10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended September 30, 2014

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period __________ to __________

Commission File Number: 001-15393

HEARTLAND FINANCIAL USA, INC.

(Exact name of Registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

42-1405748

(I.R.S. employer identification number)

1398 Central Avenue, Dubuque, Iowa  52001

(Address of principal executive offices)(Zip Code)

(563) 589-2000

(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o

     Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Act.

	Large accelerated filer ¨	Accelerated Filer x
	Non-accelerated filer ¨	Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Securities Exchange Act of 1934). Yes oNo x

Indicate the number of shares outstanding of each of the classes of Registrant's common stock as of the latest practicable date:  As of November 5, 2014, the Registrant had outstanding 18,479,869 shares of common stock, $1.00 par value per share.

HEARTLAND FINANCIAL USA, INC.

Form 10-Q Quarterly Report

Table of Contents

Part I
Item 1.	Financial Statements
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
Part II
Item 1.	Legal Proceedings
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Issuer Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Mine Safety Disclosures
Item 5.	Other Information
Item 6.	Exhibits
	Merger Agreement between Community Banc-Corp of Sheboygan, Inc. and Heartland Financial USA, Inc. dated October 22, 2014
	31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
	31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
	32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101 Financial statements formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Changes in Equity, and (vi) the Notes to Consolidated Financial Statements.

PART I

ITEM 1. FINANCIAL STATEMENTS

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data)
	September 30, 2014 (Unaudited)			December 31, 2013
ASSETS
Cash and due from banks	$	63,400		$	118,441
Federal funds sold and other short-term investments	4,436			6,829
Cash and cash equivalents	67,836			125,270
Time deposits in other financial institutions	2,605			3,355
Securities:
Trading, at fair value	—			1,801
Available for sale, at fair value (cost of $1,366,069 at September 30, 2014, and $1,659,456 at December 31, 2013)	1,369,703			1,633,902
Held to maturity, at cost (fair value of $266,641 at September 30, 2014, and $237,437 at December 31, 2013)	255,312			237,498
Other investments, at cost	20,514			21,843
Loans held for sale	93,054			46,665
Loans and leases receivable:
Held to maturity	3,798,305			3,496,952
Loans covered by loss share agreements	3,850			5,749
Allowance for loan and lease losses	(41,698		)	(41,685		)
Loans and leases receivable, net	3,760,457			3,461,016
Premises, furniture and equipment, net	132,240			135,714
Other real estate, net	20,475			29,852
Goodwill	35,583			35,583
Other intangible assets, net	33,399			32,959
Cash surrender value on life insurance	82,224			81,110
FDIC indemnification asset	83			249
Other assets	61,324			76,899
TOTAL ASSETS	$	5,934,809		$	5,923,716
LIABILITIES AND EQUITY
LIABILITIES:
Deposits:
Demand	$	1,274,439		$	1,238,581
Savings	2,599,850			2,535,242
Time	852,430			892,676
Total deposits	4,726,719			4,666,499
Short-term borrowings	348,305			408,756
Other borrowings	334,513			350,109
Accrued expenses and other liabilities	41,873			58,892
TOTAL LIABILITIES	5,451,410			5,484,256
STOCKHOLDERS' EQUITY:
Preferred stock (par value $1 per share; authorized 20,604 shares; none issued or outstanding)	—			—
Series A Junior Participating preferred stock (par value $1 per share; authorized 16,000 shares; none issued or outstanding)	—			—
Series C Fixed Rate Non-Cumulative Perpetual preferred stock (par value $1 per share; liquidation value $81.7 million; authorized, issued and outstanding 81,698 shares)	81,698			81,698
Common stock (par value $1 per share; authorized 25,000,000 shares; issued 18,477,463 shares at September 30, 2014 and 18,399,156 shares at December 31, 2013)	18,477			18,399
Capital surplus	94,393			91,632
Retained earnings	288,555			265,067
Accumulated other comprehensive income (loss)	276			(17,336		)
Treasury stock at cost (0 shares outstanding at both September 30, 2014 and December 31, 2013)	—			—
TOTAL STOCKHOLDERS' EQUITY	483,399			439,460
TOTAL LIABILITIES AND EQUITY	$	5,934,809		$	5,923,716
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands, except per share data)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
INTEREST INCOME:
Interest and fees on loans and leases	$	49,311		$	40,154		$	143,796		$	119,707
Interest on securities:
Taxable	7,547			4,803			22,755			14,174
Nontaxable	3,249			3,443			10,079			10,001
Interest on federal funds sold	1			—			1			—
Interest on interest bearing deposits in other financial institutions	6			3			20			9
TOTAL INTEREST INCOME	60,114			48,403			176,651			143,891
INTEREST EXPENSE:
Interest on deposits	4,655			4,769			14,010			14,911
Interest on short-term borrowings	227			131			655			387
Interest on other borrowings (includes $577 and $523 of interest expense related to derivatives reclassified from accumulated other comprehensive income (loss) for the three months ended September 30, 2014 and 2013, respectively, and $1,671 and $1,552 of interest expense related to derivatives reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2014 and 2013, respectively)	3,741			3,623			11,084			11,122
TOTAL INTEREST EXPENSE	8,623			8,523			25,749			26,420
NET INTEREST INCOME	51,491			39,880			150,902			117,471
Provision for loan and lease losses	2,553			5,149			11,635			7,648
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES	48,938			34,731			139,267			109,823
NONINTEREST INCOME:
Service charges and fees	4,857			4,487			15,007			12,775
Loan servicing income	1,319			598			4,223			865
Trust fees	3,194			2,918			9,747			8,764
Brokerage and insurance commissions	1,044			1,277			3,325			3,315
Securities gains, net (includes $825 and $1,118 of net security gains reclassified from accumulated other comprehensive income (loss) for the three months ended September 30, 2014 and 2013, respectively, and $2,460 and $6,612 of net security gains reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2014 and 2013, respectively.)	825			1,118			2,460			6,612
Gain (loss) on trading account securities	—			263			(38		)	839
Gains on sale of loans held for sale	8,384			8,637			23,559			34,842
Loss on sales/valuations of other real estate and repossessed assets, net	(444		)	(339		)	(1,365		)	(2,440		)
Valuation adjustment on mortgage servicing rights	—			—			—			496
Income on bank owned life insurance	371			409			1,073			1,129
Other noninterest income	612			1,011			1,635			2,407
TOTAL NONINTEREST INCOME	20,162			20,379			59,626			69,604
NONINTEREST EXPENSES:
Salaries and employee benefits	33,546			28,847			98,428			88,103
Occupancy	3,807			3,387			11,841			9,796
Furniture and equipment	2,033			1,917			6,008			6,033
Professional fees	4,429			4,486			13,169			12,262
FDIC insurance assessments	888			745			2,848			2,508
Advertising	1,383			1,360			4,082			3,836
Intangible assets amortization	521			196			1,736			594
Other real estate and loan collection expenses	215			730			1,785			2,446
Other noninterest expenses	7,389			5,140			20,590			14,642
TOTAL NONINTEREST EXPENSES	54,211			46,808			160,487			140,220
INCOME BEFORE INCOME TAXES	14,889			8,302			38,406			39,207
Income taxes (includes $93 and $222 of income tax expense reclassified from accumulated other comprehensive income (loss) for the three months ended September 30, 2014 and 2013, respectively, and $296 and $1,887 of income tax expense reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2014 and 2013, respectively)	2,916			1,492			8,769			10,289
NET INCOME	11,973			6,810			29,637			28,918
Net income available to noncontrolling interest, net of tax	—			—			—			(64		)
NET INCOME ATTRIBUTABLE TO HEARTLAND	11,973			6,810			29,637			28,854
Preferred dividends and discount	(205		)	(276		)	(613		)	(889		)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	11,768		$	6,534		$	29,024		$	27,965
EARNINGS PER COMMON SHARE - BASIC	$	0.64		$	0.39		$	1.57		$	1.65
EARNINGS PER COMMON SHARE - DILUTED	$	0.63		$	0.38		$	1.55		$	1.63
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.10		$	0.10		$	0.30		$	0.30
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Dollars in thousands)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
NET INCOME	$	11,973		$	6,810		$	29,637		$	28,918
OTHER COMPREHENSIVE INCOME
Securities:
Net change in unrealized gain (loss) on securities	(144		)	(4,857		)	30,538			(44,394		)
Reclassification adjustment for net gain realized in net income	(825		)	(1,118		)	(2,460		)	(6,612		)
Net change in non-credit related other than temporary impairment	24			24			72			72
Income taxes	372			2,229			(11,110		)	19,036
Other comprehensive income (loss) on securities	(573		)	(3,722		)	17,040			(31,898		)
Derivatives used in cash flow hedging relationships:
Net change in unrealized gain (loss) on derivatives	317			(366		)	(758		)	733
Reclassification adjustment for net loss on derivatives realized in net income	577			523			1,671			1,552
Income taxes	(334		)	(54		)	(341		)	(847		)
Other comprehensive income on cash flow hedges	560			103			572			1,438
Other comprehensive income (loss)	(13		)	(3,619		)	17,612			(30,460		)
Comprehensive income (loss)	11,960			3,191			47,249			(1,542		)
Less: comprehensive income attributable to noncontrolling interest	—			—			—			(64		)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO HEARTLAND	$	11,960		$	3,191		$	47,249		$	(1,606	)
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
	Nine Months Ended September 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	29,637		$	28,918
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	13,041			12,599
Provision for loan and lease losses	11,635			7,648
Net amortization of premium on securities	18,993			22,417
Securities gains, net	(2,460		)	(6,612		)
(Increase) decrease in trading account securities	1,801			(839		)
Stock based compensation	2,683			1,538
Write downs and losses on repossessed assets	1,365			2,440
Loans originated for sale	(694,622		)	(1,203,402		)
Proceeds on sales of loans held for sale	665,837			1,262,488
Net gains on sales of loans held for sale	(17,604		)	(24,247		)
(Increase) decrease in accrued interest receivable	(603		)	94
(Increase) decrease in prepaid expenses	(857		)	8,645
Decrease in accrued interest payable	(1,176		)	(843		)
Capitalization of mortgage servicing rights	(5,955		)	(10,595		)
Valuation adjustment on mortgage servicing rights	—			(496		)
Other, net	7,396			(3,825		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	29,111			95,928
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of time deposits in other financial institutions	—			(3,605		)
Proceeds from the sale of securities available for sale	699,830			343,410
Proceeds from the sale of other investments	10,178			3,760
Proceeds from the maturity of and principal paydowns on securities available for sale	104,089			191,683
Proceeds from the maturity of and principal paydowns on securities held to maturity	2,217			1,982
Proceeds from the maturity of and principal paydowns on other securities	750			—
Purchase of securities available for sale	(543,407		)	(541,265		)
Purchase of securities held to maturity	(20,944		)	—
Purchase of other investments	(8,849		)	(4,566		)
Net increase in loans and leases	(317,604		)	(97,741		)
Purchase of bank owned life insurance policies	—			(2,835		)
Capital expenditures	(5,738		)	(8,442		)
Proceeds from the sale of equipment	175			—
Proceeds on sale of OREO and other repossessed assets	14,578			14,304
NET CASH USED BY INVESTING ACTIVITIES	(64,725		)	(103,315		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits and savings accounts	100,466			138,415
Net decrease in time deposit accounts	(40,246		)	(59,077		)
Net decrease in short-term borrowings	(60,451		)	(578		)
Proceeds from other borrowings	5,000			160
Repayments of other borrowings	(20,596		)	(66,647		)
Purchase of noncontrolling interest	—			(2,798		)
Purchase of treasury stock	(625		)	(1,601		)
Proceeds from issuance of common stock	662			2,360
Excess tax benefits on exercised stock options	119			68
Dividends paid	(6,149		)	(5,961		)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES	(21,820		)	4,341
Net decrease in cash and cash equivalents	(57,434		)	(3,046		)
Cash and cash equivalents at beginning of year	125,270			168,054
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	67,836		$	165,008
Supplemental disclosures:
Cash paid for income/franchise taxes	$	2,632		$	4,819
Cash paid for interest	$	26,925		$	27,263
Loans transferred to OREO	$	6,528		$	13,318
Purchases of securities available for sale, accrued, not paid	$	2,089		$	7,540
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (Dollars in thousands, except per share data)
	Heartland Financial USA, Inc. Stockholders' Equity
	Preferred  Stock		Common  Stock		Capital  Surplus		Retained  Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Non-controlling Interest			Total  Equity
Balance at January 1, 2013	$	81,698	$	16,828	$	50,359	$	236,279		$	16,641		$	—		$	2,734		$	404,539
Comprehensive income							28,854			(30,460		)				64			(1,542		)
Preferred, $10.89 per share							(889		)										(889		)
Common, $0.30 per share							(5,072		)										(5,072		)
Purchase of noncontrolling interest																(2,798		)	(2,798		)
Purchase of 59,174 shares of common stock													(1,601		)				(1,601		)
Issuance of 182,392 shares of common stock			125		744								1,559						2,428
Commitments to issue common stock					1,538														1,538
Balance at September 30, 2013	$	81,698	$	16,953	$	52,641	$	259,172		$	(13,819	)	$	(42	)	$	—		$	396,603
Balance at January 1, 2014	$	81,698	$	18,399	$	91,632	$	265,067		$	(17,336	)	$	—		$	—		$	439,460
Comprehensive income							29,637			17,612									47,249
Cash dividends declared:
Preferred, $7.50 per share							(613		)										(613		)
Common, $0.30 per share							(5,536		)										(5,536		)
Purchase of 24,042 shares of common stock													(625		)				(625		)
Issuance of 102,349 shares of common stock			78		78								625						781
Commitments to issue common stock					2,683														2,683
Balance at September 30, 2014	$	81,698	$	18,477	$	94,393	$	288,555		$	276		$	—		$	—		$	483,399
See accompanying notes to consolidated financial statements.

