Loans (Tables)

9 Months Ended

Sep. 30, 2016

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



	September 30, 2016			December 31, 2015
Loans receivable held to maturity:
Commercial	$	1,295,316		$	1,279,214
Commercial real estate	2,605,296			2,326,360
Agricultural and agricultural real estate	489,387			471,870
Residential real estate	625,965			539,555
Consumer	425,582			386,867
Gross loans receivable held to maturity	5,441,546			5,003,866
Unearned discount	(721		)	(488		)
Deferred loan fees	(2,110		)	(1,892		)
Total net loans receivable held to maturity	5,438,715			5,001,486
Allowance for loan losses	(54,653		)	(48,685		)
Loans receivable, net	$	5,384,062		$	4,952,801

Allowance for Loan and Lease Losses, Based on Impairment Methodology

The following table shows the balance in the allowance for loan losses at September 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 losses policy during 2016.



	Allowance For Loan Losses						Gross Loans 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
September 30, 2016
Commercial	$	2,077	$	14,814	$	16,891	$	8,002	$	1,287,314	$	1,295,316
Commercial real estate	2,661		21,020		23,681		56,894		2,548,402		2,605,296
Agricultural and agricultural real estate	967		4,039		5,006		17,155		472,232		489,387
Residential real estate	473		1,509		1,982		22,448		603,517		625,965
Consumer	1,364		5,729		7,093		5,858		419,724		425,582
Total	$	7,542	$	47,111	$	54,653	$	110,357	$	5,331,189	$	5,441,546
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 September 30, 2016, and December 31, 2015, in thousands.



	September 30, 2016		December 31, 2015
Nonaccrual loans	$	57,344	$	37,874
Nonaccrual troubled debt restructured loans	455		1,781
Total nonaccrual loans	$	57,799	$	39,655
Accruing loans past due 90 days or more	$	105	$	—
Performing troubled debt restructured loans	$	10,281	$	11,075

Troubled Debt Restructuring on Loans Modified

The following tables provide information on troubled debt restructured loans that were modified during the three- and nine-month periods ended September 30, 2016, and September 30, 2015, dollars in thousands:



	Three Months Ended September 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	—	$	—	$	—	—	$	—	$	—
Commercial real estate	—	—		—		—	—		—
Total commercial and commercial real estate	—	—		—		—	—		—
Agricultural and agricultural real estate	—	—		—		—	—		—
Residential real estate	5	651		651		1	55		55
Consumer	—	—		—		—	—		—
Total	5	$	651	$	651	1	$	55	$	55



	Nine Months Ended September 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	5	651		651		1	55		55
Consumer	—	—		—		—	—		—
Total	7	$	930	$	930	4	$	5,188	$	5,188

Troubled Debt Restructured Loans with Payment Default

The following tables present troubled debt restructured loans for which there was a payment default during the three- and nine-month periods ended September 30, 2016, and September 30, 2015, that had been modified during the twelve-month period prior to default:



	With Payment Defaults During the Following Periods
	Three Months Ended September 30,
	2016			2015
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	—	$	—	—	$	—
Commercial real estate	—	—		1	814
Total commercial and commercial real estate	—	—		1	814
Agricultural and agricultural real estate	—	—		—	—
Residential real estate	—	—		—	—
Consumer	—	—		—	—
Total	—	$	—	1	$	814



	With Payment Defaults During the Following Periods
	Nine Months Ended September 30,
	2016			2015
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	1	$	95	—	$	—
Commercial real estate	—	—		1	814
Total commercial and commercial real estate	1	95		1	814
Agricultural and agricultural real estate	—	—		—	—
Residential real estate	—	—		—	—
Consumer	—	—		—	—
Total	1	$	95	1	$	814

Financing Receivable Credit Quality Indicators

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



	Pass		Nonpass		Total
September 30, 2016
Commercial	$	1,196,389	$	98,927	$	1,295,316
Commercial real estate	2,412,518		192,778		2,605,296
Total commercial and commercial real estate	3,608,907		291,705		3,900,612
Agricultural and agricultural real estate	422,810		66,577		489,387
Residential real estate	596,479		29,486		625,965
Consumer	415,919		9,663		425,582
Total gross loans receivable held to maturity	$	5,044,115	$	397,431	$	5,441,546
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 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 at September 30, 2016, and December 31, 2015, in thousands:



