SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of March 31, 2014, and December 31, 2013, are summarized in the table below, in thousands:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2014
U.S. government corporations and agencies	$	147,350	$	115	$	(769	)	$	146,696
Mortgage-backed securities	1,052,695		10,035		(13,109		)	1,049,621
Obligations of states and political subdivisions	200,766		2,423		(3,791		)	199,398
Total debt securities	1,400,811		12,573		(17,669		)	1,395,715
Equity securities	5,005		36		—			5,041
Total	$	1,405,816	$	12,609	$	(17,669	)	$	1,400,756
December 31, 2013
U.S. government corporations and agencies	$	220,157	$	147	$	(2,001	)	$	218,303
Mortgage-backed securities	1,156,983		9,538		(22,574		)	1,143,947
Obligations of states and political subdivisions	277,320		1,706		(12,402		)	266,624
Total debt securities	1,654,460		11,391		(36,977		)	1,628,874
Equity securities	4,996		32		—			5,028
Total	$	1,659,456	$	11,423	$	(36,977	)	$	1,633,902

At both March 31, 2014, and December 31, 2013, the amortized cost of the available for sale securities is net of $184,000 of credit related other-than-temporary impairment ("OTTI").

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of March 31, 2014, and December 31, 2013, are summarized in the table below, in thousands:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2014
Mortgage-backed securities	$	5,933	$	245	$	(372	)	$	5,806
Obligations of states and political subdivisions	251,994		8,416		(3,047		)	257,363
Total	$	257,927	$	8,661	$	(3,419	)	$	263,169
December 31, 2013
Mortgage-backed securities	$	5,973	$	199	$	(321	)	$	5,851
Obligations of states and political subdivisions	231,525		5,801		(5,740		)	231,586
Total	$	237,498	$	6,000	$	(6,061	)	$	237,437

At March 31, 2014, the amortized cost of the held to maturity securities is net of $797,000 of credit related OTTI and $493,000 of non-credit related OTTI. At December 31, 2013, the amortized cost of the held to maturity securities was net of $797,000 of credit related OTTI and $517,000 of non-credit related OTTI.

Approximately 95% 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, 2014, 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	$	8,858	$	8,977
Due in 1 to 5 years	94,678		94,865
Due in 5 to 10 years	83,887		82,963
Due after 10 years	160,693		159,289
Total debt securities	348,116		346,094
Mortgage-backed securities	1,052,695		1,049,621
Equity securities	5,005		5,041
Total investment securities	$	1,405,816	$	1,400,756

The amortized cost and estimated fair value of debt securities held to maturity at March 31, 2014, 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	$	—	$	—
Due in 1 to 5 years	12,588		13,416
Due in 5 to 10 years	42,216		43,656
Due after 10 years	197,190		200,291
Total debt securities	251,994		257,363
Mortgage-backed securities	5,933		5,806
Total investment securities	$	257,927	$	263,169

Gross gains and losses realized related to the sales of securities available for sale for the three month periods ended March 31, 2014, and 2013, are summarized as follows, in thousands:



	Three Months Ended
	March 31,
	2014		2013
Proceeds from sales	$	355,288	$	91,840
Gross security gains	2,472		3,622
Gross security losses	1,691		195

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, 2014, and December 31, 2013. 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, 2013, and December 31, 2012, 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, 2014
U.S. government corporations and agencies	$	130,411	$	(769	)	$	—	$	—		$	130,411	$	(769	)
Mortgage-backed securities	506,526		(8,413		)	132,248		(4,696		)	638,774		(13,109		)
Obligations of states and political subdivisions	89,022		(2,414		)	26,568		(1,377		)	115,590		(3,791		)
Total temporarily impaired securities	$	725,959	$	(11,596	)	$	158,816	$	(6,073	)	$	884,775	$	(17,669	)
December 31, 2013
U.S. government corporations and agencies	$	196,345	$	(2,001	)	$	—	$	—		$	196,345	$	(2,001	)
Mortgage-backed securities	640,684		(17,064		)	118,229		(5,510		)	758,913		(22,574		)
Obligations of states and political subdivisions	196,987		(11,452		)	10,714		(950		)	207,701		(12,402		)
Total temporarily impaired securities	$	1,034,016	$	(30,517	)	$	128,943	$	(6,460	)	$	1,162,959	$	(36,977	)



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, 2014
Mortgage-backed securities	$	2,163	$	(372	)	$	—	$	—		$	2,163	$	(372	)
Obligations of states and political subdivisions	32,364		(769		)	33,131		(2,278		)	65,495		(3,047		)
Total temporarily impaired securities	$	34,527	$	(1,141	)	$	33,131	$	(2,278	)	$	67,658	$	(3,419	)
December 31, 2013
Mortgage-backed securities	$	2,170	$	(319	)	$	834	$	(2	)	$	3,004	$	(321	)
Obligations of states and political subdivisions	47,175		(3,508		)	21,505		(2,232		)	68,680		(5,740		)
Total temporarily impaired securities	$	49,345	$	(3,827	)	$	22,339	$	(2,234	)	$	71,684	$	(6,061	)

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. During 2012, Heartland experienced deterioration in the credit support on three private label mortgage-backed securities which resulted in a credit-related OTTI loss. 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 $981,000 OTTI on three private label mortgage-backed securities attributable to credit-related losses was recorded 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.

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 and 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 credit quality and financial 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 or losses on the sale of available for sale securities with OTTI write-downs for the periods ended March 31, 2014, or December 31, 2013.

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,
	2014			2013
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	—			—
Accretion of non-credit related impairment	(24		)	(24		)
Total changes to AOCI for non-credit related impairment	(24		)	(24		)
Total OTTI losses (accretion) recorded on debt securities, net	$	(24	)	$	(24	)

Heartland has not experienced any OTTI writedowns since the initial impairment charge in 2012.

Included in other securities at March 31, 2014, and December 31, 2013, were shares of stock in each Federal Home Loan Bank (the "FHLB") of Des Moines, Chicago, Dallas, San Francisco, Seattle, and Topeka at an amortized cost of $12.5 million and $15.6 million , respectively.