HEARTLAND FINANCIAL USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The interim unaudited consolidated financial statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended December 31, 2013, included in the Form 10-K of Heartland Financial USA, Inc. ("Heartland") filed with the Securities and Exchange Commission ("SEC") on March 14, 2014. Accordingly, footnote disclosures which would substantially duplicate the disclosure contained in the audited consolidated financial statements have been omitted.

The financial information of Heartland included herein has been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments), that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the interim period ended September 30, 2014, are not necessarily indicative of the results expected for the year ending December 31, 2014.

Earnings Per Share

Basic earnings per share is determined using net income available to common stockholders and weighted average common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average common shares and assumed incremental common shares issued. Amounts used in the determination of basic and diluted earnings per share for the three month and nine months ended September 30, 2014 and 2013, are shown in the table below:

	Three Months Ended September 30,
(Dollars and number of shares in thousands, except per share data)	2014			2013
Net income attributable to Heartland	$	11,973		$	6,810
Preferred dividends and discount	(205		)	(276		)
Net income available to common stockholders	$	11,768		$	6,534
Weighted average common shares outstanding for basic earnings per share	18,469			16,936
Assumed incremental common shares issued for common stock equivalents	284			285
Weighted average common shares for diluted earnings per share	18,753			17,221
Earnings per common share — basic	$	0.64		$	0.39
Earnings per common share — diluted	$	0.63		$	0.38
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	94			105

	Nine Months Ended September 30,
(Dollars and number of shares in thousands, except per share data)	2014			2013
Net income attributable to Heartland	$	29,637		$	28,854
Preferred dividends and discount	(613		)	(889		)
Net income available to common stockholders	$	29,024		$	27,965
Weighted average common shares outstanding for basic earnings per share	18,456			16,904
Assumed incremental common shares issued for common stock equivalents	287			279
Weighted average common shares for diluted earnings per share	18,743			17,183
Earnings per common share — basic	$	1.57		$	1.65
Earnings per common share — diluted	$	1.55		$	1.63
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	94			105

Stock-Based Compensation

Heartland may grant, through its Nominating and Compensation Committee (the "Compensation Committee"), non-qualified and incentive stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and cash incentive awards, under its 2012 Long-Term Incentive Plan (the "Plan"). The Plan, which was approved by stockholders in May 2012 and replaced Heartland's 2005 Long-Term Incentive Plan with respect to grants after such approval, reserved 368,026 shares of common stock at September 30, 2014, for issuance under future awards that may be granted under the Plan to employees and directors of, and service providers to, Heartland or its subsidiaries.

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, "Compensation-Stock Compensation" requires the measurement of the cost of employee services received in exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the award is based upon its fair value estimated on the date of grant and recognized in the consolidated statements of income over the vesting period of the award. The fair market value of restricted stock and restricted stock units is based on the fair value of the underlying shares of common stock on the date of grant. The fair value of stock options is estimated on the date of grant using the Black-Scholes model.

The amount of tax benefit related to the exercise, vesting, and forfeiture of equity-based awards reflected in additional paid-in-capital, not taxes payable, was $119,000 and $68,000 during the nine months ended September 30, 2014, and 2013, respectively.

Restricted Stock Units

The Plan permits the Compensation Committee to grant restricted stock units ("RSUs"). On March 11, 2014, the Compensation Committee granted time-based RSUs with respect to 67,190 shares of common stock and on January 22, 2013, granted time-based RSUs with respect to 72,595 shares of common stock, to selected officers. The time-based RSUs, which represent the right, without payment, to receive shares of Heartland common stock at a specified date in the future based on specific vesting conditions, vest over five years in three equal installments on the third, fourth and fifth anniversaries of the grant date, will be settled in common stock upon vesting, and will not be entitled to dividends until vested. The time-based RSUs granted in 2014 vest upon a "qualified retirement" (as defined in the RSU agreement) while the RSUs granted in 2013 allow the Compensation Committee to exercise its discretion to provide for vesting upon retirement. In both cases, the retiree is required to sign a non-solicitation and non-compete agreement as a condition to vesting.

In addition to the time-based RSUs referenced in the preceding paragraph, the Compensation Committee granted performance-based RSUs with respect to 32,645 shares of common stock on March 11, 2014, and performance-based RSUs with respect to 40,990 shares of common stock on January 22, 2013, to Heartland executives and subsidiary presidents. These performance-based RSUs vest based first on performance measures tied to Heartland's earnings and loans on December 31, 2014, for the 2014 RSUs, and earnings and assets on December 31, 2013, for the 2013 RSUs, and then on time-based vesting conditions. For the grants awarded in 2014, the portion of the RSUs earned based on performance vest on December 31, 2016, if the executive remains employed on that date, and for the grants awarded in 2013, the portion of the RSUs earned based on performance vest on December 31, 2015, subject to employment on that date.

The Compensation Committee also grants RSUs under the Plan to directors as part of their compensation, to new management level employees at commencement of employment, and to other employees and service providers as incentives. During the nine months ended September 30, 2014, and 2013, 33,304 and 13,100 RSUs, respectively, were granted to directors and new employees.

A summary of the status of the RSUs as of September 30, 2014 and 2013, and changes during the nine months ended September 30, 2014 and 2013, follows:

	2014				2013
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Outstanding at January 1	353,070		$	18.62	348,897		$	15.75
Granted	133,139		26.65		126,685		26.92
Vested	(74,521	)	16.95		(43,388	)	17.00
Forfeited	(7,483	)	20.22		(57,982	)	19.08
Outstanding at September 30	404,205		$	21.44	374,212		$	19.02

Total compensation costs recorded for RSUs were $2.7 million and $1.5 million for the nine months ended September 30, 2014, and 2013, respectively. As of September 30, 2014, there were $3.6 million of total unrecognized compensation costs related to the 2005 and 2012 Long-Term Incentive Plans for RSUs which are expected to be recognized through 2019.

Options

Although the Plan provides authority to the Compensation Committee to grant stock options, no options were granted during the first nine months of 2014 and 2013. Prior to 2009, options were typically granted annually with an expiration date ten years after the date of grant. Vesting was generally over a five-year service period with portions of a grant becoming exercisable at three years, four years, and five years after the date of grant. A summary of the status of the stock options as of September 30, 2014 and 2013, and changes during the nine months ended September 30, 2014 and 2013, follows:

	2014				2013
	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at January 1	261,936		$	23.60	377,907		$	22.62
Granted	—		—		—		—
Exercised	(9,750	)	19.67		(68,586	)	19.54
Forfeited	(7,000	)	26.62		(1,800	)	26.68
Outstanding at September 30	245,186		$	23.67	307,521		$	23.28
Options exercisable at September 30	245,186		$	23.67	307,521		$	23.28

AtSeptember 30, 2014, the vested options totaled 245,186 shares with a weighted average exercise price of $23.67 per share and a weighted average remaining contractual life of 2.25 years. The intrinsic value (the difference between the market price and the aggregate exercise price) for the vested options as of September 30, 2014, was $594,000. The intrinsic value for the total of all options exercised during the nine months ended September 30, 2014, was $41,000.

The exercise price of stock options granted is established by the Compensation Committee, but the exercise price for the stock options may not be less than the fair market value of the shares on the date that the option is granted or, if greater, the par value of a share of stock. Each option granted is exercisable in full at any time or from time to time, subject to vesting provisions, as determined by the Compensation Committee and as provided in the option agreement, but such time may not exceed ten years from the grant date. Cash received from options exercised was $192,000 for the nine months ended September 30, 2014, and $1.3 million for the nine months ended September 30, 2013.

Total compensation costs recorded for options were $0 and $10,000 for the nine months ended September 30, 2014, and 2013, respectively. There are no unrecorded compensation costs related to options at September 30, 2014.

Subsequent Events

On October 22, 2014, Heartland entered into a merger agreement with Community Banc-Corp of Sheboygan, Inc., parent company of Community Bank & Trust in Sheboygan, Wisconsin. As of September 30, 2014, Community Bank & Trust had assets of approximately $525.0 million, including loans of $410.0 million. Under the merger agreement, and subject to shareholder and regulatory approval, Community Banc-Corp of Sheboygan, Inc. will merge into Heartland, and the

shareholders of Community Banc-Corp of Sheboygan, Inc. will receive Heartland common stock. The aggregate purchase price will be based upon 155% of adjusted tangible book value, as defined in the merger agreement, of Community Banc-Corp of Sheboygan, Inc. prior to closing. Heartland estimates the purchase price at approximately $52.0 million. The merger agreement also provides that Community Bank & Trust will simultaneously merge into Heartland’s Wisconsin Bank & Trust subsidiary. The transaction, expected to close in the first quarter of 2015, is intended to be a tax-free reorganization with respect to the stock consideration received by the stockholders of Community Banc-Corp of Sheboygan, Inc.

