Other real estate owned	11,524		Modified appraised value	Disposal costs	(3)
				Third party appraisal	(3)
				Appraisal discount	(3)
Collateral dependent impaired loans:
Commercial	597		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Commercial real estate	1,522		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Agricultural and agricultural real estate	—		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Residential real estate	2,330		Modified appraised value	Third party appraisal	(3)
				Appraisal discount	(3)
Consumer	1,905		Modified appraised value	Third party valuation	(3)
				Valuation discount	(3)
(1) The unobservable input is the bank analysis market using Moody's Global Bank Rating Methodology. The analysis takes into consideration various performance metrics as well as yield on the debt securities and credit risk analysis.
(2) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at December 31, 2015, was 86%.
(3) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The changes in fair value of the Z-TRANCHE, a Level 3 asset, that is measured on a recurring basis are summarized in the following table, in thousands:

	For the Three Months Ended March 31, 2016			For the Year Ended December 31, 2015
Balance at January 1,	$	2,039		$	4,947
Total gains (losses):
Included in earnings	—			(3,038		)
Included in other comprehensive income	(265		)	982
Purchases, sales and settlements:
Purchases	—			6
Sales	—			(736		)
Settlements	—			(122		)
Balance at period end	$	1,774		$	2,039

The changes in fair value of the corporate debt securities, Level 3 assets, that are measured on a recurring basis is summarized in the following table, in thousands:

	For the Three Months Ended March 31, 2016			For the Year Ended December 31, 2015
Balance at January 1,	$	846		$	—
Total gains (losses):
Included in earnings	121			—
Included in other comprehensive income	(91		)	106
Purchases, acquired, sales and settlements:
Purchases	—			—
Acquired	—			740
Sales	(546		)	—
Settlements	—			—
Balance at period end	$	330		$	846

The changes in fair value of the interest rate lock commitments, which are Level 3 financial instruments and are measured on a recurring basis, are summarized in the following table, in thousands:

	For the Three Months Ended March 31, 2016			For the Year Ended December 31, 2015
Balance at January 1,	$	3,168		$	2,496
Total gains (losses) included in earnings	4,727			288
Issuances	138			5,428
Settlements	(1,077		)	(5,044		)
Balance at period end	$	6,956		$	3,168

Fair Value, by Balance Sheet Grouping

The following analysis, which is inherently limited in depicting fair value, also does not consider any value associated with either existing customer relationships or the ability of Heartland to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

					Fair Value Measurements at March 31, 2016
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	133,228	$	133,228	$	133,228	$	—	$	—
Time deposits in other financial institutions	2,355		2,355		2,355		—		—
Securities:
Available for sale	1,690,516		1,690,516		531		1,687,881		2,104
Held to maturity	271,300		289,446		—		289,446		—
Other investments	22,325		22,325		—		22,090		235
Loans held for sale	76,565		76,565		—		76,565		—
Loans, net:
Commercial	1,278,343		1,271,778		—		1,270,434		1,344
Commercial real estate	2,533,220		2,533,017		—		2,530,408		2,609
Agricultural and agricultural real estate	467,844		473,559		—		473,559		—
Residential real estate	750,219		749,749		—		746,581		3,168
Consumer	423,641		428,805		—		426,795		2,010
Total Loans, net	5,453,267		5,456,908		—		5,447,777		9,131
Derivative financial instruments (1)	4,202		4,202		—		4,202		—
Interest rate lock commitments	6,956		6,956		—		—		6,956
Forward commitments	343		343		—		343		—
Financial liabilities:
Deposits
Demand deposits	2,079,521		2,079,521		—		2,079,521		—
Savings deposits	3,702,431		3,702,431		—		3,702,431		—
Time deposits	1,142,368		1,142,368		—		1,142,368		—
Short term borrowings	325,741		325,741		—		325,741		—
Other borrowings	265,760		267,812		—		267,812		—
Derivative financial instruments (2)	15,347		15,347		—		15,347		—
Forward commitments	1,623		1,623		—		1,623		—
(1) Includes embedded derivatives and loan swaps
(2) Includes cash flow hedges, fair value hedges, loan swaps, embedded conversion options and free standing derivative instruments

					Fair Value Measurements at December 31, 2015
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	258,799	$	258,799	$	258,799	$	—	$	—
Time deposits in other financial institutions	2,355		2,355		2,355		—		—
Securities:
Available for sale	1,578,434		1,578,434		519		1,575,030		2,885
Held to maturity	279,117		294,513		—		294,513		—
Other investments	21,443		21,443		—		21,208		235
Loans held for sale	74,783		74,783		—		74,783		—
Loans, net:
Commercial	1,262,612		1,257,355		—		1,256,758		597
Commercial real estate	2,305,908		2,304,716		—		2,303,194		1,522
Agricultural and agricultural real estate	468,533		469,485		—		469,485		—
Residential real estate	536,190		531,931		—		529,601		2,330
Consumer	379,558		382,579		—		380,674		1,905
Total Loans, net	4,952,801		4,946,066		—		4,939,712		6,354
Derivative financial instruments (1)	2,237		2,237		—		2,237		—
Interest rate lock commitments	3,168		3,168		—		—		3,168
Forward commitments	523		523		—		523		—
Financial liabilities:
Deposits
Demand deposits	1,914,141		1,914,141		—		1,914,141		—
Savings deposits	3,367,479		3,367,479		—		3,367,479		—
Time deposits	1,124,203		1,124,203		—		1,124,203		—
Short term borrowings	293,898		293,898		—		293,898		—
Other borrowings	263,214		281,271		—		281,271		—
Derivative financial instruments (2)	8,401		8,401		—		8,401		—
Forward commitments	315		315		—		315		—
(1) Includes embedded derivatives and loan swaps
(2) Includes cash flow hedges, fair value hedges, loan swaps and free standing derivative instruments

XML

Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Schedule of Segment Reporting

The following tables present financial information from Heartland's operating segments for the three months ended March 31, 2016, and March 31, 2015, in thousands.

	Three Months Ended March 31,
	2016						2015
	Community and Other Banking		Retail Mortgage Banking		Total		Community and Other Banking		Retail Mortgage Banking		Total
Net interest income	$	71,583	$	1,124	$	72,707	$	52,889	$	1,041	$	53,930
Provision for loan losses	2,067		—		2,067		1,671		—		1,671
Total noninterest income	18,537		11,041		29,578		17,061		13,602		30,663
Total noninterest expense	59,739		10,570		70,309		47,459		12,155		59,614
Income before taxes	$	28,314	$	1,595	$	29,909	$	20,820	$	2,488	$	23,308
Average Loans, for the period	$	5,296,191	$	61,911	$	5,358,102	$	4,189,966	$	77,627	$	4,267,593
Segment Assets, at period end	$	8,141,960	$	111,819	$	8,253,779	$	6,365,682	$	140,594	$	6,506,276

XML

Basis of Presentation (Earnings per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share
Net income attributable to Heartland	$ 20,009	$ 15,709
Preferred dividends	(168)	(204)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$ 19,841	$ 15,505
Weighted average common shares outstanding for basic earnings per share	23,657	20,215
Assumed incremental common shares issued upon exercise of stock options and non-vested restricted stock units	460	278
Weighted average common shares for diluted earnings per share	24,117	20,493
Earnings per common share — basic (in dollars per share)	$ 0.84	$ 0.77
Earnings per common share — diluted (in dollars per share)	$ 0.82	$ 0.76
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	57	0

XML

Basis of Presentation (Stock-Based Compensation) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Tax benefit from equity based awards	$ 1,100,000	$ 612,000
Options granted (in shares)	0	0
Vested options (in shares)	104,950	181,951
Vested options, weighted average exercise price (in dollars per share)	$ 24.58	$ 24.37
Vested options, weighted average remaining contractual life	1 year 1 month 25 days
Intrinsic value for vested options	$ 652,000
Intrinsic value for the total of all options exercised	$ 155,000
Maximum exercise period	10 years
Cash received from options exercised	$ 427,000	$ 676,000
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation costs	1,100,000	1,100,000
Share-based unrecognized compensation costs	5,200,000
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation costs	0	$ 0
Share-based unrecognized compensation costs	$ 0
Options granted (in shares)	0	0
Stock Options | Prior to 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, award vesting periods	5 years
Typical options expiration period after date of grant	10 years
Stock Options | Period One | Prior to 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, award vesting periods	3 years
Stock Options | Period Two | Prior to 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, award vesting periods	4 years
Stock Options | Period Three | Prior to 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, award vesting periods	5 years
Long-Term Incentive Plan 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares for issuance under future awards	162,868
Long-Term Incentive Plan 2012 | Time-based RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity instruments other than options, granted (in shares)	72,644	78,220
Share-based compensation, award vesting periods	3 years	5 years
Long-Term Incentive Plan 2012 | Performance-Based RSUs | End of Performance Period
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity instruments other than options, granted (in shares)	35,516	39,075
Share-based compensation, award vesting periods	2 years
Long-Term Incentive Plan 2012 | Performance-Based RSUs | Performance Period Ended December 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity instruments other than options, granted (in shares)	11,408
Share-based compensation, award vesting periods	3 years
Long-Term Incentive Plan 2012 | RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity instruments other than options, granted (in shares)	150	300

XML

Basis of Presentation (Summary of RSUs Activity) (Details) - RSUs - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Shares
Outstanding at beginning of period (in shares)	353,195	396,555
Granted (in shares)	119,718	117,595
Vested (in shares)	(83,982)	(126,847)
Forfeited (in shares)	(2,078)	(2,531)
Outstanding at end of period (in shares)	386,853	384,772
Weighted-Average Grant Date Fair Value
Outstanding at beginning of period (in dollars per share)	$ 25.53	$ 21.48
Granted (in dollars per share)	29.05	27.87
Vested (in dollars per share)	20.79	16.66
Forfeited (in dollars per share)	27.17	23.82
Outstanding at end of period (in dollars per share)	$ 27.53	$ 25.00

