Commitments and Contingent Liabilities

12 Months Ended

Dec. 31, 2011

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingencies Disclosure [Text Block]

COMMITMENTS AND CONTINGENT LIABILITIES

Heartland leases certain land and facilities under operating leases. Minimum future rental commitments at December 31, 2011, for all non-cancelable leases were as follows:

(Dollars in thousands)
2012	$	1,440
2013	1,521
2014	1,321
2015	982
2016	899
Thereafter	5,771
	$	11,934

Rental expense for premises and equipment leased under operating leases was $2.0 million, $1.4 million, $1.8 million, for 2011, 2010, and 2009, respectively. Some of the Heartland banks lease or sublease portions of the office space they own to third parties. In addition, DB&T Community Development Corp. leases properties it owns to third parties. Occupancy expense is presented net of rental income of $1.3 million, $1.3 million and $1.4 million for 2011, 2010, and 2009, respectively.

In the normal course of business, the Heartland banks make various commitments and incur certain contingent liabilities that are not presented in the accompanying consolidated financial statements. The commitments and contingent liabilities include various guarantees, commitments to extend credit and standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Heartland banks evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Heartland banks upon extension of credit, is based upon management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. Standby letters of credit and financial guarantees written are conditional commitments issued by the Heartland banks to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. At December 31, 2011 and 2010, commitments to extend credit aggregated $765.8 million and $623.2 million, respectively, and standby letters of credit aggregated $49.1 million and $48.7 million, respectively. Heartland enters into commitments to sell mortgage loans to reduce interest rate risk on certain mortgage loans held for sale and loan commitments which were recorded in the consolidated balance sheets at their fair values. At December 31, 2011 and 2010, Heartland had commitments to sell residential real estate loans totaling $83.5 million and $52.6 million, respectively. Heartland does not anticipate any material loss as a result of the commitments and contingent liabilities.

Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages originated under Heartland's usual underwriting procedures, and are most often sold on a nonrecourse basis. Heartland's agreements to sell residential mortgage loans in the normal course of business usually require certain representations and warranties on the underlying loans sold, related to credit information, loan documentation, collateral, and insurability, which if subsequently are untrue or breached, could require Heartland to repurchase certain loans affected. There have been insignificant instances of repurchase under representations and warranties. Heartland had a recorded repurchase obligation of $613,000 at December 31, 2011, and had no repurchase obligation recorded at December 31, 2010.

Heartland has a loss reserve for unfunded commitments, including loan commitments and letters of credit. At December 31, 2011 and 2010, the reserve for unfunded commitments, which is included in other liabilities on the consolidated balance sheets, was approximately $127,000 and $182,000, respectively. The adequacy of the reserve for unfunded commitments is reviewed on a quarterly basis, based upon changes in the amounts of commitments, delinquencies and economic conditions.

There are certain legal proceedings pending against Heartland and its subsidiaries at December 31, 2011, that are ordinary routine litigation incidental to business. While the ultimate outcome of current legal proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of these legal actions should not have a material effect on Heartland's consolidated financial position or results of operations.