Heartland has entered into an agreement to sell one branch of its Morrill & Janes Bank and Trust Company subsidiary. The branch sale is expected to close on November 7, 2014. The branch had loans of approximately $9.0 million and deposits of $28.0 million at September 30, 2014. The anticipated premium on the branch sale is 2% of average deposits.

Effect of New Financial Accounting Standards

In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,"to eliminate the diversity in practice and to increase the comparability of financial statements among companies. The guidance requires that a reporting entity generally must show an unrecognized tax benefit, or a portion of an unrecognized tax benefit, for a net operating loss carryforward, similar tax loss or a tax credit carryforward as a reduction of a deferred tax asset. However, the entity should present the unrecognized tax benefit as a liability and not as a reduction of a deferred tax asset if the carryforward or tax loss is not available on the financial statement date to settle any additional income tax liability that would result from the disallowance of the tax position under the applicable tax law, or the applicable tax law does not require the company to use, and the company does not intend to use, the carryforward or tax loss to settle additional income taxes resulting from the disallowance of the tax position. The guidance does not require any new recurring disclosures because it does not affect the recognition or measurement of uncertain tax positions. Heartland adopted this standard on January 1, 2014, and the adoption did not have a material impact on the results of operations, financial position, and liquidity.

In January 2014, the FASB issued ASU 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects." The amendments in ASU 2014-01 to Topic 323, "Equity Investments and Joint Ventures," provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments are effective for fiscal years, and interim periods within those years, beginning after December 31, 2014, and should be applied retrospectively to all periods presented. Early adoption is permitted. Heartland is in the process of evaluating the impact that adoption of this guidance will have on the results of operations, financial position, and liquidity.

In January 2014, the FASB issued ASU 2014-04, "Receivables-Troubled Debt Restructurings by Creditors: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure." The amendments in ASU 2014-04 clarify that an in-substance foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (i) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (ii) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in lieu of foreclosure or similar legal agreement. ASU 2014-04 also requires disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in loans collateralized by residential real estate property that are in the process of foreclosure. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption permitted. Once adopted, an entity can elect either (i) a modified retrospective transition method or (ii) a prospective transition method. The modified retrospective transition method is applied by means of a cumulative-effect adjustment to residential mortgage loans and foreclosed residential real estate properties existing as of the beginning of the period for which the amendments of ASU 2014-04 are effective, with real estate reclassified to loans measured at the carrying value of the real estate at the date of adoption and loans reclassified to real estate measured at the lower of net carrying value of the loan or the fair value of the real estate less costs to sell at the date of adoption. The prospective transition method is applied by means of applying the amendments of ASU 2014-04 to all instances of receiving physical possession of residential real estate properties that occur after the date of adoption. Heartland does not expect the adoption of this standard to have a material impact on the results of operations, financial position, and liquidity.

In August 2014, the FASB issued ASU 2014-14, "Receivables-Troubled Debt Restructurings by Creditors: Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure." The amendment clarifies how creditors are to classify certain government-guaranteed mortgage loans upon foreclosure. The amendment requires that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government guarantee that is not separate from the loan before foreclosure, and (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under the claim, and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured on the amount of the loan balance (principal and interest) expected to be recovered for the guarantor. This amendment is effective for annual reporting periods, and interim reporting periods within those years, beginning after December 15, 2014, with early adoption permitted. Heartland does not expect the adoption of this standard to have a material impact on the results of operations, financial position, and liquidity.

Reclassifications

In the first quarter of 2014, Heartland revised the classification of mortgage servicing rights income from loan servicing income to gain on sale of loans held for sale. The reclassification is presented in both the current and prior reporting periods. For the three and nine months ended September 30, 2013, $3.4 million and $10.6 million, respectively, were reclassified from loan servicing income to gain on sale of loans held for sale.

During the first quarter of 2014, Heartland revised the classification of loss on sales/valuations of other real estate and repossessed assets, net, from other real estate and loan collection expenses to a specific noninterest income classification. This reclassification is presented in both the current and prior reporting periods. For the three and nine months ended September 30, 2013, losses of $339,000 and $2.4 million were reclassified from other real estate and loan collection expenses to loss on sales/valuations of other real estate and repossessed assets, net. This reclassification results in other real estate and loan collection expenses for the three and nine months ended September 30, 2013, decreasing from $1.1 million and $4.9 million as previously reported to $730,000 and $2.4 million, respectively.

These reclassifications do not have a material impact on Heartland's financial statements and do not affect the financial results. Heartland believes these reclassifications are more consistent with industry reporting practices.

NOTE 2: SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of September 30, 2014, and December 31, 2013, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2014
U.S. government corporations and agencies	$	13,884	$	74	$	(12	)	$	13,946
Mortgage-backed securities	1,166,166		10,403		(11,692		)	1,164,877
Obligations of states and political subdivisions	180,998		5,680		(867		)	185,811
Total debt securities	1,361,048		16,157		(12,571		)	1,364,634
Equity securities	5,021		48		—			5,069
Total	$	1,366,069	$	16,205	$	(12,571	)	$	1,369,703
December 31, 2013
U.S. government corporations and agencies	$	220,157	$	147	$	(2,001	)	$	218,303
Mortgage-backed securities	1,156,983		9,538		(22,574		)	1,143,947
Obligations of states and political subdivisions	277,320		1,706		(12,402		)	266,624
Total debt securities	1,654,460		11,391		(36,977		)	1,628,874
Equity securities	4,996		32		—			5,028
Total	$	1,659,456	$	11,423	$	(36,977	)	$	1,633,902

At both September 30, 2014, and December 31, 2013, the amortized cost of the available for sale securities is net of $184,000 of credit related other-than-temporary impairment ("OTTI").

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of September 30, 2014, and December 31, 2013, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2014
Mortgage-backed securities	$	5,805	$	263	$	(533	)	$	5,535
Obligations of states and political subdivisions	249,507		12,914		(1,315		)	261,106
Total	$	255,312	$	13,177	$	(1,848	)	$	266,641
December 31, 2013
Mortgage-backed securities	$	5,973	$	199	$	(321	)	$	5,851
Obligations of states and political subdivisions	231,525		5,801		(5,740		)	231,586
Total	$	237,498	$	6,000	$	(6,061	)	$	237,437

At September 30, 2014, the amortized cost of the held to maturity securities is net of $797,000 of credit related OTTI and $445,000 of non-credit related OTTI. At December 31, 2013, the amortized cost of the held to maturity securities was net of $797,000 of credit related OTTI and $517,000 of non-credit related OTTI.

Approximately 97% of Heartland's mortgage-backed securities are issuances of government-sponsored enterprises.

The amortized cost and estimated fair value of debt securities available for sale at September 30, 2014, 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.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	8,440	$	8,525
Due in 1 to 5 years	19,027		19,184
Due in 5 to 10 years	83,717		86,936
Due after 10 years	83,698		85,112
Total debt securities	194,882		199,757
Mortgage-backed securities	1,166,166		1,164,877
Equity securities	5,021		5,069
Total investment securities	$	1,366,069	$	1,369,703

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 2014, 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.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	—	$	—
Due in 1 to 5 years	13,062		13,910
Due in 5 to 10 years	47,769		50,227
Due after 10 years	188,676		196,969
Total debt securities	249,507		261,106
Mortgage-backed securities	5,805		5,535
Total investment securities	$	255,312	$	266,641

Gross gains and losses realized related to the sales of securities available for sale for the three and nine months ended September 30, 2014, and 2013, are summarized as follows, in thousands:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Proceeds from sales	$	189,939	$	127,475	$	699,830	$	343,410
Gross security gains	1,101		1,420		4,547		7,703
Gross security losses	276		302		2,087		1,091

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 September 30, 2014, and December 31, 2013. 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 or more months. The reference point for determining how long an investment was in an unrealized loss position was September 30, 2013, andDecember 31, 2012, respectively. Securities for which Heartland has taken credit-related 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.

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
September 30, 2014
U.S. government corporations and agencies	$	—	$	—		$	978	$	(12	)	$	978	$	(12	)
Mortgage-backed securities	514,918		(5,627		)	296,255		(6,065		)	811,173		(11,692		)
Obligations of states and political subdivisions	886		(6		)	42,344		(861		)	43,230		(867		)
Total temporarily impaired securities	$	515,804	$	(5,633	)	$	339,577	$	(6,938	)	$	855,381	$	(12,571	)
December 31, 2013
U.S. government corporations and agencies	$	196,345	$	(2,001	)	$	—	$	—		$	196,345	$	(2,001	)
Mortgage-backed securities	640,684		(17,064		)	118,229		(5,510		)	758,913		(22,574		)
Obligations of states and political subdivisions	196,987		(11,452		)	10,714		(950		)	207,701		(12,402		)
Total temporarily impaired securities	$	1,034,016	$	(30,517	)	$	128,943	$	(6,460	)	$	1,162,959	$	(36,977	)

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
September 30, 2014
Mortgage-backed securities	$	—	$	—		$	2,861	$	(533	)	$	2,861	$	(533	)
Obligations of states and political subdivisions	1,577		(390		)	36,412		(925		)	37,989		(1,315		)
Total temporarily impaired securities	$	1,577	$	(390	)	$	39,273	$	(1,458	)	$	40,850	$	(1,848	)
December 31, 2013
Mortgage-backed securities	$	2,170	$	(319	)	$	834	$	(2	)	$	3,004	$	(321	)
Obligations of states and political subdivisions	47,175		(3,508		)	21,505		(2,232		)	68,680		(5,740		)
Total temporarily impaired securities	$	49,345	$	(3,827	)	$	22,339	$	(2,234	)	$	71,684	$	(6,061	)

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. During 2012, Heartland experienced deterioration in the credit support on three private label mortgage-backed securities which resulted in a credit-related OTTI loss. The underlying collateral on these securities experienced an increased level of defaults and a slowing of voluntary prepayments causing the present value of the forward expected cash flows, using prepayment and default vectors, to be below the amortized cost basis of the securities. Based on Heartland's evaluation, a $981,000 OTTI on three private label mortgage-backed securities attributable to credit-related losses was recorded in March 2012. The other-than-temporary credit-related losses were $797,000 in the held to maturity category and $184,000 in the available for sale category.

The remaining unrealized losses on Heartland's mortgage-backed securities are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities and 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.

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 credit quality and financial 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 available for sale securities with OTTI write-downs for the periods ended September 30, 2014, or December 31, 2013.

The following table shows the detail of OTTI write-downs on debt securities included in earnings and the related changes in other accumulated comprehensive income ("AOCI") for the same securities, in thousands:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Recorded as part of gross realized losses:
Credit related OTTI	$	—		$	—		$	—		$	—
Intent to sell OTTI	—			—			—			—
Total recorded as part of gross realized losses	—			—			—			—
Recorded directly to AOCI for non-credit related impairment:
Residential mortgage backed securities	—			—			—			—
Accretion of non-credit related impairment	(24		)	(24		)	(72		)	(72		)
Total changes to AOCI for non-credit related impairment	(24		)	(24		)	(72		)	(72		)
Total OTTI losses (accretion) recorded on debt securities, net	$	(24	)	$	(24	)	$	(72	)	$	(72	)

Heartland has not experienced any OTTI writedowns since the initial impairment charge in 2012.

