SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of September 30, 2014, and December 31, 2013, are summarized in the table below, in thousands:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2014
U.S. government corporations and agencies	$	13,884	$	74	$	(12	)	$	13,946
Mortgage-backed securities	1,166,166		10,403		(11,692		)	1,164,877
Obligations of states and political subdivisions	180,998		5,680		(867		)	185,811
Total debt securities	1,361,048		16,157		(12,571		)	1,364,634
Equity securities	5,021		48		—			5,069
Total	$	1,366,069	$	16,205	$	(12,571	)	$	1,369,703
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 September 30, 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 September 30, 2014, and December 31, 2013, are summarized in the table below, in thousands:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2014
Mortgage-backed securities	$	5,805	$	263	$	(533	)	$	5,535
Obligations of states and political subdivisions	249,507		12,914		(1,315		)	261,106
Total	$	255,312	$	13,177	$	(1,848	)	$	266,641
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 September 30, 2014, the amortized cost of the held to maturity securities is net of $797,000 of credit related OTTI and $445,000 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 97% 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 September 30, 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	$	8,440	$	8,525
Due in 1 to 5 years	19,027		19,184
Due in 5 to 10 years	83,717		86,936
Due after 10 years	83,698		85,112
Total debt securities	194,882		199,757
Mortgage-backed securities	1,166,166		1,164,877
Equity securities	5,021		5,069
Total investment securities	$	1,366,069	$	1,369,703

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 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	13,062		13,910
Due in 5 to 10 years	47,769		50,227
Due after 10 years	188,676		196,969
Total debt securities	249,507		261,106
Mortgage-backed securities	5,805		5,535
Total investment securities	$	255,312	$	266,641

Gross gains and losses realized related to the sales of securities available for sale for the three and nine months ended September 30, 2014, and 2013, are summarized as follows, in thousands:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Proceeds from sales	$	189,939	$	127,475	$	699,830	$	343,410
Gross security gains	1,101		1,420		4,547		7,703
Gross security losses	276		302		2,087		1,091

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 September 30, 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 September 30, 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
September 30, 2014
U.S. government corporations and agencies	$	—	$	—		$	978	$	(12	)	$	978	$	(12	)
Mortgage-backed securities	514,918		(5,627		)	296,255		(6,065		)	811,173		(11,692		)
Obligations of states and political subdivisions	886		(6		)	42,344		(861		)	43,230		(867		)
Total temporarily impaired securities	$	515,804	$	(5,633	)	$	339,577	$	(6,938	)	$	855,381	$	(12,571	)
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
September 30, 2014
Mortgage-backed securities	$	—	$	—		$	2,861	$	(533	)	$	2,861	$	(533	)
Obligations of states and political subdivisions	1,577		(390		)	36,412		(925		)	37,989		(1,315		)
Total temporarily impaired securities	$	1,577	$	(390	)	$	39,273	$	(1,458	)	$	40,850	$	(1,848	)
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 September 30, 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 September 30,						Nine Months Ended September 30,
	2014			2013			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		)	(72		)	(72		)
Total changes to AOCI for non-credit related impairment	(24		)	(24		)	(72		)	(72		)
Total OTTI losses (accretion) recorded on debt securities, net	$	(24	)	$	(24	)	$	(72	)	$	(72	)

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

Included in other securities at September 30, 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 $14.3 million and $15.6 million, respectively.