XML

Basis of Presentation (Summary of Stock Options Activity) (Details) - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Shares
Outstanding at beginning of period (in shares)	125,950	215,851
Granted (in shares)	0	0
Exercised (in shares)	(19,750)	(32,400)
Forfeited (in shares)	(1,250)	(1,500)
Outstanding at end of period (in shares)	104,950	181,951
Options exercisable at end of period (in shares)	104,950	181,951
Weighted-Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 24.08	$ 23.85
Granted (in dollars per share)	0.00	0.00
Exercised (in dollars per share)	21.60	20.85
Forfeited (in dollars per share)	21.60	21.00
Outstanding at end of period (in dollars per share)	24.58	24.37
Options exercisable at end of period (in dollars per share)	$ 24.58	$ 24.37

XML

Acquisitions (Narrative) (Details) - USD ($) $ in Thousands						3 Months Ended	12 Months Ended
	Feb. 05, 2016	Nov. 30, 2015	Sep. 11, 2015	Aug. 21, 2015	Jan. 16, 2015	Mar. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Mar. 31, 2015
Business Acquisition [Line Items]
Notional Amount						$ 14,903	$ 15,020
Assets						8,253,779	7,694,754		$ 6,506,276
Deposits						6,924,320	6,405,823
Goodwill						127,699	97,852
Nonaccrual loans						46,316	37,874
Premises, furniture and equipment held for sale						3,889	3,889
CIC Bancshares, Inc.
Business Acquisition [Line Items]
Total purchase price	$ 76,882
Purchase price paid by delivery of shares of common stock	2,003,235
Purchase price in cash	$ 15,672
Other borrowings	7,924
Assets	772,600
Loans	581,500
Deposits	648,100
Goodwill	29,848
Pre-tax merger related expenses						$ 551
Nonaccrual loans	1,600
Nonrecurring acquisition related costs							$ 59,491	$ 41,004
CIC Bancshares, Inc. | Preferred Stock
Business Acquisition [Line Items]
Convertible preferred stock issued, fair value	$ 3,800
Premier Valley Bank
Business Acquisition [Line Items]
Total purchase price		$ 95,500
Purchase price paid by delivery of shares of common stock		1,758,543
Purchase price in cash		$ 28,500
Assets		692,700
Loans		389,800
Deposits		622,700
Goodwill		$ 41,024
First Scottsdale Bank, N.A.
Business Acquisition [Line Items]
Purchase price in cash			$ 17,700
Assets			81,200
Loans			54,700
Deposits			65,900
Goodwill			$ 2,500
Community Bancorporation of New Mexico, Inc.
Business Acquisition [Line Items]
Purchase price in cash				$ 11,100
Assets				166,300
Loans				99,500
Deposits				147,400
Goodwill				213
Premises, furniture and equipment held for sale				$ 3,400
Community Banc-Corp of Sheboygan, Inc.
Business Acquisition [Line Items]
Total purchase price					$ 53,100
Purchase price paid by delivery of shares of common stock					1,970,720
Assets					$ 506,800
Loans					395,000
Deposits					433,900
Goodwill					$ 18,600
Purchase price, percentage of adjusted tangible book value					155.00%

XML

Acquisitions (Acquisition, fair values) (Details) - USD ($) $ in Thousands	Feb. 05, 2016	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Fair value of liabilities assumed:
Goodwill resulting from acquisition		$ 127,699	$ 97,852
Assets		$ 8,253,779	$ 7,694,754	$ 6,506,276
CIC Bancshares, Inc.
Fair value of consideration paid:
Stock, number of shares	2,003,235
Cash	$ 15,672
Total consideration paid	76,882
Fair value of assets acquired:
Cash and due from banks	23,756
Securities:
Securities available for sale	92,831
Other securities	3,486
Loans held to maturity	581,477
Premises, furniture and equipment, net	16,450
Other real estate, net	1,934
Other intangible assets, net	6,576
Other assets	16,276
Total assets	742,786
Fair value of liabilities assumed:
Deposits	648,111
Short term borrowings	35,766
Other borrowings	7,924
Other liabilities	3,951
Total liabilities assumed	695,752
Fair value of net assets acquired	47,034
Goodwill resulting from acquisition	29,848
Assets	772,600
CIC Bancshares, Inc. | Common Stock
Fair value of consideration paid:
Stock	$ 57,433
Stock, number of shares	2,003,235
CIC Bancshares, Inc. | Preferred Stock
Fair value of consideration paid:
Stock	$ 3,777
Stock, number of shares	3,000

XML

Acquisitions (Pro forma) (Details) - CIC Bancshares, Inc. - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Business Acquisition [Line Items]
Net interest income	$ 259,531	$ 221,808
Net income	$ 59,491	$ 41,004
Basic earnings per share (in dollars per share)	$ 2.63	$ 2.00
Diluted earnings per share (in dollars per share)	$ 2.58	$ 1.96

XML

Securities (Securities available for sale) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 1,680,299	$ 1,584,703
Gross Unrealized Gains	22,838	15,849
Gross Unrealized Losses	(12,621)	(22,118)
Estimated Fair Value	1,690,516	1,578,434
Total debt securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,667,149	1,571,561
Gross Unrealized Gains	22,611	15,809
Gross Unrealized Losses	(12,621)	(22,074)
Estimated Fair Value	1,677,139	1,565,296
U.S. government corporations and agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	6,479	25,847
Gross Unrealized Gains	140	22
Gross Unrealized Losses	0	(103)
Estimated Fair Value	6,619	25,766
Mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,386,707	1,254,452
Gross Unrealized Gains	14,448	9,134
Gross Unrealized Losses	(12,468)	(20,884)
Estimated Fair Value	1,388,687	1,242,702
Obligations of states and political subdivisions
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	273,147	290,522
Gross Unrealized Gains	8,008	6,547
Gross Unrealized Losses	(152)	(1,087)
Estimated Fair Value	281,003	295,982
Corporate debt securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	816	740
Gross Unrealized Gains	15	106
Gross Unrealized Losses	(1)	0
Estimated Fair Value	830	846
Equity securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	13,150	13,142
Gross Unrealized Gains	227	40
Gross Unrealized Losses	0	(44)
Estimated Fair Value	$ 13,377	$ 13,138

XML

Securities (Held to maturity securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 271,300	$ 279,117
Gross Unrealized Gains	18,492	15,901
Gross Unrealized Losses	(346)	(505)
Estimated Fair Value	289,446	294,513
Mortgage-backed securities
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	0	4,369
Gross Unrealized Gains	0	306
Gross Unrealized Losses	0	0
Estimated Fair Value	0	4,675
Obligations of states and political subdivisions
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	271,300	274,748
Gross Unrealized Gains	18,492	15,595
Gross Unrealized Losses	(346)	(505)
Estimated Fair Value	$ 289,446	$ 289,838

XML

Securities (Securities available for sale (debt maturities)) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Amortized Cost
Due in 1 year or less	$ 1,265
Due in 1 to 5 years	12,836
Due in 5 to 10 years	67,214
Due after 10 years	199,127
Total debt securities	280,442
Mortgage-backed securities	1,386,707
Equity securities	13,150
Amortized Cost	1,680,299	$ 1,584,703
Estimated Fair Value
Due in 1 year or less	1,273
Due in 1 to 5 years	13,115
Due in 5 to 10 years	69,250
Due after 10 years	204,814
Total debt securities	288,452
Mortgage-backed securities	1,388,687
Equity securities	13,377
Estimated Fair Value	$ 1,690,516	$ 1,578,434

XML

Securities (Securities held to maturity (debt maturities)) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Amortized Cost
Due in 1 year or less	$ 4,266
Due in 1 to 5 years	13,714
Due in 5 to 10 years	68,786
Due after 10 years	184,534
Total debt securities	271,300
Mortgage-backed securities	0
Amortized Cost	271,300	$ 279,117
Estimated Fair Value
Due in 1 year or less	4,336
Due in 1 to 5 years	14,499
Due in 5 to 10 years	73,224
Due after 10 years	197,387
Total debt securities	289,446
Mortgage-backed securities	0
Estimated Fair Value	$ 289,446	$ 294,513

XML

Securities (Realized gain (loss)) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Investments, Debt and Equity Securities [Abstract]
Proceeds from sales	$ 303,448	$ 289,466
Gross security gains	4,558	4,622
Gross security losses	$ 682	$ 269

XML

Securities (Available for sale securities losses) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value
Less than 12 months	$ 528,410	$ 821,737
12 months or longer	137,259	147,022
Total	665,669	968,759
Unrealized Losses
Less than 12 months	(8,406)	(16,566)
12 months or longer	(4,215)	(5,552)
Total	(12,621)	(22,118)
U.S. government corporations and agencies
Fair Value
Less than 12 months	0	22,359
12 months or longer	0	0
Total	0	22,359
Unrealized Losses
Less than 12 months	0	(103)
12 months or longer	0	0
Total	0	(103)
Mortgage-backed securities
Fair Value
Less than 12 months	517,907	724,330
12 months or longer	130,640	139,562
Total	648,547	863,892
Unrealized Losses
Less than 12 months	(8,323)	(15,523)
12 months or longer	(4,145)	(5,361)
Total	(12,468)	(20,884)
Obligations of states and political subdivisions
Fair Value
Less than 12 months	10,003	68,482
12 months or longer	6,619	7,460
Total	16,622	75,942
Unrealized Losses
Less than 12 months	(82)	(896)
12 months or longer	(70)	(191)
Total	(152)	(1,087)
Corporate debt securities
Fair Value
Less than 12 months	500	0
12 months or longer	0	0
Total	500	0
Unrealized Losses
Less than 12 months	(1)	0
12 months or longer	0	0
Total	(1)	0
Total debt securities
Fair Value
Less than 12 months	528,410	815,171
12 months or longer	137,259	147,022
Total	665,669	962,193
Unrealized Losses
Less than 12 months	(8,406)	(16,522)
12 months or longer	(4,215)	(5,552)
Total	(12,621)	(22,074)
Equity securities
Fair Value
Less than 12 months	0	6,566
12 months or longer	0	0
Total	0	6,566
Unrealized Losses
Less than 12 months	0	(44)
12 months or longer	0	0
Total	$ 0	$ (44)