Included in other securities at September 30, 2014 and December 31, 2013, were shares of stock in each Federal Home Loan Bank (the "FHLB") of Des Moines, Chicago, Dallas, San Francisco, Seattle, and Topeka at an amortized cost of $14.3 million and $15.6 million, respectively.

NOTE 3: LOANS AND LEASES

Loans and leases as of September 30, 2014, and December 31, 2013, were as follows, in thousands:

	September 30, 2014			December 31, 2013
Loans and leases receivable held to maturity:
Commercial	$	1,024,712		$	950,197
Commercial real estate	1,684,832			1,529,683
Agricultural and agricultural real estate	404,423			376,735
Residential real estate	360,309			349,349
Consumer	326,148			294,145
Gross loans and leases receivable held to maturity	3,800,424			3,500,109
Unearned discount	(98		)	(168		)
Deferred loan fees	(2,021		)	(2,989		)
Total net loans and leases receivable held to maturity	3,798,305			3,496,952
Loans covered under loss share agreements:
Commercial and commercial real estate	1,188			2,314
Agricultural and agricultural real estate	573			543
Residential real estate	1,762			2,280
Consumer	327			612
Total loans covered under loss share agreements	3,850			5,749
Allowance for loan and lease losses	(41,698		)	(41,685		)
Loans and leases receivable, net	$	3,760,457		$	3,461,016

Heartland has certain lending policies and procedures in place that are designed to provide for an acceptable level of credit risk. The board of directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the board with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem loans. Diversification in the loan portfolio is also a means of managing risk associated with fluctuations in economic conditions.

The commercial and commercial real estate loan portfolio includes a wide range of business loans, including lines of credit for working capital and operational purposes and term loans for the acquisition of equipment and real estate. Although most loans are made on a secured basis, loans may be made on an unsecured basis where warranted by the overall financial condition of the borrower. Terms of commercial business loans generally range from one to five years. Commercial loans and leases are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The collateral that Heartland requires for most of these loans and leases is based upon the discounted market value of the collateral. The primary repayment risks of commercial loans and leases are that the cash flow of the borrowers may be unpredictable, and the collateral securing these loans may fluctuate in value. Heartland seeks to minimize these risks in a variety of ways. The underwriting analysis includes credit verification, analysis of global cash flows, appraisals and a review of the financial condition of the borrower. Personal guarantees are frequently required as a tertiary form of repayment. In addition, when underwriting loans for commercial real estate, careful consideration is given to the property's operating history, future operating projections, current and projected occupancy, location and physical condition. Heartland also utilizes government guaranteed lending through the U.S. Small Business Administration and the USDA Rural Development Business and Industry Program to assist customers with longer-term funding and to reduce risk.

Agricultural loans, many of which are secured by crops, machinery and real estate, are provided to finance capital improvements and farm operations as well as acquisitions of livestock and machinery. Agricultural loans present unique credit risks relating to adverse weather conditions, loss of livestock due to disease or other factors, declines in market prices for agricultural products and the impact of government regulations. The ultimate repayment of agricultural loans is dependent upon the profitable operation or management of the agricultural entity. In underwriting agricultural loans, lending personnel work closely with their customers to review budgets and cash flow projections for the ensuing crop year. These budgets and cash flow projections are monitored closely during the year and reviewed with the customers at least annually. Lending personnel also work closely with governmental agencies, including the Farm Service Agency, to help agricultural customers obtain credit enhancement products such as loan guarantees or interest assistance.

Heartland originates first-lien, adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a single family residential property. These loans are principally collateralized by owner-occupied properties and are amortized over 10 to 30 years. Heartland typically sells longer-term, low-rate, residential mortgage loans in the secondary market with servicing rights retained. This practice allows Heartland to better manage interest rate risk and liquidity risk. The Heartland bank subsidiaries participate in lending programs sponsored by U.S. government agencies such as Veterans Administration and Federal Home Administration when justified by market conditions.

Consumer lending includes motor vehicle, home improvement, home equity and small personal credit lines. Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than one-to-four-family residential mortgage loans. Consumer loan collections are dependent on the borrower's continuing financial stability, and are therefore more likely to be affected by adverse personal circumstances. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate. Heartland's consumer finance subsidiaries, Citizens Finance Co. and Citizens Finance of Illinois Co., typically lend to borrowers with past credit problems or limited credit histories, which comprise approximately 22% of Heartland's total consumer loan portfolio.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Heartland’s policy is to discontinue the accrual of interest income on any loan or lease when, in the opinion of management, there is a reasonable doubt as to the timely collection of the interest and principal, normally when a loan or lease is 90 days past due. When interest accruals are deemed uncollectible, interest credited to income in the current year is reversed and interest accrued in prior years is charged to the allowance for loan and lease losses. Nonaccrual loans and leases are returned to an accrual status when, in the opinion of management, the financial position of the borrower indicates that there is no longer any reasonable doubt as to the timely payment of interest and principal.

Under Heartland’s credit practices, a loan is impaired when, based on current information and events, it is probable that Heartland will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loan impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except where more practical, at the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent.

The following table shows the balance in the allowance for loan and lease losses at September 30, 2014, and December 31, 2013, 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 2014.

	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
September 30, 2014
Commercial	$	451	$	10,904	$	11,355	$	8,278	$	1,016,434	$	1,024,712
Commercial real estate	1,176		14,969		16,145		33,280		1,651,552		1,684,832
Agricultural and agricultural real estate	67		3,049		3,116		5,689		398,734		404,423
Residential real estate	424		3,199		3,623		8,187		352,122		360,309
Consumer	1,287		5,966		7,253		6,150		319,998		326,148
Unallocated	—		206		206		—		—		—
Total	$	3,405	$	38,293	$	41,698	$	61,584	$	3,738,840	$	3,800,424
December 31, 2013
Commercial	$	2,817	$	10,282	$	13,099	$	14,644	$	935,553	$	950,197
Commercial real estate	818		13,334		14,152		28,299		1,501,384		1,529,683
Agricultural and agricultural real estate	756		2,236		2,992		16,667		360,068		376,735
Residential real estate	605		3,115		3,720		7,214		342,135		349,349
Consumer	1,721		6,001		7,722		5,137		289,008		294,145
Unallocated	—		—		—		—		—		—
Total	$	6,717	$	34,968	$	41,685	$	71,961	$	3,428,148	$	3,500,109

The following table presents nonaccrual loans, accruing loans past due 90 days or more and troubled debt restructured loans not covered under loss share agreements at September 30, 2014, and December 31, 2013, in thousands. There were no nonaccrual leases, accruing leases past due 90 days or more or restructured leases at September 30, 2014, and December 31, 2013.

	September 30, 2014		December 31, 2013
Nonaccrual loans	$	25,802	$	29,313
Nonaccrual troubled debt restructured loans	4,328		13,081
Total nonaccrual loans	$	30,130	$	42,394
Accruing loans past due 90 days or more	$	—	$	24
Performing troubled debt restructured loans	$	11,994	$	19,353

The following tables provide information on troubled debt restructured loans that were modified during the three and nine months ended September 30, 2014, and September 30, 2013, dollars in thousands:

	Three Months Ended September 30,
	2014					2013
	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	1	60		60		—	—		—
Residential real estate	—	—		—		1	65		65
Consumer	—	—		—		—	—		—
Total	1	$	60	$	60	1	$	65	$	65

	Nine Months Ended September 30,
	2014					2013
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial	—	$	—	$	—	3	$	17,873	$	17,873
Commercial real estate	1	298		298		—	—		—
Total commercial and commercial real estate	1	298		298		3	17,873		17,873
Agricultural and agricultural real estate	3	3,417		3,417		3	2,576		2,576
Residential real estate	1	38		38		4	762		762
Consumer	—	—		—		1	166		166
Total	5	$	3,753	$	3,753	11	$	21,377	$	21,377

The pre-modification and post-modification recorded investment represents amounts as of the date of loan modification. Since the modifications on these loans have been only interest rate concessions and term extensions, not principal reductions, the pre-modification and post-modification recorded investment amounts are the same. At September 30, 2014, there were no commitments to extend credit to any of the borrowers with an existing troubled debt restructuring.

The following tables provide information on troubled debt restructured loans for which there was a payment default during the three months and nine months ended September 30, 2014, and September 30, 2013, in thousands, that had been modified during the twelve month period prior to the default:

	With Payment Defaults During the Following Periods
	Three Months Ended September 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	—	$	—	1	$	13,000
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	—	—		1	13,000
Agricultural and agricultural real estate	1	60		—	—
Residential real estate	—	—		—	—
Consumer	—	—		—	—
Total	1	$	60	1	$	13,000

	With Payment Defaults During the Following Periods
	Nine Months Ended September 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	—	$	—	2	$	17,670
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	—	—		2	17,670
Agricultural and agricultural real estate	1	60		—	—
Residential real estate	—	—		2	167
Consumer	—	—		—	—
Total	1	$	60	4	$	17,837

Heartland's internal rating system is a series of grades reflecting management's risk assessment, based on its analysis of the borrower's financial condition. The "pass" category consists of all loans that are not in the "nonpass" category, categorized into a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the pass category is monitored for early identification of credit deterioration. The "nonpass" category consists of special mention, substandard, doubtful and loss loans. The "special mention" rating is attached to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten its capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. These credits are closely monitored for improvement or deterioration. The "substandard" rating is assigned to loans that are inadequately protected by the current sound net worth and paying capacity of the borrower and may be further at risk due to deterioration in the value of collateral pledged. Well-defined weaknesses jeopardize liquidation of the debt. These loans are still considered collectible, however, a distinct possibility exists that Heartland will sustain some loss if deficiencies are not corrected. Substandard loans may exhibit some or all of the following weaknesses: deteriorating trends, lack of earnings, inadequate debt service capacity, excessive debt and/or lack of liquidity. The "doubtful" rating is assigned to loans where identified weaknesses make collection or liquidation in full, on the basis of existing facts, conditions and values, highly questionable and improbable. These borrowers are usually in default, lack liquidity and capital, as well as, resources necessary to remain an operating entity. Specific pending events, such as capital injections, liquidations or perfection of liens on additional collateral, may strengthen the credit, thus deferring classification of the loan as loss until exact status can be determined. The "loss" rating is assigned to loans considered uncollectible. As of September 30, 2014, Heartland had no loans classified as doubtful or loss. Loans are placed on "nonaccrual" when management does not expect to collect payments of principal and interest in full or when principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection.