	Accruing Loans
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual		Total Loans
September 30, 2016
Commercial	$	2,754	$	427	$	91	$	3,272	$	1,287,663	$	4,381	$	1,295,316
Commercial real estate	8,499		815		—		9,314		2,576,946		19,036		2,605,296
Total commercial and commercial real estate	11,253		1,242		91		12,586		3,864,609		23,417		3,900,612
Agricultural and agricultural real estate	93		1,473		—		1,566		473,708		14,113		489,387
Residential real estate	2,042		142		—		2,184		607,229		16,552		625,965
Consumer	4,888		760		14		5,662		416,203		3,717		425,582
Total gross loans receivable held to maturity	$	18,276	$	3,617	$	105	$	21,998	$	5,361,749	$	57,799	$	5,441,546
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 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 September 30, 2016, and December 31, 2015; the outstanding loan balances recorded on the consolidated balance sheets at September 30, 2016, and December 31, 2015; any related allowance recorded for those loans as of September 30, 2016, and December 31, 2015; the average outstanding loan balances recorded on the consolidated balance sheets during the three- and nine- months ended September 30, 2016, and year ended December 31, 2015; and the interest income recognized on the impaired loans during the three- and nine-month periods ended September 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
September 30, 2016
Impaired loans with a related allowance:
Commercial	$	4,664	$	4,283	$	2,077	$	3,121	$	73	$	2,566	$	87
Commercial real estate	15,379		15,346		2,661		15,696		138		9,114		350
Total commercial and commercial real estate	20,043		19,629		4,738		18,817		211		11,680		437
Agricultural and agricultural real estate	3,181		3,181		967		1,112		—		390		—
Residential real estate	3,512		3,427		473		3,602		8		3,285		15
Consumer	3,277		3,277		1,364		3,198		10		3,251		25
Total impaired loans with a related allowance	$	30,013	$	29,514	$	7,542	$	26,729	$	229	$	18,606	$	477
Impaired loans without a related allowance:
Commercial	$	4,632	$	3,719	$	—	$	4,413	$	78	$	7,105	$	339
Commercial real estate	44,750		41,548		—		37,243		452		41,645		1,236
Total commercial and commercial real estate	49,382		45,267		—		41,656		530		48,750		1,575
Agricultural and agricultural real estate	13,974		13,974		—		15,310		23		12,232		118
Residential real estate	19,496		19,021		—		18,660		136		17,684		217
Consumer	2,741		2,581		—		2,397		12		2,619		32
Total impaired loans without a related allowance	$	85,593	$	80,843	$	—	$	78,023	$	701	$	81,285	$	1,942
Total impaired loans held to maturity:
Commercial	$	9,296	$	8,002	$	2,077	$	7,534	$	151	$	9,671	$	426
Commercial real estate	60,129		56,894		2,661		52,939		590		50,759		1,586
Total commercial and commercial real estate	69,425		64,896		4,738		60,473		741		60,430		2,012
Agricultural and agricultural real estate	17,155		17,155		967		16,422		23		12,622		118
Residential real estate	23,008		22,448		473		22,262		144		20,969		232
Consumer	6,018		5,858		1,364		5,595		22		5,870		57
Total impaired loans held to maturity	$	115,606	$	110,357	$	7,542	$	104,752	$	930	$	99,891	$	2,419



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



	September 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	$	2,371	$	119,811	$	122,182	$	—	$	159,393	$	159,393
Commercial real estate	4,119		688,587		692,706		7,716		494,010		501,726
Agricultural and agricultural real estate	—		174		174		—		2,985		2,985
Residential real estate	185		175,812		175,997		—		85,549		85,549
Consumer loans	—		49,515		49,515		—		33,644		33,644
Total Loans	$	6,675	$	1,033,899	$	1,040,574	$	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 nine-month periods ended September 30, 2016, and September 30, 2015, were as follows, in thousands:



Balance at June 30, 2016	$	168
Original yield discount, net, at date of acquisition	—
Accretion	(379		)
Reclassification from nonaccretable difference⁽¹⁾	331
Balance at September 30, 2016	$	120

Balance at December 31, 2015	$	557
Original yield discount, net, at date of acquisitions	19
Accretion	(845		)
Reclassification from nonaccretable difference⁽¹⁾	389
Balance at September 30, 2016	$	120

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



Balance at June 30, 2015	$	398
Original yield discount, net, at date of acquisitions	68
Accretion	(202		)
Reclassification from nonaccretable difference⁽¹⁾	34
Balance at September 30, 2015	$	298

Balance at December 31, 2014	$	—
Original yield discount, net, at date of acquisitions	420
Accretion	(318		)
Reclassification from nonaccretable difference⁽¹⁾	196
Balance at September 30, 2015	$	298

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