XML

Securities (Held to maturity securities losses) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value
Less than 12 months	$ 1,363	$ 3,646
12 months or longer	5,717	18,033
Total	7,080	21,679
Unrealized Losses
Less than 12 months	(18)	(12)
12 months or longer	(328)	(493)
Total	(346)	(505)
Mortgage-backed securities
Fair Value
Less than 12 months	0	0
12 months or longer	0	0
Total	0	0
Unrealized Losses
Less than 12 months	0	0
12 months or longer	0	0
Total	0	0
Obligations of states and political subdivisions
Fair Value
Less than 12 months	1,363	3,646
12 months or longer	5,717	18,033
Total	7,080	21,679
Unrealized Losses
Less than 12 months	(18)	(12)
12 months or longer	(328)	(493)
Total	$ (346)	$ (505)

XML

Securities (Other-than-temporary impairments) (Details)	1 Months Ended	3 Months Ended		12 Months Ended
	Mar. 31, 2012 USD ($) security	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($) security
Investments, Debt and Equity Securities [Abstract]
Number of investments with OTTI | security	3
OTTI write-downs included in earnings, held to maturity debt securities	$ 797,000			$ 716,000
Number of private label mortgage-backed securities | security				2
Gross realized gains (losses) on sale of available for sale securities with OTTI write-downs		$ 0
Carrying value of held to maturity securities		4,400,000
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI write-downs included in earnings, available for sale debt securities	184,000	0		$ 237,000
Gross realized losses with OTTI write-downs		682,000	$ 269,000
Realized gross gains (losses) on held to maturity securities		0
Recorded as part of gross realized losses:
Credit related OTTI		0	0
Intent to sell OTTI		0	0
Total recorded as part of gross realized losses	$ 981,000	0	0	769,000
Recorded directly to AOCI for non-credit related impairment:
Residential mortgage backed securities		0	0
Reduction of non-credit related impairment related to security sales		(120,000)	0
Accretion of non-credit related impairment		(7,000)	(24,000)
Total changes to AOCI for non-credit related impairment		(127,000)	(24,000)
Total OTTI losses (accretion) recorded on debt securities, net		(127,000)	$ (24,000)
Held-to-maturity Securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Credit related OTTI		0		1,500,000
Non-credit related OTTI		0		40,000
Recorded directly to AOCI for non-credit related impairment:
Reduction of non-credit related impairment related to security sales				200,000
Mortgage Backed Securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI write-downs included in earnings, available for sale debt securities				$ 53,000
Realized gross gains on carrying value of securities		89,000
Gross realized losses with OTTI write-downs		85,000
Realized gross gains (losses) on held to maturity securities		$ 439,000

XML

Securities (Other securities) (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]
Fair value of securities pledged	$ 811.7	$ 855.8
FHLB	$ 15.7	$ 14.3
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Investment [Line Items]
Percentage of mortgage-backed securities issued by government-sponsored enterprises	79.00%

XML

Loans and Leases (Loans and leases receivable) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Loans and Leases [Line Items]
Gross loans and leases receivable held to maturity	$ 5,506,408	$ 5,003,866
Unearned discount	(640)	(488)
Deferred loan fees	(2,763)	(1,892)
Total net loans and leases receivable held to maturity	5,503,005	5,001,486
Allowance for loan and lease losses	(49,738)	(48,685)
Loans and leases receivable, net	5,453,267	4,952,801
Loans secured by residential real estate property in process of foreclosure	$ 2,200
Threshold period past due, nonperforming status of loans and leases	90 days
Commercial
Loans and Leases [Line Items]
Gross loans and leases receivable held to maturity	$ 1,295,504	1,279,214
Commercial real estate
Loans and Leases [Line Items]
Gross loans and leases receivable held to maturity	2,555,268	2,326,360
Agricultural and agricultural real estate
Loans and Leases [Line Items]
Gross loans and leases receivable held to maturity	471,271	471,870
Residential real estate
Loans and Leases [Line Items]
Gross loans and leases receivable held to maturity	$ 753,666	539,555
Residential real estate | Minimum
Loans and Leases [Line Items]
Length of loan agreements	10 years
Residential real estate | Maximum
Loans and Leases [Line Items]
Length of loan agreements	30 years
Consumer
Loans and Leases [Line Items]
Gross loans and leases receivable held to maturity	$ 430,699	386,867
Consumer | Citizens Finance Co | Loans and Finance Receivables
Loans and Leases [Line Items]
Concentration risk, percentage	19.00%
Gross loans and leases receivable held to maturity
Loans and Leases [Line Items]
Gross loans and leases receivable held to maturity	$ 5,506,408	5,003,866
Commercial and commercial real estate
Loans and Leases [Line Items]
Gross loans and leases receivable held to maturity	$ 3,850,772	$ 3,605,574
Commercial and commercial real estate | Minimum
Loans and Leases [Line Items]
Length of loan agreements	1 year
Commercial and commercial real estate | Maximum
Loans and Leases [Line Items]
Length of loan agreements	5 years

XML

Loans and Leases (Allowance for credit losses on financing receivables) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	$ 3,794	$ 2,768
Ending Balance Under ASC 450-20	45,944	45,917
Total	49,738	48,685	$ 41,854	$ 41,449
Ending Balance Evaluated for Impairment Under ASC 310-10-35	94,001	80,221
Ending Balance Evaluated for Impairment Under ASC 450-20	5,412,407	4,923,645
Total	5,506,408	5,003,866
Commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	984	471
Ending Balance Under ASC 450-20	15,390	15,624
Total	16,374	16,095	11,688	11,909
Ending Balance Evaluated for Impairment Under ASC 310-10-35	11,018	6,919
Ending Balance Evaluated for Impairment Under ASC 450-20	1,284,486	1,272,295
Total	1,295,504	1,279,214
Commercial real estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	1,252	698
Ending Balance Under ASC 450-20	19,243	18,834
Total	20,495	19,532	16,635	15,898
Ending Balance Evaluated for Impairment Under ASC 310-10-35	44,082	45,442
Ending Balance Evaluated for Impairment Under ASC 450-20	2,511,186	2,280,918
Total	2,555,268	2,326,360
Agricultural and agricultural real estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	0	0
Ending Balance Under ASC 450-20	4,028	3,887
Total	4,028	3,887	3,216	3,295
Ending Balance Evaluated for Impairment Under ASC 310-10-35	13,593	4,612
Ending Balance Evaluated for Impairment Under ASC 450-20	457,678	467,258
Total	471,271	471,870
Residential real estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	311	393
Ending Balance Under ASC 450-20	1,540	1,541
Total	1,851	1,934	3,745	3,741
Ending Balance Evaluated for Impairment Under ASC 310-10-35	19,345	17,790
Ending Balance Evaluated for Impairment Under ASC 450-20	734,321	521,765
Total	753,666	539,555
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	1,247	1,206
Ending Balance Under ASC 450-20	5,743	6,031
Total	6,990	7,237	$ 6,570	$ 6,606
Ending Balance Evaluated for Impairment Under ASC 310-10-35	5,963	5,458
Ending Balance Evaluated for Impairment Under ASC 450-20	424,736	381,409
Total	$ 430,699	$ 386,867

XML

Loans and Leases (Financing receivables, non accrual status) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Receivables [Abstract]
Nonaccrual loans	$ 46,316	$ 37,874
Nonaccrual troubled debt restructured loans	1,434	1,781
Total nonaccrual loans	47,750	39,655
Accruing loans past due 90 days or more	639	0
Performing troubled debt restructured loans	$ 10,711	$ 11,075

XML

Loans and Leases (Troubled debt restructuring on loans modified) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) loan	Mar. 31, 2015 USD ($) loan
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	1
Pre- Modification Recorded Investment	$ 0	$ 3,992
Post- Modification Recorded Investment	$ 0	$ 3,992
Commercial
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	0
Pre- Modification Recorded Investment	$ 0	$ 0
Post- Modification Recorded Investment	$ 0	$ 0
Commercial real estate
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	1
Pre- Modification Recorded Investment	$ 0	$ 3,992
Post- Modification Recorded Investment	$ 0	$ 3,992
Commercial and commercial real estate
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	1
Pre- Modification Recorded Investment	$ 0	$ 3,992
Post- Modification Recorded Investment	$ 0	$ 3,992
Agricultural and agricultural real estate
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	0
Pre- Modification Recorded Investment	$ 0	$ 0
Post- Modification Recorded Investment	$ 0	$ 0
Residential real estate
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	0
Pre- Modification Recorded Investment	$ 0	$ 0
Post- Modification Recorded Investment	$ 0	$ 0
Consumer
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	0	0
Pre- Modification Recorded Investment	$ 0	$ 0
Post- Modification Recorded Investment	$ 0	$ 0

XML

Loans and Leases (Troubled debt in text) (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Gross loans and leases receivable held to maturity	$ 5,506,408,000	$ 5,003,866,000
Doubtful
Financing Receivable, Recorded Investment [Line Items]
Gross loans and leases receivable held to maturity	80,000
Loss
Financing Receivable, Recorded Investment [Line Items]
Gross loans and leases receivable held to maturity	$ 0