The following table presents loans and leases not covered by loss share agreements by credit quality indicator at September 30, 2014, and December 31, 2013, in thousands:

	Pass		Nonpass		Total
September 30, 2014
Commercial	$	913,923	$	110,789	$	1,024,712
Commercial real estate	1,536,940		147,892		1,684,832
Total commercial and commercial real estate	2,450,863		258,681		2,709,544
Agricultural and agricultural real estate	377,733		26,690		404,423
Residential real estate	341,984		18,325		360,309
Consumer	316,609		9,539		326,148
Total gross loans and leases receivable held to maturity	$	3,487,189	$	313,235	$	3,800,424
December 31, 2013
Commercial	$	871,825	$	78,372	$	950,197
Commercial real estate	1,390,820		138,863		1,529,683
Total commercial and commercial real estate	2,262,645		217,235		2,479,880
Agricultural and agricultural real estate	335,821		40,914		376,735
Residential real estate	333,161		16,188		349,349
Consumer	284,148		9,997		294,145
Total gross loans and leases receivable held to maturity	$	3,215,775	$	284,334	$	3,500,109

The nonpass category in the table above is comprised of approximately 69% special mention and 31% substandard as of September 30, 2014. The percent of nonpass loans on nonaccrual status as of September 30, 2014, was 9%. As of December 31, 2013, the nonpass category in the table above was comprised of approximately 59% special mention, 38% substandard, and 3% doubtful. The percent of nonpass loans on nonaccrual status as of December 31, 2013, was 15%. Loans delinquent 30 to 89 days as a percent of total loans were 0.32% at September 30, 2014, compared to 0.30% at December 31, 2013. Changes in credit risk are monitored on a continuous basis and changes in risk ratings are made when identified. All impaired loans are reviewed at least annually.

The following table sets forth information regarding Heartland's accruing and nonaccrual loans and leases not covered by loss share agreements at September 30, 2014, and December 31, 2013, 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
September 30, 2014
Commercial	$	5,163	$	124	$	—	$	5,287	$	1,013,124	$	6,301	$	1,024,712
Commercial real estate	941		101		—		1,042		1,670,756		13,034		1,684,832
Total commercial and commercial real estate	6,104		225		—		6,329		2,683,880		19,335		2,709,544
Agricultural and agricultural real estate	89		—		—		89		402,319		2,015		404,423
Residential real estate	1,626		120		—		1,746		352,362		6,201		360,309
Consumer	2,915		990		—		3,905		319,664		2,579		326,148
Total gross loans and leases receivable held to maturity	$	10,734	$	1,335	$	—	$	12,069	$	3,758,225	$	30,130	$	3,800,424
December 31, 2013
Commercial	$	697	$	741	$	—	$	1,438	$	935,508	$	13,251	$	950,197
Commercial real estate	3,042		199		24		3,265		1,511,618		14,800		1,529,683
Total commercial and commercial real estate	3,739		940		24		4,703		2,447,126		28,051		2,479,880
Agricultural and agricultural real estate	818		—		—		818		369,907		6,010		376,735
Residential real estate	1,199		56		—		1,255		342,735		5,359		349,349
Consumer	2,624		1,089		—		3,713		287,458		2,974		294,145
Total gross loans and leases receivable held to maturity	$	8,380	$	2,085	$	24	$	10,489	$	3,447,226	$	42,394	$	3,500,109

The majority of Heartland's impaired loans are those that are nonaccrual or have had their terms restructured in a troubled debt restructuring. The following tables present, for impaired loans not covered by loss share agreements and by category of loan, the unpaid contractual balance at September 30, 2014, and December 31, 2013; the outstanding loan balance recorded on the consolidated balance sheets at September 30, 2014, and December 31, 2013; any related allowance recorded for those loans as of September 30, 2014, and December 31, 2013; the average outstanding loan balance recorded on the consolidated balance sheets during the three months and nine months ended September 30, 2014, and year ended December 31, 2013; and the interest income recognized on the impaired loans during the three months and nine months ended September 30, 2014, and year ended December 31, 2013, 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, 2014
Impaired loans with a related allowance:
Commercial	$	4,751	$	4,675	$	451	$	6,960	$	—	$	7,022	$	10
Commercial real estate	4,092		3,832		1,176		11,645		7		6,294		40
Total commercial and commercial real estate	8,843		8,507		1,627		18,605		7		13,316		50
Agricultural and agricultural real estate	3,368		3,368		67		4,021		12		4,176		67
Residential real estate	2,024		1,939		424		6,308		8		3,604		17
Consumer	4,339		4,330		1,287		5,489		21		4,710		81
Total loans held to maturity	$	18,574	$	18,144	$	3,405	$	34,423	$	48	$	25,806	$	215
Impaired loans without a related allowance:
Commercial	$	4,222	$	3,603	$	—	$	2,620	$	20	$	3,519	$	60
Commercial real estate	33,626		29,448		—		23,937		595		23,325		883
Total commercial and commercial real estate	37,848		33,051		—		26,557		615		26,844		943
Agricultural and agricultural real estate	3,749		2,321		—		2,100		3		3,731		10
Residential real estate	6,616		6,248		—		6,449		—		6,055		64
Consumer	1,820		1,820		—		1,627		17		1,722		34
Total loans held to maturity	$	50,033	$	43,440	$	—	$	36,733	$	635	$	38,352	$	1,051
Total impaired loans held to maturity:
Commercial	$	8,973	$	8,278	$	451	$	9,580	$	20	$	10,541	$	70
Commercial real estate	37,718		33,280		1,176		35,582		602		29,619		923
Total commercial and commercial real estate	46,691		41,558		1,627		45,162		622		40,160		993
Agricultural and agricultural real estate	7,117		5,689		67		6,121		15		7,907		77
Residential real estate	8,640		8,187		424		12,757		8		9,659		81
Consumer	6,159		6,150		1,287		7,116		38		6,432		115
Total impaired loans held to maturity	$	68,607	$	61,584	$	3,405	$	71,156	$	683	$	64,158	$	1,266

	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
December 31, 2013
Impaired loans with a related allowance:
Commercial	$	7,901	$	7,901	$	2,817	$	5,343	$	38
Commercial real estate	9,164		8,909		818		7,686		282
Total commercial and commercial real estate	17,065		16,810		3,635		13,029		320
Agricultural and agricultural real estate	13,818		13,818		756		7,537		354
Residential real estate	2,460		2,460		605		3,179		13
Consumer	3,485		3,485		1,721		3,490		100
Total loans held to maturity	$	36,828	$	36,573	$	6,717	$	27,235	$	787
Impaired loans without a related allowance:
Commercial	$	7,724	$	6,743	$	—	$	9,394	$	89
Commercial real estate	24,830		19,390		—		25,676		538
Total commercial and commercial real estate	32,554		26,133		—		35,070		627
Agricultural and agricultural real estate	2,849		2,849		—		9,985		189
Residential real estate	5,345		4,754		—		4,198		80
Consumer	1,652		1,652		—		1,515		37
Total loans held to maturity	$	42,400	$	35,388	$	—	$	50,768	$	933
Total impaired loans held to maturity:
Commercial	$	15,625	$	14,644	$	2,817	$	14,737	$	127
Commercial real estate	33,994		28,299		818		33,362		820
Total commercial and commercial real estate	49,619		42,943		3,635		48,099		947
Agricultural and agricultural real estate	16,667		16,667		756		17,522		543
Residential real estate	7,805		7,214		605		7,377		93
Consumer	5,137		5,137		1,721		5,005		137
Total impaired loans held to maturity	$	79,228	$	71,961	$	6,717	$	78,003	$	1,720

On July 2, 2009, Heartland acquired all deposits of The Elizabeth State Bank in Elizabeth, Illinois through its subsidiary Galena State Bank & Trust Co. based in Galena, Illinois, in a whole bank loss sharing transaction facilitated by the FDIC. As of July 2, 2009, The Elizabeth State Bank had loans of $42.7 million. The estimated fair value of the loans acquired was $37.8 million.

The acquired loans and other real estate owned are covered by two loss share agreements between the FDIC and Galena State Bank & Trust Co., which affords Galena State Bank & Trust Co. significant loss protection. Under the loss share agreements, the FDIC covers 80% of the covered loan and other real estate owned losses (referred to as covered assets) up to $10 million and 95% of losses in excess of that amount. The term for loss sharing on non-residential real estate losses is five years with respect to losses and eight years with respect to recoveries, while the term for loss sharing on residential real estate loans is ten years with respect to losses and recoveries. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC at the date of the transaction. New loans made after the acquisition are not covered by the loss share agreements.

The Elizabeth State Bank acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” Purchased loans acquired in a business combination, which include loans purchased in The Elizabeth State Bank acquisition, are recorded at estimated fair value on their purchase date, but the purchaser cannot carry over the related allowance for loan and lease losses. Purchased loans are accounted for under ASC 310-30, “Loans and Debt Securities with Deteriorated Credit Quality,” when the loans have evidence of credit deterioration since origination and it is probable at the date of the acquisition that Heartland will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration at the purchase date included statistics such as past due and nonaccrual status. Generally, acquired loans that meet Heartland’s definition for nonaccrual status fall within the scope of ASC 310-30. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference which is included in the carrying value of the loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in cash flows result in a

reversal of the provision for loan and lease losses to the extent of prior charges, or a reclassification of the difference from nonaccretable to accretable with a positive impact on future interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

The carrying amount of the loans covered by these loss share agreements at September 30, 2014, and December 31, 2013, consisted of purchased impaired and nonimpaired loans as summarized in the following table, in thousands:

	September 30, 2014						December 31, 2013
	Impaired Purchased Loans		Non  Impaired Purchased Loans		Total Covered Loans		Impaired Purchased Loans		Non Impaired Purchased Loans		Total Covered Loans
Commercial and commercial real estate	$	—	$	1,188	$	1,188	$	549	$	1,765	$	2,314
Agricultural and agricultural real estate	—		573		573		—		543		543
Residential real estate	—		1,762		1,762		—		2,280		2,280
Consumer loans	266		61		327		538		74		612
Total Covered Loans	$	266	$	3,584	$	3,850	$	1,087	$	4,662	$	5,749

On the acquisition date, the preliminary estimate of the contractually required payments receivable for all loans with evidence of credit deterioration since origination acquired in the acquisition was $13.8 million and the estimated fair value of the loans was $9.0 million. At September 30, 2014, and December 31, 2013, a majority of these loans were valued based upon the liquidation value of the underlying collateral, because the expected cash flows are primarily based on the liquidation of underlying collateral and the timing and amount of the cash flows could not be reasonably estimated. There was no allowance for loan and lease losses related to these ASC 310-30 loans at September 30, 2014, and December 31, 2013.

On the acquisition date, the preliminary estimate of the contractually required payments receivable for all nonimpaired loans acquired in the acquisition was $28.9 million and the estimated fair value of the loans was $28.7 million.

