SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of debt securities available for sale and equity securities with a readily determinable fair value that are carried at fair value as of March 31, 2019, and December 31, 2018, are summarized in the table below, in thousands:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2019
U.S. government corporations and agencies	$	26,873	$	10	$	(115	)	$	26,768
Mortgage and asset-backed securities	1,889,977		6,476		(25,055		)	1,871,398
Obligations of states and political subdivisions	481,452		6,146		(2,643		)	484,955
Total debt securities	2,398,302		12,632		(27,813		)	2,383,121
Equity securities with a readily determinable fair value	17,339		—		—			17,339
Total	$	2,415,641	$	12,632	$	(27,813	)	$	2,400,460
December 31, 2018
U.S. government corporations and agencies	$	32,075	$	3	$	(127	)	$	31,951
Mortgage and asset-backed securities	2,061,358		3,740		(38,400		)	2,026,698
Obligations of states and political subdivisions	382,101		919		(8,046		)	374,974
Total debt securities	2,475,534		4,662		(46,573		)	2,433,623
Equity securities with a readily determinable fair value	17,086		—		—			17,086
Total	$	2,492,620	$	4,662	$	(46,573	)	$	2,450,709

On January 1, 2019, Heartland adopted ASU 2017-12, and as a result of the adoption, $148.0 million of held to maturity debt securities were transferred to debt securities available for sale. The securities were transferred at book value on the date of the transfer.

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of March 31, 2019, and December 31, 2018, are summarized in the table below, in thousands:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2019
Obligations of states and political subdivisions	$	88,089	$	7,151	$	—		$	95,240
Total	$	88,089	$	7,151	$	—		$	95,240
December 31, 2018
Obligations of states and political subdivisions	$	236,283	$	9,554	$	(496	)	$	245,341
Total	$	236,283	$	9,554	$	(496	)	$	245,341

The amortized cost and estimated fair value of investment securities carried at fair value at March 31, 2019, 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.



	March 31, 2019
	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	29,138	$	29,100
Due in 1 to 5 years	51,367		50,972
Due in 5 to 10 years	123,062		123,289
Due after 10 years	304,758		308,362
Total debt securities	508,325		511,723
Mortgage and asset-backed securities	1,889,977		1,871,398
Equity securities with a readily determinable fair value	17,339		17,339
Total investment securities	$	2,415,641	$	2,400,460

The amortized cost and estimated fair value of debt securities held to maturity at March 31, 2019, 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.



	March 31, 2019
	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	6	$	6
Due in 1 to 5 years	12,966		13,200
Due in 5 to 10 years	58,150		61,138
Due after 10 years	16,967		20,896
Total investment securities	$	88,089	$	95,240

As of March 31, 2019, and December 31, 2018, securities with a fair value of $455.6 million and $524.8 million, respectively, were pledged to secure public and trust deposits, short-term borrowings and for other purposes as required or permitted by law.

Gross gains and losses realized related to the sales of securities carried at fair value for the three-month periods ended March 31, 2019 and 2018, are summarized as follows, in thousands:



	Three Months Ended March 31,
	2019		2018
Proceeds from sales	$	434,154	$	392,246
Gross security gains	2,408		3,013
Gross security losses	833		1,572

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, 2019, and December 31, 2018. 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 months or more. The reference point for determining how long an investment was in an unrealized loss position was March 31, 2018, and December 31, 2017, respectively. Securities for which Heartland has taken credit-related other-than-temporary impairment ("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.



Debt 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, 2019
U.S. government corporations and agencies	$	18,742	$	(95	)	$	4,541	$	(20	)	$	23,283	$	(115	)
Mortgage and asset-backed securities	227,902		(2,075		)	926,176		(22,980		)	1,154,078		(25,055		)
Obligations of states and political subdivisions	26,161		(98		)	132,515		(2,545		)	158,676		(2,643		)
Total temporarily impaired securities	$	272,805	$	(2,268	)	$	1,063,232	$	(25,545	)	$	1,336,037	$	(27,813	)
December 31, 2018
U.S. government corporations and agencies	$	24,902	$	(83	)	$	4,577	$	(44	)	$	29,479	$	(127	)
Mortgage and asset-backed securities	733,826		(9,060		)	805,089		(29,340		)	1,538,915		(38,400		)
Obligations of states and political subdivisions	34,990		(390		)	258,143		(7,656		)	293,133		(8,046		)
Total temporarily impaired securities	$	793,718	$	(9,533	)	$	1,067,809	$	(37,040	)	$	1,861,527	$	(46,573	)



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, 2019
Obligations of states and political subdivisions	$	—	$	—		$	—	$	—		$	—	$	—
Total temporarily impaired securities	$	—	$	—		$	—	$	—		$	—	$	—
December 31, 2018
Obligations of states and political subdivisions	$	10,802	$	(17	)	$	19,508	$	(479	)	$	30,310	$	(496	)
Total temporarily impaired securities	$	10,802	$	(17	)	$	19,508	$	(479	)	$	30,310	$	(496	)

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.

The remaining unrealized losses on Heartland's mortgage and asset-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.

The remaining 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 or losses on the sale of securities carried at fair value or held to maturity securities with OTTI write-downs for the three-month periods ended March 31, 2019, and March 31, 2018, respectively.

Other investments, at cost, include equity securities without a readily determinable fair value. Equity securities without a readily determinable fair value totaled $17.3 million and $17.1 million at March 31, 2019, and December 31, 2018, respectively. At March 31, 2019, and December 31, 2018, other investments at cost included shares of stock in the Federal Home Loan Banks (the "FHLBs") of Des Moines, Chicago, Dallas, San Francisco and Topeka at an amortized cost of $15.4 million and $16.6 million, respectively.

The Heartland banks are required by federal law to maintain FHLB stock as members of the various FHLBs. These equity securities are "restricted" in that they can only be sold back to the respective institutions from which they were acquired or another member institution at par. Therefore, the FHLB stock is less liquid than other marketable equity securities, and the fair value approximates amortized cost. Heartland considers its FHLB stock as a long-term investment that provides access to competitive products and liquidity. Heartland evaluates impairment in these investments based on the ultimate recoverability of the par value and, at March 31, 2019, did not consider the investments to be other than temporarily impaired.