XML

Loans and Leases (Loans and leases not covered by share agreements (credit quality indicator)) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	$ 5,506,408	$ 5,003,866
Commercial
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	1,295,504	1,279,214
Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	2,555,268	2,326,360
Commercial and commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	3,850,772	3,605,574
Agricultural and agricultural real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	471,271	471,870
Residential real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	753,666	539,555
Consumer
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	430,699	386,867
Pass
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	5,041,241	4,541,863
Pass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	1,128,858	1,106,276
Pass | Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	2,339,414	2,107,474
Pass | Commercial and commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	3,468,272	3,213,750
Pass | Agricultural and agricultural real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	426,929	435,745
Pass | Residential real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	725,773	515,195
Pass | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	420,267	377,173
Nonpass
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	465,167	462,003
Nonpass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	166,646	172,938
Nonpass | Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	215,854	218,886
Nonpass | Commercial and commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	382,500	391,824
Nonpass | Agricultural and agricultural real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	44,342	36,125
Nonpass | Residential real estate
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	27,893	24,360
Nonpass | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total gross loans and leases receivable held to maturity	$ 10,432	$ 9,694

XML

Loans and Leases (Loans and leases not covered by share agreements (in text)) (Details)	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Loans delinquent 30 to 89 days, percentage	0.45%	0.31%
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Percent of loans	57.00%	68.00%
Substandard
Financing Receivable, Recorded Investment [Line Items]
Percent of loans	43.00%	32.00%
Nonpass
Financing Receivable, Recorded Investment [Line Items]
Percent of nonaccrual loans	10.00%	8.00%

XML

Loans and Leases (Loans and leases not covered by share agreements (past due financing receivables)) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	$ 25,171	$ 15,348
Accruing Loans and Leases, Current	5,433,487	4,948,863
Nonaccrual	47,750	39,655
Total	5,506,408	5,003,866
Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	1,961	2,613
Accruing Loans and Leases, Current	1,288,064	1,273,678
Nonaccrual	5,479	2,923
Total	1,295,504	1,279,214
Commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	3,714	5,626
Accruing Loans and Leases, Current	2,529,840	2,302,052
Nonaccrual	21,714	18,682
Total	2,555,268	2,326,360
Commercial and commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	5,675	8,239
Accruing Loans and Leases, Current	3,817,904	3,575,730
Nonaccrual	27,193	21,605
Total	3,850,772	3,605,574
Agricultural and agricultural real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	13,023	197
Accruing Loans and Leases, Current	457,459	470,455
Nonaccrual	789	1,218
Total	471,271	471,870
Residential real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	2,495	2,015
Accruing Loans and Leases, Current	734,977	523,915
Nonaccrual	16,194	13,625
Total	753,666	539,555
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	3,978	4,897
Accruing Loans and Leases, Current	423,147	378,763
Nonaccrual	3,574	3,207
Total	430,699	386,867
30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	22,765	11,561
30-59 Days Past Due | Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	1,565	2,005
30-59 Days Past Due | Commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	3,413	3,549
30-59 Days Past Due | Commercial and commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	4,978	5,554
30-59 Days Past Due | Agricultural and agricultural real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	12,600	143
30-59 Days Past Due | Residential real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	1,753	1,900
30-59 Days Past Due | Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	3,434	3,964
60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	1,767	3,787
60-89 Days Past Due | Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	396	608
60-89 Days Past Due | Commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	212	2,077
60-89 Days Past Due | Commercial and commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	608	2,685
60-89 Days Past Due | Agricultural and agricultural real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	423	54
60-89 Days Past Due | Residential real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	192	115
60-89 Days Past Due | Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	544	933
90 Days or More Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	639	0
90 Days or More Past Due | Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	0	0
90 Days or More Past Due | Commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	89	0
90 Days or More Past Due | Commercial and commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	89	0
90 Days or More Past Due | Agricultural and agricultural real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	0	0
90 Days or More Past Due | Residential real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	550	0
90 Days or More Past Due | Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Accruing Loans and Leases, Past Due	$ 0	$ 0

XML

Loans and Leases (Impaired loans not covered by loss share agreements) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	$ 15,189	$ 9,210
Impaired loans without a related allowance, Unpaid Contractual Balance	82,343	74,644
Total impaired loans held to maturity, Unpaid Contractual Balance	97,532	83,854
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	15,100	9,093
Impaired loans without a related allowance, Loan Balance	78,901	71,128
Total impaired loans held to maturity, Loan Balance	94,001	80,221
Impaired loans, Related Allowance Recorded	3,794	2,768
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	12,472	11,287
Impaired loans without a related allowance, Avg. Loan Balance	84,286	60,831
Total impaired loans held to maturity, Avg. Loan Balance	96,758	72,118
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	73	80
Impaired loans without a related allowance, Interest Income Recognized	819	2,268
Total impaired loans held to maturity, Interest Income Recognized	892	2,348
Commercial
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	4,766	1,192
Impaired loans without a related allowance, Unpaid Contractual Balance	6,277	5,784
Total impaired loans held to maturity, Unpaid Contractual Balance	11,043	6,976
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	4,766	1,160
Impaired loans without a related allowance, Loan Balance	6,252	5,759
Total impaired loans held to maturity, Loan Balance	11,018	6,919
Impaired loans, Related Allowance Recorded	984	471
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	2,137	524
Impaired loans without a related allowance, Avg. Loan Balance	9,849	7,511
Total impaired loans held to maturity, Avg. Loan Balance	11,986	8,035
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	35	12
Impaired loans without a related allowance, Interest Income Recognized	143	515
Total impaired loans held to maturity, Interest Income Recognized	178	527
Commercial real estate
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	4,297	2,697
Impaired loans without a related allowance, Unpaid Contractual Balance	43,157	46,099
Total impaired loans held to maturity, Unpaid Contractual Balance	47,454	48,796
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	4,203	2,697
Impaired loans without a related allowance, Loan Balance	39,879	42,745
Total impaired loans held to maturity, Loan Balance	44,082	45,442
Impaired loans, Related Allowance Recorded	1,252	698
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	4,210	2,539
Impaired loans without a related allowance, Avg. Loan Balance	46,872	38,444
Total impaired loans held to maturity, Avg. Loan Balance	51,082	40,983
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	25	19
Impaired loans without a related allowance, Interest Income Recognized	384	1,395
Total impaired loans held to maturity, Interest Income Recognized	409	1,414
Commercial and commercial real estate
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	9,063	3,889
Impaired loans without a related allowance, Unpaid Contractual Balance	49,434	51,883
Total impaired loans held to maturity, Unpaid Contractual Balance	58,497	55,772
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	8,969	3,857
Impaired loans without a related allowance, Loan Balance	46,131	48,504
Total impaired loans held to maturity, Loan Balance	55,100	52,361
Impaired loans, Related Allowance Recorded	2,236	1,169
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	6,347	3,063
Impaired loans without a related allowance, Avg. Loan Balance	56,721	45,955
Total impaired loans held to maturity, Avg. Loan Balance	63,068	49,018
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	60	31
Impaired loans without a related allowance, Interest Income Recognized	527	1,910
Total impaired loans held to maturity, Interest Income Recognized	587	1,941
Agricultural and agricultural real estate
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	0	0
Impaired loans without a related allowance, Unpaid Contractual Balance	13,593	4,612
Total impaired loans held to maturity, Unpaid Contractual Balance	13,593	4,612
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	0	0
Impaired loans without a related allowance, Loan Balance	13,593	4,612
Total impaired loans held to maturity, Loan Balance	13,593	4,612
Impaired loans, Related Allowance Recorded	0	0
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	0	2,823
Impaired loans without a related allowance, Avg. Loan Balance	7,422	2,287
Total impaired loans held to maturity, Avg. Loan Balance	7,422	5,110
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	0	0
Impaired loans without a related allowance, Interest Income Recognized	251	175
Total impaired loans held to maturity, Interest Income Recognized	251	175
Residential real estate
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	2,868	2,210
Impaired loans without a related allowance, Unpaid Contractual Balance	16,610	15,802
Total impaired loans held to maturity, Unpaid Contractual Balance	19,478	18,012
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	2,873	2,125
Impaired loans without a related allowance, Loan Balance	16,472	15,665
Total impaired loans held to maturity, Loan Balance	19,345	17,790
Impaired loans, Related Allowance Recorded	311	393
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	2,917	2,524
Impaired loans without a related allowance, Avg. Loan Balance	17,173	10,186
Total impaired loans held to maturity, Avg. Loan Balance	20,090	12,710
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	4	16
Impaired loans without a related allowance, Interest Income Recognized	32	145
Total impaired loans held to maturity, Interest Income Recognized	36	161
Consumer
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	3,258	3,111
Impaired loans without a related allowance, Unpaid Contractual Balance	2,706	2,347
Total impaired loans held to maturity, Unpaid Contractual Balance	5,964	5,458
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	3,258	3,111
Impaired loans without a related allowance, Loan Balance	2,705	2,347
Total impaired loans held to maturity, Loan Balance	5,963	5,458
Impaired loans, Related Allowance Recorded	1,247	1,206
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	3,208	2,877
Impaired loans without a related allowance, Avg. Loan Balance	2,970	2,403
Total impaired loans held to maturity, Avg. Loan Balance	6,178	5,280
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	9	33
Impaired loans without a related allowance, Interest Income Recognized	9	38
Total impaired loans held to maturity, Interest Income Recognized	$ 18	$ 71

XML

Loans and Leases (Purchased impaired loans (in text)) (Details) - USD ($) $ in Millions	Feb. 05, 2016	Nov. 30, 2015	Sep. 11, 2015	Aug. 21, 2015	Jan. 16, 2015
Centennial Bank
Financing Receivable, Impaired [Line Items]
Loans	$ 594.9
Estimated fair value of loans acquired	$ 581.5
Premier Valley Bank
Financing Receivable, Impaired [Line Items]
Loans		$ 400.5
Estimated fair value of loans acquired		$ 389.8
First Scottsdale Bank, N.A.
Financing Receivable, Impaired [Line Items]
Loans			$ 56.5
Estimated fair value of loans acquired			$ 54.7
Community Bancorporation of New Mexico, Inc.
Financing Receivable, Impaired [Line Items]
Loans				$ 103.7
Estimated fair value of loans acquired				$ 99.5
Community Banc-Corp of Sheboygan, Inc.
Financing Receivable, Impaired [Line Items]
Loans					$ 413.4
Estimated fair value of loans acquired					$ 395.0