NOTE 4: ALLOWANCE FOR LOAN AND LEASE LOSSES

Changes in the allowance for loan and lease losses for the three and nine months ended September 30, 2014, and September 30, 2013, were as follows, in thousands:

	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at June 30, 2014	$	11,927		$	14,680		$	2,788		$	3,815		$	7,516		$	166	$	40,892
Charge-offs	(875		)	(295		)	(338		)	(21		)	(1,120		)	—		(2,649		)
Recoveries	145			539			5			29			184			—		902
Provision	158			1,221			661			(200		)	673			40		2,553
Balance at September 30, 2014	$	11,355		$	16,145		$	3,116		$	3,623		$	7,253		$	206	$	41,698
	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2013	$	13,099		$	14,152		$	2,992		$	3,720		$	7,722		$	—	$	41,685
Charge-offs	(7,940		)	(1,379		)	(1,974		)	(225		)	(3,189		)	—		(14,707		)
Recoveries	552			1,833			9			85			606			—		3,085
Provision	5,644			1,539			2,089			43			2,114			206		11,635
Balance at September 30, 2014	$	11,355		$	16,145		$	3,116		$	3,623		$	7,253		$	206	$	41,698

	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at June 30, 2013	$	9,436		$	13,671		$	3,055		$	3,580		$	7,881		$	—	$	37,623
Charge-offs	(163		)	(630		)	—			(450		)	(1,270		)	—		(2,513		)
Recoveries	78			514			1			76			383			—		1,052
Provision	3,745			488			(240		)	331			825			—		5,149
Balance at September 30, 2013	$	13,096		$	14,043		$	2,816		$	3,537		$	7,819		$	—	$	41,311
	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2012	$	11,388		$	14,473		$	2,138		$	3,543		$	7,173		$	—	$	38,715
Charge-offs	(1,422		)	(2,561		)	(23		)	(856		)	(3,488		)	—		(8,350		)
Recoveries	983			1,279			100			102			834			—		3,298
Provision	2,147			852			601			748			3,300			—		7,648
Balance at September 30, 2013	$	13,096		$	14,043		$	2,816		$	3,537		$	7,819		$	—	$	41,311

Management allocates the allowance for loan and lease losses by pools of risk within each loan portfolio. The allocation of the allowance for loan and lease losses by loan portfolio is made for analytical purposes and is not necessarily indicative of the trend of future loan and lease losses in any particular category. The total allowance for loan and lease losses is available to absorb losses from any segment of the loan portfolio.

NOTE 5: GOODWILL, CORE DEPOSIT PREMIUM AND OTHER INTANGIBLE ASSETS

Heartland had goodwill of $35.6 million at both September 30, 2014, and December 31, 2013. Heartland conducts its annual internal assessment of the goodwill both collectively and at its subsidiaries as of September 30.

Other intangible assets consist of core deposit intangibles, mortgage servicing rights and customer relationship intangible. The gross carrying amount of other intangible assets and the associated accumulated amortization at September 30, 2014, and December 31, 2013, are presented in the table below, in thousands:

	September 30, 2014						December 31, 2013
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	21,069	$	12,049	$	9,020	$	21,069	$	10,345	$	10,724
Mortgage servicing rights	36,193		12,228		23,965		32,160		10,372		21,788
Customer relationship intangible	1,177		763		414		1,177		730		447
Total	$	58,439	$	25,040	$	33,399	$	54,406	$	21,447	$	32,959

The following table shows the estimated future amortization expense for amortizable intangible assets, in thousands:

	Core Deposit Intangibles		Mortgage Servicing Rights		Customer Relationship Intangible		Total
Three months ending December 31, 2014	$	476	$	1,424	$	11	$	1,911
Year ending December 31,
2015	1,780		5,635		42		7,457
2016	1,575		4,830		41		6,446
2017	1,393		4,025		40		5,458
2018	1,232		3,220		39		4,491
2019	1,056		2,415		38		3,509
Thereafter	1,508		2,416		203		4,127

Projections of amortization expense for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of September 30, 2014. Heartland's actual experience may be significantly different depending upon changes in mortgage interest rates and market conditions. Mortgage loans serviced for others were $3.36 billion and $3.05 billion as of September 30, 2014, and December 31, 2013, respectively. The fair value of Heartland's mortgage servicing rights was estimated at $33.3 million at September 30, 2014, and $32.0 million at December 31, 2013.

Heartland's mortgage servicing rights portfolio is comprised of loans serviced for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Government National Mortgage Association. The servicing rights portfolio is separated into 15- and 30-year tranches. At both September 30, 2014, and December 31, 2013, no valuation allowance was required for any of the tranches.

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 are considered in the calculation. The average constant prepayment rate was11.00%and9.65%for the September 30, 2014, and December 31, 2013, valuations, respectively. The discount rate was9.68%and10.15%for the September 30, 2014 and December 31, 2013, valuations, respectively. The average capitalization rate for the first nine months of 2014 ranged from0.75%to1.39%compared to0.79%and1.39%for 2013. Fees collected for the servicing of mortgage loans for others were $6.4 million and $4.9 million for the nine months ended September 30, 2014, and September 30, 2013, respectively.

The following table summarizes, in thousands, the changes in capitalized mortgage servicing rights for the nine months ended September 30, 2014 and 2013:

	2014			2013
Balance at January 1	$	21,788		$	15,653
Originations	5,955			10,595
Amortization	(3,778		)	(5,548		)
Valuation adjustment	—			496
Balance at September 30	$	23,965		$	21,196
Fair value of mortgage servicing rights	$	33,260		$	31,179
Mortgage servicing rights, net to servicing portfolio	0.71		%	0.73		%

NOTE 6: DERIVATIVE FINANCIAL INSTRUMENTS

Heartland uses derivative financial instruments as part of its interest rate risk management strategy. As part of the strategy, Heartland considers the use of interest rate swaps, caps, floors and collars and certain interest rate lock commitments and forward sales of securities related to mortgage banking activities. Heartland's current strategy includes the use of interest rate swaps, interest rate lock commitments, and forward sales of mortgage securities. Heartland's objectives are to add stability to its net interest margin and to manage its exposure to movements in interest rates. The contract or notional amount of a derivative is used to determine, along with the other terms of the derivative, the amounts to be exchanged between the counterparties. Heartland is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. Heartland minimizes this risk by entering into derivative contracts with large, stable financial institutions. Heartland has not experienced any losses from nonperformance by these counterparties. Heartland monitors counterparty risk in accordance with the provisions of ASC 815. In addition, interest rate-related derivative instruments generally contain language outlining collateral pledging requirements for each counterparty. Collateral must be posted when the market value exceeds certain threshold limits which are determined by credit ratings of each counterparty. Heartland was required to pledge $3.8 million and $5.4 million of cash as collateral at September 30, 2014, and December 31, 2013, respectively. Heartland's counterparties were required to pledge $0 and $540,000 at September 30, 2014, and December 31, 2013, respectively.

Heartland's derivative and hedging instruments are recorded at fair value on the consolidated balance sheets. See Note 7, “Fair Value,” for additional fair value information and disclosures.

Cash Flow Hedges

Heartland has variable rate funding which creates exposure to variability in interest payments due to changes in interest rates. To manage the interest rate risk related to the variability of interest payments, Heartland has entered into various interest rate swap agreements. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are received or made on Heartland's variable-rate liabilities. For the nine

months ended September 30, 2014, the change in net unrealized losses on cash flow hedges reflects changes in the fair value of the swaps and reclassification from accumulated other comprehensive income (loss) to interest expense totaling $1.7 million. For the next twelve months, Heartland estimates that cash payments and reclassification from accumulated other comprehensive income (loss) to interest expense will total $2.3 million.

Heartland executed an interest rate swap transaction on April 5, 2011, with an effective date of April 20, 2011, and an expiration date of April 20, 2016, to effectively convert $15.0 million of its newly issued variable rate amortizing debt to fixed rate debt. For accounting purposes, this swap transaction is designated as a cash flow hedge of the changes in cash flows attributable to changes in one-month LIBOR, the benchmark interest rate being hedged, associated with the interest payments made on an amount of Heartland's debt principal equal to the then-outstanding swap notional amount. At inception, Heartland asserted that the underlying principal balance would remain outstanding throughout the hedge transaction making it probable that sufficient LIBOR-based interest payments would exist through the maturity date of the swap.

Heartland entered into three forward-starting interest rate swap transactions during 2009 to effectively convert Heartland Financial Statutory Trust IV, V and VII, which are variable interest rate subordinated debentures, to fixed interest rate debt. During the first quarter of 2014, the interest rate swap transaction on Heartland Financial Statutory Trust IV expired. Prior to the expiration of the swap, Heartland entered into a new forward-starting interest rate swap to replace the expiring swap. In addition, Heartland added two new forward starting interest rate swap transactions to effectively convert Morrill Statutory Trust I and Morrill Statutory Trust II, which total $16.6 million, from variable interest rate subordinated debentures to fixed interest rate debt. For accounting purposes, these five swap transactions are designated as cash flow hedges of the changes in cash flows attributable to changes in LIBOR, the benchmark interest rate being hedged, associated with the interest payments made on $85.0 million of Heartland's subordinated debentures that reset quarterly on a specified reset date. At inception, Heartland asserted that the underlying principal balance would remain outstanding throughout the hedge transaction making it probable that sufficient LIBOR-based interest payments would exist through the maturity date of the swaps.

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments designated as cash flow hedges at September 30, 2014, and December 31, 2013, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category	Receive Rate		Weighted Average Pay Rate		Maturity
September 30, 2014
Interest rate swap	$	10,713	$	(295	)	Other Liabilities	2.904	%	5.140	%	04/20/2016
Interest rate swap	25,000		(117		)	Other Liabilities	0.235	%	2.255	%	03/17/2021
Interest rate swap	20,000		(1,120		)	Other Liabilities	0.234	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,579		)	Other Liabilities	0.232	%	3.355	%	01/07/2020
Interest rate swap	10,000		48			Other Assets	0.235	%	1.674	%	03/26/2019
Interest rate swap	10,000		48			Other Assets	0.235	%	1.658	%	03/18/2019
December 31, 2013
Interest rate swap	$	11,719	$	(457	)	Other Liabilities	2.917	%	5.140	%	04/20/2016
Interest rate swap	25,000		(146		)	Other Liabilities	0.244	%	2.580	%	03/17/2014
Interest rate swap	20,000		(1,507		)	Other Liabilities	0.239	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,587		)	Other Liabilities	0.243	%	3.355	%	01/07/2020

The table below identifies the gains and losses recognized on Heartland's derivative instruments designated as cash flow hedges for the three and nine months ended September 30, 2014, and September 30, 2013, in thousands:

	Effective Portion							Ineffective Portion
	Recognized in OCI			Reclassified from AOCI into Income				Recognized in Income on Derivatives
	Amount of Gain (Loss)			Category	Amount of Gain (Loss)			Category	Amount of Gain (Loss)
Three Months Ended September 30, 2014
Interest rate swap	$	68		Interest Expense	$	(63	)	Other Income	$	—
Interest rate swap	193			Interest Expense	(129		)	Other Income	—
Interest rate swap	208			Interest Expense	(153		)	Other Income	—
Interest rate swap	248			Interest Expense	(158		)	Other Income	—
Interest rate swap	89			Interest Expense	(37		)	Other Income	—
Interest rate swap	88			Interest Expense	(37		)	Other Income	—
Interest rate swap	—			Interest Expense	—			Other Income	—
Nine Months Ended September 30, 2014
Interest rate swap	$	162		Interest Expense	$	(192	)	Other Income	$	—
Interest rate swap	(117		)	Interest Expense	(258		)	Other Income	—
Interest rate swap	387			Interest Expense	(455		)	Other Income	—
Interest rate swap	8			Interest Expense	(473		)	Other Income	—
Interest rate swap	48			Interest Expense	(74		)	Other Income	—
Interest rate swap	48			Interest Expense	(73		)	Other Income	—
Interest rate swap	146			Interest Expense	(146		)	Other Income	—
Three Months Ended September 30, 2013
Interest rate swap	$	27		Interest Expense	$	(69	)	Other Income	$	—
Interest rate swap	138			Interest Expense	(147		)	Other Income	—
Interest rate swap	7			Interest Expense	(151		)	Other Income	—
Interest rate swap	(15		)	Interest Expense	(156		)	Other Income	—
Nine Months Ended September 30, 2013
Interest rate swap	$	203		Interest Expense	$	(210	)	Other Income	$	—
Interest rate swap	419			Interest Expense	(436		)	Other Income	—
Interest rate swap	548			Interest Expense	(446		)	Other Income	—
Interest rate swap	1,115			Interest Expense	(460		)	Other Income	—

Mortgage Derivatives

Heartland also has entered into interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans and mortgage backed securities that are considered derivative instruments. The fair value of these commitments is recorded on the consolidated balance sheets with the changes in fair value recorded in the consolidated statements of income as a component of gains on sale of loans held for sale. These derivative contracts are designated as free standing derivative contracts and are not designated against specific assets and liabilities on the consolidated balance sheets or forecasted transactions and therefore do not qualify for hedge accounting treatment.

