Heartland had goodwill of $446.3 million at December 31, 2019, and $391.7 million at December 31, 2018. Heartland conducts its annual internal assessment of the goodwill both collectively and at its subsidiaries as of September 30. There was no goodwill impairment as of the most recent assessment.

Heartland recorded $19.2 million of goodwill and $1.8 million of core deposit intangibles in connection with the acquisition of substantially all of the assets and substantially all of the deposits and certain other liabilities of Rockford Bank and Trust Company, headquartered in Rockford, Illinois on November 30, 2019.

Heartland recorded $35.4 million of goodwill and $11.4 million of core deposit intangibles in connection with the acquisition of Blue Valley Ban Corp., parent company of Bank of Blue Valley, headquartered in Overland Park, Kansas on May 10, 2019.

Heartland recorded $121.4 million of goodwill and $13.9 million of core deposit intangibles in connection with the acquisition of First Bank Lubbock Bancshares, Inc., parent company of First Bank & Trust Company, headquartered in Lubbock, Texas on May 18, 2018.

Heartland recorded $33.7 million of goodwill and $7.7 million of core deposit intangibles in connection with the acquisition of Signature Bancshares, Inc., parent company of Signature Bank, headquartered in Minnetonka, Minnesota on February 23, 2018.

The core deposit intangibles recorded with the Blue Valley Ban Corp., First Bank Lubbock Bancshares, Inc., and Signature Bancshares, Inc. acquisitions are not deductible for tax purposes and are expected to be amortized over a period of 10 years on an accelerated basis.

Goodwill related to the Blue Valley Ban Corp., First Bank Lubbock Bancshares, Inc., and Signature Bancshares, Inc. acquisitions resulted from expected operational synergies, increased market presence, cross-selling opportunities, and expanded business lines and is not deductible for tax purposes.

The core deposit intangibles and goodwill recorded with the Rockford Bank and Trust Company acquisition of substantially all of the assets and substantially all of the deposits and certain other liabilities, is deductible for tax purposes and the core deposit intangibles are expected to be amortized over a period of 10 years on an accelerated basis.

Other intangible assets consist of core deposit intangibles, mortgage servicing rights, customer relationship intangible and commercial servicing rights. The gross carrying amount of other intangible assets and the associated accumulated amortization at December 31, 2019, and December 31, 2018, are presented in the table below, in thousands:


	December 31, 2019										December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	96,821	$	48,338	$	48,483	$	83,640	$	36,403	$	47,237
Customer relationship intangible	1,177		972		205		1,177		935		242
Mortgage servicing rights	7,886		2,265		5,621		42,228		12,865		29,363
Commercial servicing rights	6,952		5,837		1,115		6,834		5,125		1,709
Total	$	112,836	$	57,412	$	55,424	$	133,879	$	55,328	$	78,551

On April 30, 2019, Dubuque Bank and Trust Company closed on the sale of substantially all of its servicing rights portfolio, which contained loans with an unpaid principal balance of $3.31 billion to PNC Bank, N.A. The transaction qualified as a sale, and $20.6 million of mortgage servicing rights were de-recognized on the consolidated balance sheet as of June 30, 2019. Cash of approximately $36.6 million was received during 2019, and Heartland recorded a gain on the sale of this portfolio of approximately $14.5 million. In the agreement, which included customary terms and conditions, Dubuque Bank and Trust Company provided interim servicing of the loans until the transfer date, which was August 1, 2019.


	Core Deposit Intangibles		Customer Relationship Intangible		Mortgage Servicing Rights		Commercial Servicing Rights		Total
Year ending December 31,
2020	$	10,577	$	37	$	1,405	$	301	$	12,320
2021	8,691		35		1,205		267		10,198
2022	7,102		34		1,004		235		8,375
2023	6,201		34		803		155		7,193
2024	5,108		33		602		86		5,829
Thereafter	10,804		32		602		71		11,509
Total	$	48,483	$	205	$	5,621	$	1,115	$	55,424

Projections of amortization expense for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of December 31, 2019. Heartland's actual experience may be significantly different depending upon changes in mortgage interest rates and market conditions. Mortgage loans serviced for others at First Bank & Trust were $616.7 million and $648.9 million as of December 31, 2019, and December 31, 2018, respectively. Custodial escrow balances maintained in connection with the mortgage loan servicing portfolio at First Bank & Trust were approximately $5.0 million and $5.9 million as of December 31, 2019, and December 31, 2018, respectively.

The fair value of Heartland's mortgage servicing rights at First Bank & Trust was estimated at $5.6 million and $7.0 million at December 31, 2019, and December 31, 2018, respectively, and is comprised of loans serviced for the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").

Heartland transferred custodial escrow balances totaling $22.9 million to PNC Bank, N.A. in conjunction with the transfer of the mortgage servicing rights portfolio on August 1, 2019. Custodial escrow balances maintained in connection with the mortgage loan servicing portfolio at Dubuque Bank and Trust Company totaled $17.7 million at December 31, 2018.

The fair value of mortgage servicing rights is calculated based upon a discounted cash flow analysis. Cash flow assumptions, including prepayment speeds, servicing costs and escrow earnings of First Bank & Trust's mortgage servicing rights are considered in the calculation. The average constant prepayment rate was 14.20% as of December 31, 2019 compared to 10.30% for the December 31, 2018 valuation. The discount rate was 9.03% for both the December 31, 2019 and December 31, 2018 valuations. The average capitalization rate for 2019 ranged from 80 to 103 basis points compared to a range of 93 to 117 basis

points for 2018 since acquisition on May 18, 2018. Fees collected for the servicing of mortgage loans for others were $4.9 million, $9.9 million and $11.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.