XML

Loans and Leases (Carrying amount loans not covered by loss share agreements) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired Purchased Loans	$ 9,257	$ 7,716
Non Impaired Purchased Loans	1,272,662	775,581
Total Purchased Loans	1,281,919	783,297
Commercial
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired Purchased Loans	2,545	0
Non Impaired Purchased Loans	184,963	159,393
Total Purchased Loans	187,508	159,393
Commercial real estate
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired Purchased Loans	5,997	7,716
Non Impaired Purchased Loans	723,390	494,010
Total Purchased Loans	729,387	501,726
Agricultural and agricultural real estate
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired Purchased Loans	0	0
Non Impaired Purchased Loans	1,296	2,985
Total Purchased Loans	1,296	2,985
Residential real estate
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired Purchased Loans	715	0
Non Impaired Purchased Loans	293,176	85,549
Total Purchased Loans	293,891	85,549
Consumer
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired Purchased Loans	0	0
Non Impaired Purchased Loans	69,837	33,644
Total Purchased Loans	$ 69,837	$ 33,644

XML

Loans and Leases (Change in accretable yield) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Balance at beginning of period	$ 557	$ 0
Original yield discount, net, at date of acquisitions	19	352
Accretion	273	0
Reclassification from nonaccretable difference	(2)	0
Balance at end of period	$ 305	$ 352

XML

Loans and Leases (Carrying amount loans not covered by loss share agreements (in text)) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan and lease losses	$ 49,738	$ 48,685
2016 and 2015 Acquisitions
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contractually required payments of loans acquired	21,000
Estimated fair value of loans acquired	13,100
Allowance for loan and lease losses	205
Contractually required payments receivable of nonimpaired loans	1,550,000
Estimated fair value of nonimpaired loans acquired	$ 1,510,000

XML

Allowance for Loan and Lease Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	$ 48,685	$ 41,449
Charge-offs	(1,605)	(2,004)
Recoveries	591	738
Provision	2,067	1,671
Ending Balance	49,738	41,854
Commercial
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	16,095	11,909
Charge-offs	(98)	(274)
Recoveries	176	320
Provision	201	(267)
Ending Balance	16,374	11,688
Commercial real estate
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	19,532	15,898
Charge-offs	(312)	(333)
Recoveries	146	126
Provision	1,129	944
Ending Balance	20,495	16,635
Agricultural
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	3,887	3,295
Charge-offs	0	(276)
Recoveries	3	22
Provision	138	175
Ending Balance	4,028	3,216
Residential real estate
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	1,934	3,741
Charge-offs	(37)	(58)
Recoveries	20	37
Provision	(66)	25
Ending Balance	1,851	3,745
Consumer
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	7,237	6,606
Charge-offs	(1,158)	(1,063)
Recoveries	246	233
Provision	665	794
Ending Balance	6,990	6,570
Unallocated
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	0	0
Charge-offs	0	0
Recoveries	0	0
Provision	0	0
Ending Balance	$ 0	$ 0

XML

Goodwill, Core Deposit Premium and Other Intangible Assets (Goodwill) (Details) - USD ($) $ in Thousands	Feb. 05, 2016	Nov. 30, 2015	Sep. 11, 2015	Aug. 21, 2015	Jan. 16, 2015	Mar. 31, 2016	Dec. 31, 2015
Goodwill [Line Items]
Goodwill						$ 127,699	$ 97,852
CIC Bancshares, Inc.
Goodwill [Line Items]
Goodwill	$ 29,848
CIC Bancshares, Inc. | Core Deposits
Goodwill [Line Items]
Intangibles recognized	$ 6,400
Intangibles, amortization period	10 years
CIC Bancshares, Inc. | Commercial Servicing Rights
Goodwill [Line Items]
Intangibles recognized	$ 190
Premier Valley Bank
Goodwill [Line Items]
Goodwill		$ 41,024
Premier Valley Bank | Core Deposits
Goodwill [Line Items]
Intangibles recognized		$ 8,000
Intangibles, amortization period		10 years
Premier Valley Bank | Commercial Servicing Rights
Goodwill [Line Items]
Intangibles recognized		$ 616
First Scottsdale Bank, N.A.
Goodwill [Line Items]
Goodwill			$ 2,500
First Scottsdale Bank, N.A. | Core Deposits
Goodwill [Line Items]
Intangibles recognized			$ 357
Intangibles, amortization period			10 years
Community Bancorporation of New Mexico, Inc.
Goodwill [Line Items]
Goodwill				$ 213
Community Bancorporation of New Mexico, Inc. | Core Deposits
Goodwill [Line Items]
Intangibles recognized				$ 1,700
Intangibles, amortization period				10 years
Community Banc-Corp of Sheboygan, Inc.
Goodwill [Line Items]
Goodwill					$ 18,600
Community Banc-Corp of Sheboygan, Inc. | Core Deposits
Goodwill [Line Items]
Intangibles recognized					$ 6,000
Intangibles, amortization period					10 years
Community Banc-Corp of Sheboygan, Inc. | Commercial Servicing Rights
Goodwill [Line Items]
Intangibles recognized					$ 4,300

XML

Goodwill, Core Deposit Premium and Other Intangible Assets (Carrying amount of intangible assets (incl accumulated amortization) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 97,569	$ 89,724
Accumulated Amortization	36,149	32,779
Net Carrying Amount	61,420	56,945
Core deposit intangibles
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	43,504	37,118
Accumulated Amortization	17,345	15,460
Net Carrying Amount	26,159	21,658
Mortgage servicing rights
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	46,818	45,744
Accumulated Amortization	16,368	15,430
Net Carrying Amount	30,450	30,314
Customer relationship intangible
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,176	1,177
Accumulated Amortization	825	815
Net Carrying Amount	351	362
Commercial servicing rights
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	6,071	5,685
Accumulated Amortization	1,611	1,074
Net Carrying Amount	$ 4,460	$ 4,611

XML

Goodwill, Core Deposit Premium and Other Intangible Assets (Estimated future amortization expense for amortizable intangible assets) (Details) $ in Thousands	Mar. 31, 2016 USD ($)
Future amortization expense for amortizable intangible assets [Line Items]
Nine months ending December 31, 2016	$ 11,245
Year ending December 31,
2017	11,308
2018	9,858
2019	8,329
2020	6,855
2021	5,426
Thereafter	8,399
Total	61,420
Core deposit intangibles
Future amortization expense for amortizable intangible assets [Line Items]
Nine months ending December 31, 2016	3,716
Year ending December 31,
2017	4,419
2018	3,909
2019	3,426
2020	2,982
2021	2,463
Thereafter	5,244
Total	26,159
Mortgage servicing rights
Future amortization expense for amortizable intangible assets [Line Items]
Nine months ending December 31, 2016	6,778
Year ending December 31,
2017	5,918
2018	5,073
2019	4,227
2020	3,382
2021	2,536
Thereafter	2,536
Total	30,450
Customer relationship intangible
Future amortization expense for amortizable intangible assets [Line Items]
Nine months ending December 31, 2016	31
Year ending December 31,
2017	40
2018	39
2019	38
2020	36
2021	35
Thereafter	132
Total	351
Commercial servicing rights
Future amortization expense for amortizable intangible assets [Line Items]
Nine months ending December 31, 2016	720
Year ending December 31,
2017	931
2018	837
2019	638
2020	455
2021	392
Thereafter	487
Total	$ 4,460

XML

Goodwill, Core Deposit Premium and Other Intangible Assets (Mortgage and commercial loans servicing) (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Valuation servicing rights in tranches [Line Items]
Mortgage loans serviced for others	$ 4,110,000,000		$ 4,060,000,000
Custodial escrow balances maintained	25,000,000		19,200,000
Valuation allowance	0		0
Mortgage Servicing Rights
Valuation servicing rights in tranches [Line Items]
Servicing asset at amortized value	$ 38,944,000	$ 34,492,000	$ 40,900,000
Prepayment rate	12.09%		10.65%
Discount rate	9.26%		9.25%
Fees collected for servicing of mortgage loans	$ 2,900,000	2,500,000
Mortgage Servicing Rights | Minimum
Valuation servicing rights in tranches [Line Items]
Average cap rate	0.88%		0.65%
Mortgage Servicing Rights | Maximum
Valuation servicing rights in tranches [Line Items]
Average cap rate	1.35%		1.38%
Mortgage Servicing Rights 15-year Tranche
Valuation servicing rights in tranches [Line Items]
Servicing asset, agreement term	15 years
Mortgage Servicing Rights 30-year Tranche
Valuation servicing rights in tranches [Line Items]
Servicing asset, agreement term	30 years
Commercial Servicing Rights
Valuation servicing rights in tranches [Line Items]
Servicing asset at amortized value	$ 4,899,000	$ 4,429,000
Fees collected for servicing of mortgage loans	80,000
Loans serviced for Small Business Administration and US Department of Agriculture	$ 189,900,000
Commercial Servicing Rights | Minimum
Valuation servicing rights in tranches [Line Items]
Prepayment rate	7.14%		7.33%
Discount rate	11.74%		12.35%
Average cap rate	0.031%		0.018%
Commercial Servicing Rights | Maximum
Valuation servicing rights in tranches [Line Items]
Prepayment rate	8.10%		8.10%
Discount rate	13.49%		13.49%
Average cap rate	0.0445%		0.0445%