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments not designated as hedging instruments at September 30, 2014, and December 31, 2013, in thousands:

	Balance Sheet Category	Notional Amount		Fair Value
September 30, 2014
Interest rate lock commitments (mortgage)	Other Assets	$	103,933	$	3,291
Forward commitments	Other Assets	114,988		222
Forward commitments	Other Liabilities	179,044		(623		)
December 31, 2013
Interest rate lock commitments (mortgage)	Other Assets	$	63,370	$	1,809
Forward commitments	Other Assets	117,637		1,206
Forward commitments	Other Liabilities	53,277		(133		)

The table below identifies the income statement category of the gains and losses recognized in income on Heartland's derivative instruments not designated as hedging instruments for the three and nine months ended September 30, 2014, and September 30, 2013, in thousands:

	Income Statement Category	Year-to-Date Gain (Loss) Recognized
Three Months Ended September 30, 2014
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	(1,924	)
Forward commitments	Gains on sale of loans held for sale	1,505
Nine Months Ended September 30, 2014
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	3,393
Forward commitments	Gains on sale of loans held for sale	(1,474		)
Three Months Ended September 30, 2013
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	5,219
Forward commitments	Gains on sale of loans held for sale	(11,430		)
Nine Months Ended September 30, 2013
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	(6,047	)
Forward commitments	Gains on sale of loans held for sale	(1,289		)

NOTE 7: FAIR VALUE

Heartland utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, trading securities and derivatives are recorded in the consolidated balance sheets at fair value on a recurring basis. Additionally, from time to time, Heartland may be required to record at fair value other assets on a nonrecurring basis such as loans held for sale, loans held to maturity and certain other assets including, but not limited to, mortgage servicing rights and other real estate owned. These nonrecurring fair value adjustments typically involve application of lower of cost or fair value accounting or write-downs of individual assets.

Fair Value Hierarchy

Under ASC 820, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 — Valuation is based upon quoted prices for identical instruments in active markets.

Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, or similar instruments in markets that are not active, and model-based valuation techniques for all significant assumptions are observable in the market.

Level 3 — Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring or non-recurring basis.

Assets

Securities Available for Sale and Held to Maturity

Securities available for sale are recorded at fair value on a recurring basis. Securities held to maturity are generally recorded at cost and are recorded at fair value only to the extent a decline in fair value is determined to be other-than-temporary. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury securities. Level 2 securities include U.S. government and agency securities, mortgage-backed securities and private collateralized mortgage obligations, municipal bonds and corporate debt securities. Level 3 securities consist primarily of Z-TRANCHE mortgage-backed securities. On a quarterly basis, a secondary independent pricing service is used for a sample of securities to validate the pricing from Heartland's primary pricing service.

Trading Assets

Trading assets are recorded at fair value and consist of securities held for trading purposes. The valuation method for trading securities is the same as the methodology used for securities classified as available for sale.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or fair value on an aggregate basis. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, Heartland classifies loans held for sale subjected to nonrecurring fair value adjustments as Level 2.

Loans Held to Maturity

Heartland does not record loans held to maturity at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310. The fair value of impaired loans is measured using one of the following impairment methods: 1) the present value of expected future cash flows discounted at the loan's effective interest rate or 2) the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent. In accordance with ASC 820, impaired loans measured at fair value are classified as nonrecurring Level 3 in the fair value hierarchy.

Mortgage Servicing Rights

Mortgage servicing rights assets represent the value associated with servicing residential real estate loans that have been sold to outside investors with servicing retained. Heartland uses the amortization method (i.e., the lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, to determine the carrying value of its mortgage servicing rights. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates, prepayment speeds and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. Mortgage servicing rights are subject to impairment testing. The carrying values of these rights are reviewed quarterly for impairment based upon the calculation of fair value as performed by an outside third party. For purposes of measuring impairment, the rights are stratified into certain risk characteristics including note type and note term. If the valuation model reflects a fair value less than the carrying value, mortgage servicing rights are adjusted to fair value through a valuation allowance. Heartland classifies mortgage servicing rights as nonrecurring with Level 3 measurement inputs.

Derivative Financial Instruments

Heartland's current interest rate risk strategy includes interest rate swaps. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. To comply with the provisions of ASC 820, Heartland incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, Heartland has considered the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although Heartland has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2014, and December 31, 2013, Heartland has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, Heartland has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Interest rate lock commitments

Heartland uses an internal valuation model that relies on internally developed inputs to estimate the fair value of its interest rate lock commitments which is based on unobservable inputs that reflect management's assumptions and specific information about each borrower. Interest rate lock commitments are classified in Level 3 of the fair value hierarchy.

Forward commitments

The fair value of forward commitments are estimated using an internal valuation model, which includes current trade pricing for similar financial instruments in active markets that Heartland has the ability to access and are classified in Level 2 of the fair value hierarchy.

Other Real Estate Owned

Other real estate owned ("OREO") represents property acquired through foreclosures and settlements of loans. Property acquired is carried at the fair value of the property at the time of acquisition (representing the property's cost basis), plus any acquisition costs, or the estimated fair value of the property, less disposal costs. Heartland considers third party appraisals, as well as independent fair value assessments from realtors or persons involved in selling OREO, in determining the fair value of particular properties. Accordingly, the valuation of OREO is subject to significant external and internal judgment. Heartland periodically reviews OREO to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. OREO is classified as nonrecurring Level 3.

The table below presents Heartland's assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2014, and December 31, 2013, in thousands, aggregated by the level in the fair value hierarchy within which those measurements fall:

	Total Fair Value		Level 1		Level 2		Level 3
September 30, 2014
Assets
Trading securities	$	—	$	—	$	—	$	—
Securities available for sale
U.S. government corporations and agencies	13,946		2,536		11,410		—
Mortgage-backed securities	1,164,877		—		1,160,029		4,848
Obligations of states and political subdivisions	185,811		—		185,811		—
Equity securities	5,069		—		5,069		—
Derivative financial instruments	96		—		96		—
Interest rate lock commitments	3,291		—		—		3,291
Forward commitments	222		—		222		—
Total assets at fair value	$	1,373,312	$	2,536	$	1,362,637	$	8,139
Liabilities
Derivative financial instruments	$	3,111	$	—	$	3,111	$	—
Forward commitments	623		—		623		—
Total liabilities at fair value	$	3,734	$	—	$	3,734	$	—
December 31, 2013
Assets
Trading securities	$	1,801	$	1,801	$	—	$	—
Securities available for sale
U.S. government corporations and agencies	218,303		4,084		214,219		—
Mortgage-backed securities	1,143,947		—		1,140,649		3,298
Obligations of states and political subdivisions	266,624		—		266,624		—
Equity securities	5,028		—		5,028		—
Interest rate lock commitments	1,809		—		—		1,809
Forward commitments	1,206		—		1,206		—
Total assets at fair value	$	1,638,718	$	5,885	$	1,627,726	$	5,107
Liabilities
Derivative financial instruments	$	3,697	$	—	$	3,697	$	—
Forward commitments	133		—		133		—
Total liabilities at fair value	$	3,830	$	—	$	3,830	$	—

As of March 31, 2014, Heartland revised the classification of interest rate lock commitments from previous filings. In previous filings, interest rate lock commitments were classified as Level 2 under ASC 820. The resulting change in presentation does not have a material impact on the financial statements and did not affect the method by which Heartland estimates fair value, nor the resulting fair values.

The tables below present Heartland's assets that are measured at fair value on a nonrecurring basis, in thousands:

	Fair Value Measurements at September 30, 2014
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	1,545	$	—	$	—	$	1,545	$	112
Commercial real estate	7,058		—		—		7,058		470
Agricultural and agricultural real estate	827		—		—		827		1,428
Residential real estate	2,503		—		—		2,503		—
Consumer	3,043		—		—		3,043		9
Total collateral dependent impaired loans	$	14,976	$	—	$	—	$	14,976	$	2,019
Other real estate owned	$	20,475	$	—	$	—	$	20,475	$	1,365

	Fair Value Measurements at December 31, 2013
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	7,229	$	—	$	—	$	7,229	$	919
Commercial real estate	7,749		—		—		7,749		1,881
Agricultural and agricultural real estate	13,062		—		—		13,062		—
Residential real estate	3,396		—		—		3,396		—
Consumer	1,763		—		—		1,763		—
Total collateral dependent impaired loans	$	33,199	$	—	$	—	$	33,199	$	2,800
Other real estate owned	$	29,852	$	—	$	—	$	29,852	$	2,799

The following tables present additional quantitative information about assets measured at fair value and for which Heartland has utilized Level 3 inputs to determine fair value, in thousands:

	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value at 9/30/14		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	4,848	Discounted cash flows	Pretax discount rate	6.50 - 8.00%
				Actual defaults	12.71-20.14% (15.52%)
				Actual deferrals	6.25-22.35% (11.32%)
Interest rate lock commitments	3,291		Discounted cash flows	Closing ratio	(1)
Collateral dependent impaired loans:
Commercial	1,545		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Commercial real estate	7,058		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Agricultural and agricultural real estate	827		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Residential real estate	2,503		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Consumer	3,043		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Other real estate owned	20,475		Modified appraised value	Third party appraisal	(2)
				Appraisal discount
(1) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at September 30, 2014 was 84%.
(2) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value at 12/31/13		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	3,298	Discounted cash flows	Pretax discount rate	7.00 - 9.00%
				Actual defaults	12.50-28.20% (20.80%)
				Actual deferrals	6.10-16.00% (11.10%)
Interest rate lock commitments	1,809		Discounted cash flows	Closing ratio	(1)
Collateral dependent impaired loans:
Commercial	7,229		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Commercial real estate	7,749		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Agricultural and agricultural real estate	13,062		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Residential real estate	3,396		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Consumer	1,763		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Other real estate owned	29,852		Modified appraised value	Third party appraisal	(2)
				Appraisal discount
(1) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at December 31, 2013 was 87%.
(2) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

The changes in fair value of the Z-TRANCHE, a Level 3 asset, that is measured on a recurring basis is summarized in the following table, in thousands:

	For the Nine Months Ended September 30, 2014			For the Year Ended December 31, 2013
Balance at January 1,	$	3,298		$	4,089
Total gains (losses):
Included in earnings	—			(1,587		)
Included in other comprehensive income	1,669			826
Purchases, issuances, sales and settlements:
Purchases	—			—
Sales	(119		)	(30		)
Settlements	—			—
Balance at period end	$	4,848		$	3,298

The changes in fair value of the interest rate lock commitments, which are Level 3 financial instruments and are measured on a recurring basis, are summarized in the following table, in thousands:

	For the Nine Months Ended September 30, 2014			For the Year Ended December 31, 2013
Balance at January 1,	$	1,809		$	9,353
Total gains (losses) included in earnings	3,393			(10,518		)
Issuances	1,798			9,821
Settlements	(3,709		)	(6,847		)
Balance at period end	$	3,291		$	1,809

Gains included in gains (losses) on sales of loans held for sale attributable to interest rate lock commitments held at September 30, 2014, and December 31, 2013, were $3.3 million and $1.8 million, respectively.