	2019			2018
Balance at January 1	$	29,363		$	23,248
Originations	893			5,045
Amortization	(3,168)			(5,867)
Sale of mortgage servicing rights	(20,556)			—
Acquired mortgage servicing rights	—			6,995
Valuation allowance on servicing rights	(911)			(58)
Balance at December 31	$	5,621		$	29,363
Fair value of mortgage servicing rights	$	5,621		$	48,680
Mortgage servicing rights, net to servicing portfolio	0.91		%	0.72		%

Heartland's commercial servicing portfolio is comprised of loans guaranteed by the Small Business Administration and United States Department of Agriculture that have been sold with servicing retained by Heartland, which totaled $82.1 million at December 31, 2019, and $107.4 million at December 31, 2018. The commercial servicing rights portfolio is separated into two tranches at the respective Heartland subsidiary, loans with a term of less than 20 years and loans with a term of more than 20 years. Fees collected for the servicing of commercial loans for others were $1.0 million and $1.6 million for the years ended December 31, 2019 and 2018, respectively.

The fair value of each commercial servicing rights portfolio is calculated based upon a discounted cash flow analysis. Cash flow assumptions, including prepayment speeds and servicing costs, are considered in the calculation. The range of average constant prepayment rates for the portfolio valuations was 14.25% and 18.08% as of December 31, 2019, compared to 11.01% and 13.50% as of December 31, 2018. The discount rate range was 10.65% and 13.94% for the December 31, 2019, valuations compared to 13.44% and 16.96% for the December 31, 2018 valuations. The capitalization rate ranged from 310 to 445 basis points at both December 31, 2019 and 2018. The total fair value of Heartland's commercial servicing rights portfolios was estimated at $1.6 million as of December 31, 2019, and $2.1 million as of December 31, 2018.


	2019			2018
Balance at January 1,	$	1,709		$	2,609
Originations	118			115
Amortization	(712)			(1,027)
Purchased commercial servicing rights	—			—
Valuation allowance on servicing rights	—			12
Balance at December 31,	$	1,115		$	1,709
Fair value of commercial servicing rights	$	1,594		$	2,134
Commercial servicing rights, net to servicing portfolio	1.36		%	1.59		%

Mortgage and commercial servicing rights are initially recorded at fair value in net gains on sale of loans held for sale when they are acquired through loan sales. Fair value is based on market prices for comparable servicing contracts, when available, or based on a valuation model that calculates the present value of estimated future net servicing income.

Mortgage and commercial servicing rights are subsequently measured using the amortization method, which requires the asset to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing rights are evaluated for impairment at each Heartland subsidiary based upon the fair value of the assets as compared to the carrying amount. Impairment is recognized through a valuation allowance for specific tranches to the extent that fair value is less than carrying amount at each Heartland subsidiary. At December 31, 2019, a valuation allowance of $114,000 was required on the mortgage servicing rights 15-year tranche and a $797,000 valuation allowance was required on the mortgage servicing rights 30-year tranche. At December 31, 2018, a $20,000 valuation allowance was required on the 15-

year tranche and a $38,000 valuation was required on the 30-year tranche for mortgage servicing rights. At both December 31, 2019 and December 31, 2018, no valuation allowance was required on commercial servicing rights with an original term of less than 20 years and no valuation allowance was required on commercial servicing rights with an original term of greater than 20 years.

The following table summarizes, in thousands, the book value, the fair value of each tranche of the mortgage servicing rights and any recorded valuation allowance at each respective subsidiary at December 31, 2019, and December 31, 2018:


December 31, 2019	Book Value 15-Year Tranche		Fair Value 15-Year Tranche		Impairment 15-Year Tranche		Book Value 30-Year Tranche		Fair Value 30-Year Tranche		Impairment 30-Year Tranche
Dubuque Bank and Trust Company	$	—	$	—	$	—	$	—	$	—	$	—
First Bank & Trust	1,482		1,368		114		5,050		4,253		797
Total	$	1,482	$	1,368	$	114	$	5,050	$	4,253	$	797
December 31, 2018
Dubuque Bank and Trust Company	$	2,195	$	4,636	$	—	$	20,025	$	36,901	$	—
First Bank & Trust	1,685		1,665		20		5,516		5,478		38
Total	$	3,880	$	6,301	$	20	$	25,541	$	42,379	$	38

The following table summarizes, in thousands, the book value, the fair value of each tranche of the commercial servicing rights and any recorded valuation allowance at each respective subsidiary at December 31, 2019, and December 31, 2018:


	Book Value- Less than 20 Years		Fair Value- Less than 20 Years		Impairment- Less than 20 Years		Book Value- More than 20 Years		Fair Value- More than 20 Years		Impairment- More than 20 Years
December 31, 2019
Citywide Banks	$	—	$	—	$	—	$	—	$	—	$	—
Premier Valley Bank	1		13		—		135		161		—
Wisconsin Bank & Trust	128		272		—		851		1,148		—
Total	$	129	$	285	$	—	$	986	$	1,309	$	—
December 31, 2018
Citywide Banks	$	1	$	6	$	—	$	18	$	20	$	—
Premier Valley Bank	45		74		—		178		184		—
Wisconsin Bank & Trust	249		411		—		1,218		1,439		—
Total	$	295	$	491	$	—	$	1,414	$	1,643	$	—