XML

Goodwill, Core Deposit Premium and Other Intangible Assets (Changes in capitalized mortgage and commercial servicing rights) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Mortgage servicing rights
Servicing Asset at Fair Value, Amount [Roll Forward]
Balance at beginning of period	$ 30,314	$ 24,984
Originations	2,395	2,686
Amortization	(2,259)	(2,175)
Balance at end of period	30,450	25,495
Fair value of servicing rights	$ 38,944	$ 34,492	$ 40,900
Servicing rights, net to servicing portfolio (as a percent)	0.74%	0.71%
Commercial servicing rights
Servicing Asset at Fair Value, Amount [Roll Forward]
Balance at beginning of period	$ 4,611	$ 0
Purchased commercial servicing rights	190	4,255
Originations	195	132
Amortization	(536)	(215)
Balance at end of period	4,460	4,172
Fair value of servicing rights	$ 4,899	$ 4,429
Servicing rights, net to servicing portfolio (as a percent)	2.35%	2.87%

XML

Derivative Financial Instruments (Cash collateral on derivative financial instruments) (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Derivative [Line Items]
Cash pledged as collateral	$ 7,700,000	$ 5,300,000
Counterparties
Derivative [Line Items]
Cash pledged as collateral	$ 0	$ 79,000

XML

Derivative Financial Instruments (Estimated cash payments and reclassification to interest expense) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Change in net unrealized losses on cash flow hedges	$ 506
Estimated amount to be reclassified from accumulated other comprehensive income to interest expense within the next twelve months	$ 2,000

XML

Derivative Financial Instruments (Executed interest rate swap) (Details) - Derivative Financial Instruments $ in Millions	Mar. 31, 2016 USD ($) transaction	Mar. 31, 2015 USD ($) transaction	Apr. 20, 2011 USD ($)
Derivative [Line Items]
Derivative, notional amount			$ 15.0
Heartland Financial Statutory Trust VI
Derivative [Line Items]
Derivative, notional amount		$ 20.0
Number of swap transactions | transaction		2
Cash Flow Hedges
Derivative [Line Items]
Derivative, notional amount	$ 85.0
Number of swap transactions | transaction	5
Cash Flow Hedges | Heartland Financial Statutory Trust IV, V and VII
Derivative [Line Items]
Derivative, notional amount	$ 65.0
Cash Flow Hedges | Morrill Statutory Trust I and II
Derivative [Line Items]
Derivative, notional amount	$ 20.0

XML

Derivative Financial Instruments (Balance sheet category and fair values of derivative instruments (cash flow hedges)) (Details) - Other Liabilities - Interest Rate Swap - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Derivatives, Fair Value [Line Items]
Notional Amount	$ 8,580	$ 8,947
Fair Value	$ (14)	$ (57)
Receive Rate	3.182%	3.152%
Weighted Average Pay Rate	5.14%	5.14%
Notional Amount	$ 25,000	$ 25,000
Fair Value	$ (1,374)	$ (713)
Receive Rate	0.642%	0.526%
Weighted Average Pay Rate	2.255%	2.255%
Notional Amount	$ 20,000	$ 20,000
Fair Value	$ (507)	$ (600)
Receive Rate	0.635%	0.414%
Weighted Average Pay Rate	3.22%	3.22%
Notional Amount	$ 20,000	$ 20,000
Fair Value	$ (1,891)	$ (1,582)
Receive Rate	0.617%	0.323%
Weighted Average Pay Rate	3.355%	3.355%
Notional Amount	$ 10,000	$ 10,000
Fair Value	$ (223)	$ (83)
Receive Rate	0.63%	0.603%
Weighted Average Pay Rate	1.674%	1.674%
Notional Amount	$ 10,000	$ 10,000
Fair Value	$ (219)	$ (83)
Receive Rate	0.642%	0.526%
Weighted Average Pay Rate	1.658%	1.658%
Notional Amount	$ 20,000	$ 20,000
Fair Value	$ (1,044)	$ (146)
Receive Rate	0.00%	0.00%
Weighted Average Pay Rate	2.39%	2.39%
Notional Amount	$ 20,000	$ 20,000
Fair Value	$ (1,085)	$ (176)
Receive Rate	0.00%	0.00%
Weighted Average Pay Rate	2.352%	2.352%

XML

Derivative Financial Instruments (Gains (losses) recognized on derivatives (cash flow hedges)) (Details) - Interest Rate Swap - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Interest Expense
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	$ 43	$ 39
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(44)	(57)
Interest Expense
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	(661)	(376)
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(109)	(126)
Interest Expense
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	93	45
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(142)	(151)
Interest Expense
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	(309)	(184)
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(155)	(160)
Interest Expense
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	(140)	(108)
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(27)	(35)
Interest Expense
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	(136)	(106)
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(29)	(35)
Interest Expense
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	(898)	(107)
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	0	0
Interest Expense
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	(909)
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	0
Interest Expense
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)		(93)
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)		0
Other Income
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0
Other Income
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0
Other Income
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0
Other Income
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0
Other Income
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0
Other Income
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0
Other Income
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0
Other Income
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	$ 0
Other Income
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)		$ 0

XML

Derivative Financial Instruments (Narrative) (Details)	3 Months Ended
	Mar. 31, 2016 USD ($) shares	Dec. 31, 2015 USD ($)	Jun. 30, 2015 USD ($)
Derivative [Line Items]
Derivative, notional amount	$ 14,903,000	$ 15,020,000
Number of shares to be issued upon conversion | shares	73,394
Cash pledged as collateral	$ 7,700,000	5,300,000
Other Liabilities
Derivative [Line Items]
Derivative, notional amount	2,000,000
Fair Value Hedging [Member] | Interest Rate Swap
Derivative [Line Items]
Derivative, fixed interest rate			3.40%
Derivative, basis spread on LIBOR (as a percent)			0.88%
Derivative, notional amount			$ 13,800,000
Cash pledged as collateral	6,500,000
Back-to-back Loan Swaps | Interest Rate Swap
Derivative [Line Items]
Cash pledged as collateral	$ 780,000	$ 0

XML

Derivative Financial Instruments (Fair value hedge) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Derivative [Line Items]
Notional Amount	$ 14,903	$ 15,020
Fair Value Hedging [Member]
Derivative [Line Items]
Notional Amount	41,391	13,805
Fair Value	$ (4,053)	$ (621)

XML

Derivative Financial Instruments Gains (losses) on fair value hedges (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Fair Value Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain (Loss)	$ (1,222)	$ 0

XML

Derivative Financial Instruments (Balance sheet category and fair value of embedded derivatives) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Notional Amount	$ 14,903	$ 15,020
Fair Value	1,846	1,574
Year-to-Date Gain (Loss) Recognized	$ 272	$ 0

XML

Derivative Financial Instruments (Balance sheet category and fair values of embedded derivatives) (Details) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Derivative [Line Items]
Notional Amount	$ 14,903	$ 15,020
Year-to-Date Gain (Loss) Recognized	272	$ 0
Other noninterest income
Derivative [Line Items]
Year-to-Date Gain (Loss) Recognized	(100)
Other Liabilities
Derivative [Line Items]
Notional Amount	2,000
Fair Value	$ (422)

XML

Derivative Financial Instruments (Loan swaps) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Derivative [Line Items]
Notional Amount	$ 14,903	$ 15,020
Other Liabilities
Derivative [Line Items]
Notional Amount	2,000
Back-to-back Loan Swaps | Other Assets
Derivative [Line Items]
Notional Amount	33,028	15,782
Fair Value, Receive fixed-pay floating interest rate swap	$ 2,356	$ 663
Weighted Average Receive Rate	4.97%	5.08%
Weighted Average Pay Rate	3.16%	3.07%
Back-to-back Loan Swaps | Other Liabilities
Derivative [Line Items]
Notional Amount	$ 33,028	$ 15,782
Fair Value, Pay fixed-receive floating interest rate swap	$ (2,356)	$ (663)
Weighted Average Receive Rate	3.16%	3.07%
Weighted Average Pay Rate	4.97%	5.08%

XML

Derivative Financial Instruments (Balance sheet category and fair values of derivative instruments (not designated as hedging instruments)) (Details) - Not Designated as Hedging Instrument - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Other Assets | Interest rate lock commitments
Derivatives, Fair Value [Line Items]
Notional Amount. Other Assets	$ 153,073	$ 99,665
Fair Value, Other Assets	6,956	3,168
Other Assets | Forward commitments
Derivatives, Fair Value [Line Items]
Notional Amount. Other Assets	61,000	118,378
Fair Value, Other Assets	343	523
Other Liabilities | Forward commitments
Derivatives, Fair Value [Line Items]
Notional Amount, Other Liabilities	258,183	136,709
Fair Value, Other Liabilities	(1,623)	(315)
Other Liabilities | Undesignated interest rate swaps
Derivatives, Fair Value [Line Items]
Notional Amount, Other Liabilities	23,005	50,975
Fair Value, Other Liabilities	$ (2,159)	$ (3,677)

XML

Derivative Financial Instruments (Derivative instruments gains and losses recognized (not designated as hedging instruments)) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Gains on sale of loans held for sale | Interest rate lock commitments
Trading Activity, Gains and Losses, Net [Line Items]
Gain (Loss) Recognized	$ 4,727	$ 5,544
Gains on sale of loans held for sale | Forward commitments
Trading Activity, Gains and Losses, Net [Line Items]
Gain (Loss) Recognized	(1,489)	(125)
Other noninterest income | Undesignated interest rate swaps
Trading Activity, Gains and Losses, Net [Line Items]
Gain (Loss) Recognized	$ (316)	$ 0

