Loans and Leases (Tables)

6 Months Ended

Jun. 30, 2016

Loans and leases as of June 30, 2016, and December 31, 2015, were as follows, in thousands:



	June 30, 2016			December 31, 2015
Loans and leases receivable held to maturity:
Commercial	$	1,287,301		$	1,279,214
Commercial real estate	2,643,578			2,326,360
Agricultural and agricultural real estate	480,883			471,870
Residential real estate	644,267			539,555
Consumer	428,730			386,867
Gross loans and leases receivable held to maturity	5,484,759			5,003,866
Unearned discount	(686		)	(488		)
Deferred loan fees	(1,815		)	(1,892		)
Total net loans and leases receivable held to maturity	5,482,258			5,001,486
Allowance for loan and lease losses	(51,756		)	(48,685		)
Loans and leases receivable, net	$	5,430,502		$	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 June 30, 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
June 30, 2016
Commercial	$	1,342	$	14,183	$	15,525	$	7,985	$	1,279,316	$	1,287,301
Commercial real estate	2,780		20,188		22,968		53,481		2,590,097		2,643,578
Agricultural and agricultural real estate	6		4,094		4,100		14,359		466,524		480,883
Residential real estate	446		1,619		2,065		21,710		622,557		644,267
Consumer	1,351		5,747		7,098		5,708		423,022		428,730
Total	$	5,925	$	45,831	$	51,756	$	103,243	$	5,381,516	$	5,484,759
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 June 30, 2016, and December 31, 2015, in thousands. There were no nonaccrual leases, accruing leases past due 90 days or more or restructured leases at June 30, 2016, and December 31, 2015.



	June 30, 2016		December 31, 2015
Nonaccrual loans	$	55,732	$	37,874
Nonaccrual troubled debt restructured loans	1,321		1,781
Total nonaccrual loans	$	57,053	$	39,655
Accruing loans past due 90 days or more	$	—	$	—
Performing troubled debt restructured loans	$	9,923	$	11,075

Troubled Debt Restructuring on Loans Modified

The following table provides information on troubled debt restructured loans that were modified during the three- and six-month periods ended June 30, 2016, and June 30, 2015, dollars in thousands:



	Three Months Ended June 30,
	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	1	$	100	$	100	1	$	830	$	830
Commercial real estate	1	179		179		—	—		—
Total commercial and commercial real estate	2	279		279		1	830		830
Agricultural and agricultural real estate	—	—		—		1	311		311
Residential real estate	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	2	$	279	$	279	2	$	1,141	$	1,141



	Six Months Ended June 30,
	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	1	$	100	$	100	1	$	830	$	830
Commercial real estate	1	179		179		1	3,992		3,992
Total commercial and commercial real estate	2	279		279		2	4,822		4,822
Agricultural and agricultural real estate	—	—		—		1	311		311
Residential real estate	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	2	$	279	$	279	3	$	5,133	$	5,133

Troubled Debt Restructured Loans with Payment Default

The following tables presents troubled debt restructured loans for which there was a payment default during the three and six months ended June 30, 2016, and June 30, 2015, that had been modified during the twelve-month period prior to default.



	With Payment Defaults During the Following Periods
	Three Months Ended June 30,
	2016			2015
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	1	$	100	—	$	—
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	1	100		—	—
Agricultural and agricultural real estate	—	—		—	—
Residential real estate	—	—		—	—
Consumer	—	—		—	—
Total	1	$	100	—	$	—



	With Payment Defaults During the Following Periods
	Six Months Ended June 30,
	2016			2015
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	1	$	100	—	$	—
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	1	100		—	—
Agricultural and agricultural real estate	—	—		—	—
Residential real estate	—	—		—	—
Consumer	—	—		—	—
Total	1	$	100	—	$	—

Financing Receivable Credit Quality Indicators

The following table presents loans and leases by credit quality indicator at June 30, 2016, and December 31, 2015, in thousands:



	Pass		Nonpass		Total
June 30, 2016
Commercial	$	1,154,318	$	132,983	$	1,287,301
Commercial real estate	2,438,572		205,006		2,643,578
Total commercial and commercial real estate	3,592,890		337,989		3,930,879
Agricultural and agricultural real estate	431,671		49,212		480,883
Residential real estate	615,626		28,641		644,267
Consumer	418,251		10,479		428,730
Total gross loans and leases receivable held to maturity	$	5,058,438	$	426,321	$	5,484,759
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 June 30, 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
June 30, 2016
Commercial	$	1,714	$	823	$	—	$	2,537	$	1,279,293	$	5,471	$	1,287,301
Commercial real estate	17,469		12,058		—		29,527		2,595,224		18,827		2,643,578
Total commercial and commercial real estate	19,183		12,881		—		32,064		3,874,517		24,298		3,930,879
Agricultural and agricultural real estate	1,108		133		—		1,241		468,819		10,823		480,883
Residential real estate	1,554		17		—		1,571		624,327		18,369		644,267
Consumer	4,058		949		—		5,007		420,160		3,563		428,730
Total gross loans and leases receivable held to maturity	$	25,903	$	13,980	$	—	$	39,883	$	5,387,823	$	57,053	$	5,484,759
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 June 30, 2016, and December 31, 2015; the outstanding loan balances recorded on the consolidated balance sheets at June 30, 2016, and December 31, 2015; any related allowance recorded for those loans as of June 30, 2016, and December 31, 2015; the average outstanding loan balances recorded on the consolidated balance sheets during the three and six months ended June 30, 2016, and year ended December 31, 2015; and the interest income recognized on the impaired loans during the three and six months ended June 30, 2016, and year ended December 31, 2015, in thousands:



	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Quarter- to- Date Avg. Loan Balance		Quarter- to- Date Interest Income Recognized		Year- to- Date Avg. Loan Balance		Year- to- Date Interest Income Recognized
June 30, 2016
Impaired loans with a related allowance:
Commercial	$	2,664	$	2,664	$	1,342	$	3,598	$	8	$	2,857	$	14
Commercial real estate	16,106		16,106		2,780		7,823		208		6,037		213
Total commercial and commercial real estate	18,770		18,770		4,122		11,421		216		8,894		227
Agricultural and agricultural real estate	111		111		6		36		—		18		—
Residential real estate	3,792		3,706		446		3,351		3		3,127		7
Consumer	3,185		3,185		1,351		3,359		6		3,277		15
Total impaired loans with a related allowance	$	25,858	$	25,772	$	5,925	$	18,167	$	225	$	15,316	$	249
Impaired loans without a related allowance:
Commercial	$	5,332	$	5,321	$	—	$	4,709	$	91	$	7,281	$	261
Commercial real estate	38,783		37,375		—		38,928		380		42,830		785
Total commercial and commercial real estate	44,115		42,696		—		43,637		471		50,111		1,046
Agricultural and agricultural real estate	14,248		14,248		—		14,031		—		10,700		94
Residential real estate	18,137		18,004		—		17,050		49		17,082		81
Consumer	2,538		2,523		—		2,337		11		2,651		20
Total impaired loans without a related allowance	$	79,038	$	77,471	$	—	$	77,055	$	531	$	80,544	$	1,241
Total impaired loans held to maturity:
Commercial	$	7,996	$	7,985	$	1,342	$	8,307	$	99	$	10,138	$	275
Commercial real estate	54,889		53,481		2,780		46,751		588		48,867		998
Total commercial and commercial real estate	62,885		61,466		4,122		55,058		687		59,005		1,273
Agricultural and agricultural real estate	14,359		14,359		6		14,067		—		10,718		94
Residential real estate	21,929		21,710		446		20,401		52		20,209		88
Consumer	5,723		5,708		1,351		5,696		17		5,928		35
Total impaired loans held to maturity	$	104,896	$	103,243	$	5,925	$	95,222	$	756	$	95,860	$	1,490



	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 June 30, 2016 and December 31, 2015, consisted of purchased impaired and nonimpaired loans as summarized in the following table, in thousands:



	June 30, 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	$	3,261	$	154,959	$	158,220	$	—	$	159,393	$	159,393
Commercial real estate	4,071		762,523		766,594		7,716		494,010		501,726
Agricultural and agricultural real estate	—		771		771		—		2,985		2,985
Residential real estate	236		187,274		187,510		—		85,549		85,549
Consumer loans	—		57,073		57,073		—		33,644		33,644
Total Loans	$	7,568	$	1,162,600	$	1,170,168	$	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 and six months ended June 30, 2016, and June 30, 2015, were as follows, in thousands:



Balance at March 31, 2016	$	305
Original yield discount, net, at date of acquisition	—
Accretion	193
Reclassification from nonaccretable difference⁽¹⁾	(56		)
Balance at June 30, 2016	$	168

Balance at December 31, 2015	$	557
Original yield discount, net, at date of acquisitions	19
Accretion	466
Reclassification from nonaccretable difference⁽¹⁾	(58		)
Balance at June 30, 2016	$	168

(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.



Balance at March 31, 2015	$	352
Original yield discount, net, at date of acquisitions	—
Accretion	116
Reclassification from nonaccretable difference⁽¹⁾	(162		)
Balance at June 30, 2015	$	398

Balance at December 31, 2014	$	—
Original yield discount, net, at date of acquisitions	352
Accretion	116
Reclassification from nonaccretable difference⁽¹⁾	(162		)
Balance at June 30, 2015	$	398

(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.