XML

Fair Value (Fair value measurement recurring) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Assets
Securities available for sale	$ 1,690,516	$ 1,578,434
U.S. government corporations and agencies
Assets
Securities available for sale	6,619	25,766
Mortgage-backed securities
Assets
Securities available for sale	1,388,687	1,242,702
Obligations of states and political subdivisions
Assets
Securities available for sale	281,003	295,982
Corporate debt securities
Assets
Securities available for sale	830	846
Equity securities
Assets
Securities available for sale	13,377	13,138
Level 1
Assets
Securities available for sale	531	519
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Level 1 | Interest rate lock commitments
Assets
Derivative assets	0	0
Level 1 | Forward commitments
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Level 2
Assets
Securities available for sale	1,687,881	1,575,030
Derivative assets	4,202	2,237
Liabilities
Derivative liabilities	15,347	8,401
Level 2 | Interest rate lock commitments
Assets
Derivative assets	0	0
Level 2 | Forward commitments
Assets
Derivative assets	343	523
Liabilities
Derivative liabilities	1,623	315
Level 3
Assets
Securities available for sale	2,104	2,885
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Level 3 | Interest rate lock commitments
Assets
Derivative assets	6,956	3,168
Level 3 | Forward commitments
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Recurring Basis
Assets
Total assets at fair value	1,702,017	1,584,362
Liabilities
Total liabilities at fair value	16,970	8,716
Recurring Basis | Derivative financial instruments(1)
Assets
Derivative assets	4,202	2,237
Liabilities
Derivative liabilities	15,347	8,401
Recurring Basis | Interest rate lock commitments
Assets
Derivative assets	6,956	3,168
Recurring Basis | Forward commitments
Assets
Derivative assets	343	523
Liabilities
Derivative liabilities	1,623	315
Recurring Basis | U.S. government corporations and agencies
Assets
Securities available for sale	6,619	25,766
Recurring Basis | Mortgage-backed securities
Assets
Securities available for sale	1,388,687	1,242,702
Recurring Basis | Obligations of states and political subdivisions
Assets
Securities available for sale	281,003	295,982
Recurring Basis | Corporate debt securities
Assets
Securities available for sale	830	846
Recurring Basis | Equity securities
Assets
Securities available for sale	13,377	13,138
Recurring Basis | Level 1
Assets
Total assets at fair value	531	519
Liabilities
Total liabilities at fair value	0	0
Recurring Basis | Level 1 | Derivative financial instruments(1)
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Recurring Basis | Level 1 | Interest rate lock commitments
Assets
Derivative assets	0	0
Recurring Basis | Level 1 | Forward commitments
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Recurring Basis | Level 1 | U.S. government corporations and agencies
Assets
Securities available for sale	531	519
Recurring Basis | Level 1 | Mortgage-backed securities
Assets
Securities available for sale	0	0
Recurring Basis | Level 1 | Obligations of states and political subdivisions
Assets
Securities available for sale	0	0
Recurring Basis | Level 1 | Corporate debt securities
Assets
Securities available for sale	0	0
Recurring Basis | Level 1 | Equity securities
Assets
Securities available for sale	0	0
Recurring Basis | Level 2
Assets
Total assets at fair value	1,692,426	1,577,790
Liabilities
Total liabilities at fair value	16,970	8,716
Recurring Basis | Level 2 | Derivative financial instruments(1)
Assets
Derivative assets	4,202	2,237
Liabilities
Derivative liabilities	15,347	8,401
Recurring Basis | Level 2 | Interest rate lock commitments
Assets
Derivative assets	0	0
Recurring Basis | Level 2 | Forward commitments
Assets
Derivative assets	343	523
Liabilities
Derivative liabilities	1,623	315
Recurring Basis | Level 2 | U.S. government corporations and agencies
Assets
Securities available for sale	6,088	25,247
Recurring Basis | Level 2 | Mortgage-backed securities
Assets
Securities available for sale	1,386,913	1,240,663
Recurring Basis | Level 2 | Obligations of states and political subdivisions
Assets
Securities available for sale	281,003	295,982
Recurring Basis | Level 2 | Corporate debt securities
Assets
Securities available for sale	500	0
Recurring Basis | Level 2 | Equity securities
Assets
Securities available for sale	13,377	13,138
Recurring Basis | Level 3
Assets
Total assets at fair value	9,060	6,053
Liabilities
Total liabilities at fair value	0	0
Recurring Basis | Level 3 | Derivative financial instruments(1)
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Recurring Basis | Level 3 | Interest rate lock commitments
Assets
Derivative assets	6,956	3,168
Recurring Basis | Level 3 | Forward commitments
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Recurring Basis | Level 3 | U.S. government corporations and agencies
Assets
Securities available for sale	0	0
Recurring Basis | Level 3 | Mortgage-backed securities
Assets
Securities available for sale	1,774	2,039
Recurring Basis | Level 3 | Obligations of states and political subdivisions
Assets
Securities available for sale	0	0
Recurring Basis | Level 3 | Corporate debt securities
Assets
Securities available for sale	330	846
Recurring Basis | Level 3 | Equity securities
Assets
Securities available for sale	$ 0	$ 0

XML

Fair Value (Fair value measurement non-recurring) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Premises, furniture and equipment held for sale	$ 3,889	$ 3,889
Nonrecurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	9,131	6,354
Other real estate owned	11,338	11,524
Nonrecurring Basis | Year-to- Date Losses
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	272
Other real estate owned	237	5,520
Nonrecurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Other real estate owned	0	0
Nonrecurring Basis | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Other real estate owned	0	0
Nonrecurring Basis | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	9,131	6,354
Other real estate owned	11,338	11,524
Nonrecurring Basis | Premises, furniture and equipment held for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Premises, furniture and equipment held for sale	3,889	3,889
Nonrecurring Basis | Premises, furniture and equipment held for sale | Year-to- Date Losses
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Premises, furniture and equipment held for sale	0	0
Nonrecurring Basis | Premises, furniture and equipment held for sale | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Premises, furniture and equipment held for sale	0	0
Nonrecurring Basis | Premises, furniture and equipment held for sale | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Premises, furniture and equipment held for sale	0	0
Nonrecurring Basis | Premises, furniture and equipment held for sale | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Premises, furniture and equipment held for sale	3,889	3,889
Nonrecurring Basis | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	1,344	597
Nonrecurring Basis | Commercial | Year-to- Date Losses
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	82
Nonrecurring Basis | Commercial | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Commercial | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Commercial | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	1,344	597
Nonrecurring Basis | Commercial real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	2,609	1,522
Nonrecurring Basis | Commercial real estate | Year-to- Date Losses
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	86
Nonrecurring Basis | Commercial real estate | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Commercial real estate | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Commercial real estate | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	2,609	1,522
Nonrecurring Basis | Agricultural and agricultural real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Agricultural and agricultural real estate | Year-to- Date Losses
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Agricultural and agricultural real estate | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Agricultural and agricultural real estate | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Agricultural and agricultural real estate | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Residential real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	3,168	2,330
Nonrecurring Basis | Residential real estate | Year-to- Date Losses
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	104
Nonrecurring Basis | Residential real estate | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Residential real estate | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Residential real estate | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	3,168	2,330
Nonrecurring Basis | Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	2,010	1,905
Nonrecurring Basis | Consumer | Year-to- Date Losses
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Consumer | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Consumer | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Consumer | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	$ 2,010	$ 1,905

XML

Fair Value (Quantitative Information about Level 3 fair value measurements) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Securities available for sale	$ 1,690,516	$ 1,578,434
Premises, furniture and equipment held for sale	3,889	3,889
Corporate debt securities
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Securities available for sale	830	846
Recurring Basis | Interest rate lock commitments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Derivative assets	6,956	3,168
Recurring Basis | Corporate debt securities
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Securities available for sale	830	846
Nonrecurring Basis
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other real estate owned	11,338	11,524
Collateral dependent impaired loans	9,131	6,354
Nonrecurring Basis | Commercial
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	1,344	597
Nonrecurring Basis | Commercial real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	2,609	1,522
Nonrecurring Basis | Agricultural and agricultural real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	0	0
Nonrecurring Basis | Residential real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	3,168	2,330
Nonrecurring Basis | Consumer
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	2,010	1,905
Nonrecurring Basis | Premises, furniture and equipment held for sale
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Premises, furniture and equipment held for sale	3,889	3,889
Level 3
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Securities available for sale	2,104	2,885
Derivative assets	0	0
Level 3 | Interest rate lock commitments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Derivative assets	6,956	3,168
Level 3 | Recurring Basis | Premises, furniture and equipment held for sale
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Premises, furniture and equipment held for sale	3,889	3,889
Level 3 | Recurring Basis | Interest rate lock commitments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Derivative assets	$ 6,956	$ 3,168
Closing ratio	88.00%	86.00%
Level 3 | Recurring Basis | Z-TRANCHE Securities
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Securities available for sale	$ 1,774	$ 2,039
Level 3 | Recurring Basis | Z-TRANCHE Securities | Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Pretax discount rate	7.50%	7.50%
Actual defaults (as a percent)	22.07%	22.20%
Actual deferrals (as a percent)	10.67%	10.75%
Level 3 | Recurring Basis | Z-TRANCHE Securities | Maximum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Pretax discount rate	9.50%	9.50%
Actual defaults (as a percent)	34.19%	33.55%
Actual deferrals (as a percent)	20.53%	21.82%
Level 3 | Recurring Basis | Z-TRANCHE Securities | Weighted Average
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Actual defaults (as a percent)	31.03%	30.60%
Actual deferrals (as a percent)	13.21%	13.36%
Level 3 | Recurring Basis | Corporate debt securities
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Securities available for sale	$ 330	$ 846
Level 3 | Nonrecurring Basis
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other real estate owned	11,338	11,524
Collateral dependent impaired loans	9,131	6,354
Level 3 | Nonrecurring Basis | Commercial
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	1,344	597
Level 3 | Nonrecurring Basis | Commercial real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	2,609	1,522
Level 3 | Nonrecurring Basis | Agricultural and agricultural real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	0	0
Level 3 | Nonrecurring Basis | Residential real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	3,168	2,330
Level 3 | Nonrecurring Basis | Consumer
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	2,010	1,905
Level 3 | Nonrecurring Basis | Premises, furniture and equipment held for sale
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Premises, furniture and equipment held for sale	$ 3,889	$ 3,889

XML

Fair Value (Changes Level 3 assets (fair value, recurring)) (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Purchases, acquired, sales and settlements:
Gains included in net gains on sale of loans held for sale	$ 8,475	$ 11,056
Interest rate lock commitments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	3,168	2,496	$ 2,496
Total gains (losses):
Included in earnings	4,727		288
Purchases, acquired, sales and settlements:
Issuances	138		5,428
Settlements	(1,077)		(5,044)
Balance at period end	6,956		3,168
Gains included in net gains on sale of loans held for sale	7,000		3,200
Z-TRANCHE Securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	2,039	4,947	4,947
Total gains (losses):
Included in earnings	0		(3,038)
Included in other comprehensive income	(265)		982
Purchases, acquired, sales and settlements:
Purchases	0		6
Sales	0		(736)
Settlements	0		(122)
Balance at period end	1,774		2,039
Corporate debt securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	846	$ 0	0
Total gains (losses):
Included in earnings	121		0
Included in other comprehensive income	(91)		106
Purchases, acquired, sales and settlements:
Purchases	0		0
Acquired	0		740
Sales	(546)		0
Settlements	0		0
Balance at period end	$ 330		$ 846

XML

Fair Value (Estimated fair value financial instruments (incl. carrying amounts)) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Financial assets:
Securities available for sale	$ 1,690,516	$ 1,578,434
Held to maturity	289,446	294,513
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Cash and cash equivalents	133,228	258,799
Time deposits in other financial institutions	2,355	2,355
Securities available for sale	531	519
Held to maturity	0	0
Other investments	0	0
Loans held for sale	0	0
Loans, net	0	0
Derivative assets	0	0
Financial liabilities:
Short term borrowings	0	0
Other borrowings	0	0
Derivative liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Demand deposits
Financial liabilities:
Deposits	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Savings deposits
Financial liabilities:
Deposits	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Time deposits
Financial liabilities:
Deposits	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate lock commitments
Financial assets:
Derivative assets	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Forward commitments
Financial assets:
Derivative assets	0	0
Financial liabilities:
Derivative liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Commercial
Financial assets:
Loans, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Commercial real estate
Financial assets:
Loans, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Agricultural and agricultural real estate
Financial assets:
Loans, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Residential real estate
Financial assets:
Loans, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Consumer
Financial assets:
Loans, net	0	0
Significant Other Observable Inputs (Level 2)
Financial assets:
Cash and cash equivalents	0	0
Time deposits in other financial institutions	0	0
Securities available for sale	1,687,881	1,575,030
Held to maturity	289,446	294,513
Other investments	22,090	21,208
Loans held for sale	76,565	74,783
Loans, net	5,447,777	4,939,712
Derivative assets	4,202	2,237
Financial liabilities:
Short term borrowings	325,741	293,898
Other borrowings	267,812	281,271
Derivative liabilities	15,347	8,401
Significant Other Observable Inputs (Level 2) | Demand deposits
Financial liabilities:
Deposits	2,079,521	1,914,141
Significant Other Observable Inputs (Level 2) | Savings deposits
Financial liabilities:
Deposits	3,702,431	3,367,479
Significant Other Observable Inputs (Level 2) | Time deposits
Financial liabilities:
Deposits	1,142,368	1,124,203
Significant Other Observable Inputs (Level 2) | Interest rate lock commitments
Financial assets:
Derivative assets	0	0
Significant Other Observable Inputs (Level 2) | Forward commitments
Financial assets:
Derivative assets	343	523
Financial liabilities:
Derivative liabilities	1,623	315
Significant Other Observable Inputs (Level 2) | Commercial
Financial assets:
Loans, net	1,270,434	1,256,758
Significant Other Observable Inputs (Level 2) | Commercial real estate
Financial assets:
Loans, net	2,530,408	2,303,194
Significant Other Observable Inputs (Level 2) | Agricultural and agricultural real estate
Financial assets:
Loans, net	473,559	469,485
Significant Other Observable Inputs (Level 2) | Residential real estate
Financial assets:
Loans, net	746,581	529,601
Significant Other Observable Inputs (Level 2) | Consumer
Financial assets:
Loans, net	426,795	380,674
Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	0	0
Time deposits in other financial institutions	0	0
Securities available for sale	2,104	2,885
Held to maturity	0	0
Other investments	235	235
Loans held for sale	0	0
Loans, net	9,131	6,354
Derivative assets	0	0
Financial liabilities:
Short term borrowings	0	0
Other borrowings	0	0
Derivative liabilities	0	0
Significant Unobservable Inputs (Level 3) | Demand deposits
Financial liabilities:
Deposits	0	0
Significant Unobservable Inputs (Level 3) | Savings deposits
Financial liabilities:
Deposits	0	0
Significant Unobservable Inputs (Level 3) | Time deposits
Financial liabilities:
Deposits	0	0
Significant Unobservable Inputs (Level 3) | Interest rate lock commitments
Financial assets:
Derivative assets	6,956	3,168
Significant Unobservable Inputs (Level 3) | Forward commitments
Financial assets:
Derivative assets	0	0
Financial liabilities:
Derivative liabilities	0	0
Significant Unobservable Inputs (Level 3) | Commercial
Financial assets:
Loans, net	1,344	597
Significant Unobservable Inputs (Level 3) | Commercial real estate
Financial assets:
Loans, net	2,609	1,522
Significant Unobservable Inputs (Level 3) | Agricultural and agricultural real estate
Financial assets:
Loans, net	0	0
Significant Unobservable Inputs (Level 3) | Residential real estate
Financial assets:
Loans, net	3,168	2,330
Significant Unobservable Inputs (Level 3) | Consumer
Financial assets:
Loans, net	2,010	1,905
Carrying Amount
Financial assets:
Cash and cash equivalents	133,228	258,799
Time deposits in other financial institutions	2,355	2,355
Securities available for sale	1,690,516	1,578,434
Held to maturity	271,300	279,117
Other investments	22,325	21,443
Loans held for sale	76,565	74,783
Loans, net	5,453,267	4,952,801
Derivative assets	4,202	2,237
Financial liabilities:
Short term borrowings	325,741	293,898
Other borrowings	265,760	263,214
Derivative liabilities	15,347	8,401
Carrying Amount | Demand deposits
Financial liabilities:
Deposits	2,079,521	1,914,141
Carrying Amount | Savings deposits
Financial liabilities:
Deposits	3,702,431	3,367,479
Carrying Amount | Time deposits
Financial liabilities:
Deposits	1,142,368	1,124,203
Carrying Amount | Interest rate lock commitments
Financial assets:
Derivative assets	6,956	3,168
Carrying Amount | Forward commitments
Financial assets:
Derivative assets	343	523
Financial liabilities:
Derivative liabilities	1,623	315
Carrying Amount | Commercial
Financial assets:
Loans, net	1,278,343	1,262,612
Carrying Amount | Commercial real estate
Financial assets:
Loans, net	2,533,220	2,305,908
Carrying Amount | Agricultural and agricultural real estate
Financial assets:
Loans, net	467,844	468,533
Carrying Amount | Residential real estate
Financial assets:
Loans, net	750,219	536,190
Carrying Amount | Consumer
Financial assets:
Loans, net	423,641	379,558
Estimated Fair Value
Financial assets:
Cash and cash equivalents	133,228	258,799
Time deposits in other financial institutions	2,355	2,355
Securities available for sale	1,690,516	1,578,434
Held to maturity	289,446	294,513
Other investments	22,325	21,443
Loans held for sale	76,565	74,783
Loans, net	5,456,908	4,946,066
Derivative assets	4,202	2,237
Financial liabilities:
Short term borrowings	325,741	293,898
Other borrowings	267,812	281,271
Derivative liabilities	15,347	8,401
Estimated Fair Value | Demand deposits
Financial liabilities:
Deposits	2,079,521	1,914,141
Estimated Fair Value | Savings deposits
Financial liabilities:
Deposits	3,702,431	3,367,479
Estimated Fair Value | Time deposits
Financial liabilities:
Deposits	1,142,368	1,124,203
Estimated Fair Value | Interest rate lock commitments
Financial assets:
Derivative assets	6,956	3,168
Estimated Fair Value | Forward commitments
Financial assets:
Derivative assets	343	523
Financial liabilities:
Derivative liabilities	1,623	315
Estimated Fair Value | Commercial
Financial assets:
Loans, net	1,271,778	1,257,355
Estimated Fair Value | Commercial real estate
Financial assets:
Loans, net	2,533,017	2,304,716
Estimated Fair Value | Agricultural and agricultural real estate
Financial assets:
Loans, net	473,559	469,485
Estimated Fair Value | Residential real estate
Financial assets:
Loans, net	749,749	531,931
Estimated Fair Value | Consumer
Financial assets:
Loans, net	$ 428,805	$ 382,579

XML

Segment Reporting (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) segment	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment	2
Segment Reporting Information [Line Items]
Net interest income	$ 72,707	$ 53,930
Provision for loan losses	2,067	1,671
Total noninterest income	29,578	30,663
Total noninterest expense	70,309	59,614
INCOME BEFORE INCOME TAXES	29,909	23,308
Average Loans, for the period	5,358,102	4,267,593
Segment Assets, at period end	8,253,779	6,506,276	$ 7,694,754
Operating Segments | Community and Other Banking
Segment Reporting Information [Line Items]
Net interest income	71,583	52,889
Provision for loan losses	2,067	1,671
Total noninterest income	18,537	17,061
Total noninterest expense	59,739	47,459
INCOME BEFORE INCOME TAXES	28,314	20,820
Average Loans, for the period	5,296,191	4,189,966
Segment Assets, at period end	8,141,960	6,365,682
Operating Segments | Retail Mortgage Banking
Segment Reporting Information [Line Items]
Net interest income	1,124	1,041
Provision for loan losses	0	0
Total noninterest income	11,041	13,602
Total noninterest expense	10,570	12,155
INCOME BEFORE INCOME TAXES	1,595	2,488
Average Loans, for the period	61,911	77,627
Segment Assets, at period end	$ 111,819	$ 140,594