The tables below summarize the estimated fair value of Heartland's financial instruments as defined by ASC 825 as of September 30, 2014, and December 31, 2013, in thousands. The carrying amounts in the following tables are recorded in the consolidated balance sheets under the indicated captions. In accordance with ASC 825, the assets and liabilities that are not financial instruments are not included in the disclosure, such as the value of the mortgage servicing rights, premises, furniture and equipment, goodwill and other intangibles and other liabilities.

Heartland does not believe that the estimated information presented herein is representative of the earnings power or value of Heartland. The following analysis, which is inherently limited in depicting fair value, also does not consider any value associated with either existing customer relationships or the ability of Heartland to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

					Fair Value Measurements at September 30, 2014
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	67,836	$	67,836	$	67,836	$	—	$	—
Time deposits in other financial institutions	2,605		2,605		2,605		—		—
Securities:
Trading	—		—		—		—		—
Available for sale	1,369,703		1,369,703		2,536		1,362,319		4,848
Held to maturity	255,312		266,641		—		266,641		—
Other investments	20,514		20,514		—		20,279		235
Loans held for sale	93,054		93,054		—		93,054		—
Loans, net:
Commercial	1,012,918		1,004,481		—		1,002,936		1,545
Commercial real estate	1,668,969		1,682,042		—		1,674,984		7,058
Agricultural and agricultural real estate	401,785		388,171		—		387,344		827
Residential real estate	357,658		329,916		—		327,413		2,503
Consumer	319,126		312,399		—		309,356		3,043
Total Loans, net	3,760,456		3,717,009		—		3,702,033		14,976
Derivative financial instruments	96		96		—		96		—
Interest rate lock commitments	3,291		3,291		—		—		3,291
Forward commitments	222		222		—		222		—
Financial liabilities:
Deposits
Demand deposits	1,274,439		1,274,439		—		1,274,439		—
Savings deposits	2,599,850		2,599,850		—		2,599,850		—
Time deposits	852,430		852,430		—		852,430		—
Short term borrowings	348,305		348,305		—		348,305		—
Other borrowings	334,513		339,338		—		339,338		—
Derivative financial instruments	3,111		3,111		—		3,111		—
Forward commitments	623		623		—		623		—

					Fair Value Measurements at December 31, 2013
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	125,270	$	125,270	$	125,270	$	—	$	—
Securities:
Trading	1,801		1,801		1,801		—		—
Available for sale	1,633,902		1,633,902		4,084		1,626,520		3,298
Held to maturity	237,498		237,437		—		237,437		—
Other investments	21,843		21,843		—		21,608		235
Loans held for sale	46,665		46,665		—		46,665		—
Loans, net:
Commercial	936,305		930,501		—		923,272		7,229
Commercial real estate	1,516,352		1,512,773		—		1,505,024		7,749
Agricultural and agricultural real estate	374,203		378,086		—		365,024		13,062
Residential real estate	347,266		335,362		—		331,966		3,396
Consumer	286,890		273,139		—		271,376		1,763
Total Loans, net	3,461,016		3,429,861		—		3,396,662		33,199
Derivative financial instruments	—		—		—		—		—
Interest rate lock commitments	1,809		1,809		—		—		1,809
Forward commitments	1,206		1,206		—		1,206		—
Financial liabilities:
Deposits
Demand deposits	1,238,581		1,238,581		—		1,238,581		—
Savings deposits	2,535,242		2,535,242		—		2,535,242		—
Time deposits	892,676		892,676		—		892,676		—
Short term borrowings	408,756		408,756		—		408,756		—
Other borrowings	350,109		355,923		—		355,923		—
Derivative financial instruments	3,697		3,697		—		3,697		—
Forward commitments	133		133		—		133		—

Cash and Cash Equivalents — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Time Deposits in Other Financial Institutions — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Securities —For securities either held to maturity, available for sale or trading, fair value equals quoted market price if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. For Level 3 securities, Heartland utilizes independent pricing provided by third party vendors or brokers.

Other Investments — Fair value measurement of other investments, which consists primarily of FHLB stock, are based on their redeemable value, which is at cost due to the restrictions placed on their transferability. The market for these securities is restricted to the issuer of the stock and subject to impairment evaluation.

Loans and Leases—The fair value of loans is estimated using an entrance price concept by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of impaired loans is measured using the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the underlying collateral. The fair value of loans held for sale is estimated using quoted market prices.

Interest Rate Lock Commitments — The fair value of interest rate lock commitments is estimated using an internal valuation model, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated closing ratio based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment group.

Forward Commitments — The fair value of these instruments is estimated using an internal valuation model, which includes current trade pricing for similar financial instruments.

Derivative Financial Instruments — The fair value of all derivatives is estimated based on the amount that Heartland would pay or would be paid to terminate the contract or agreement, using current rates and, when appropriate, the current creditworthiness of the counter-party.

Deposits — The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. If the fair value of the fixed maturity certificates of deposit is calculated at less than the carrying amount, the carrying value of these deposits is reported as the fair value.

Short-term and Other Borrowings—Rates currently available to Heartland for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Commitments to Extend Credit, Unused Lines of Credit and Standby Letters of Credit — Based upon management's analysis of the off balance sheet financial instruments, there are no significant unrealized gains or losses associated with these financial instruments based upon review of the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.

NOTE 8: SEGMENT REPORTING

Heartland has identified two operating segments for purposes of financial reporting: community and other banking and retail mortgage banking. These segments were determined based on the products and services provided or the type of customers served and are consistent with the information used by Heartland's key decision makers to make operating decisions and to assess Heartland's performance. The following tables present financial information from Heartland's operating segments for the three and nine month periods ended September 30, 2014, and 2013, in thousands.

	Three Months Ended September 30,
	2014							2013
	Community and Other Banking		Retail Mortgage Banking			Total		Community and Other Banking		Retail Mortgage Banking			Total
Net interest income	$	50,790	$	701		$	51,491	$	39,292	$	588		$	39,880
Provision for loan losses	2,553		—			2,553		5,149		—			5,149
Total noninterest income	11,124		9,038			20,162		11,971		8,408			20,379
Total noninterest expense	42,784		11,427			54,211		35,511		11,297			46,808
Income (loss) before taxes	$	16,577	$	(1,688	)	$	14,889	$	10,603	$	(2,301	)	$	8,302
Average Loans, for the period	$	3,736,917	$	75,301		$	3,812,218	$	2,867,933	$	69,575		$	2,937,508
Segment Assets, at period end	$	5,817,427	$	117,382		$	5,934,809	$	4,825,781	$	86,949		$	4,912,730
	Nine Months Ended September 30,
	2014							2013
	Community and Other Banking		Retail Mortgage Banking			Total		Community and Other Banking		Retail Mortgage Banking			Total
Net interest income	$	148,930	$	1,972		$	150,902	$	115,968	$	1,503		$	117,471
Provision for loan losses	11,635		—			11,635		7,648		—			7,648
Total noninterest income	33,720		25,906			59,626		35,190		34,414			69,604
Total noninterest expense	127,743		32,744			160,487		104,199		36,021			140,220
Income (loss) before taxes	$	43,272	$	(4,866	)	$	38,406	$	39,311	$	(104	)	$	39,207
Average Loans, for the period	$	3,629,822	$	62,896		$	3,692,718	$	2,820,418	$	86,552		$	2,906,970
Segment Assets, at period end	$	5,817,427	$	117,382		$	5,934,809	$	4,825,781	$	86,949		$	4,912,730

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SAFE HARBOR STATEMENT

This document (including information incorporated by reference) contains, and future oral and written statements of Heartland and its management may contain, forward-looking statements within the meaning of such term in the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of Heartland. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of Heartland's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Although Heartland has made these statements based on management's experience and best estimate of future events, there may be events or factors that management has not anticipated, and the accuracy and achievement of such forward-looking statements and estimates are subject to a number of risks, including those identified in our Annual Report on Form 10-K for the year ended December 31, 2013. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and Heartland undertakes no obligation to update any statement in light of new information or future events.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes have the most effect on Heartland's reported financial position and results of operations are described as critical accounting policies in Heartland's Annual Report on Form 10-K for the year ended December 31, 2013. There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since the year ended December 31, 2013.

OVERVIEW

Heartland's results of operations depend primarily on net interest income, which is the difference between interest income from interest earning assets and interest expense on interest bearing liabilities. Noninterest income, which includes service charges and fees, loan servicing income, trust income, brokerage and insurance commissions, securities gains and gains on sale of loans held for sale, also affects Heartland's results of operations. Heartland's principal operating expenses, aside from interest expense, consist of the provision for loan and lease losses, salaries and employee benefits, occupancy and equipment costs, professional fees, FDIC insurance premiums, advertising and other real estate and loan collection expenses.

Net income available to common stockholders was $11.8 million, or $0.63 per diluted common share, for the quarter ended September 30, 2014, compared to $6.5 million, or $0.38 per diluted common share, for the third quarter of 2013. Return on average common equity was 11.86% and return on average assets was 0.79% for the third quarter of 2014, compared to 8.38% and 0.53%, respectively, for the same quarter in 2013.

Positively affecting net income for the quarter as compared to the same quarter last year was a $11.6 million increase in net interest income, largely due to strong loan growth and the acquisition of Morrill & Janes Bank and Trust Company completed during the last quarter of 2013. This improvement was partially offset by a $7.4 million increase in noninterest expenses, primarily due to the added expenses at Morrill & Janes Bank and Trust Company.

Net income available to common stockholders for the first nine months of 2014 was $29.0 million, or $1.55 per diluted common share, compared to $28.0 million, or $1.63 per diluted common share, recorded during the first nine months of 2013. Return on average common equity was 10.21% and return on average assets was 0.67% for the first nine months of 2014, compared to 11.63% and 0.76%, respectively, for the same period in 2013.

Positively affecting net income for the first nine months of 2014 was a $33.4 million or 28% increase in net interest income, largely due to strong loan growth and the acquisition of Morrill & Janes Bank and Trust Company. This improvement was offset by a $11.3 million or 32% decrease in gains on sale of loans held for sale, resulting from weaker mortgage loan volumes, and a $20.3 million or 14% increase in noninterest expenses, primarily due to the added expenses of Morrill & Janes Bank and Trust Company.

Total assets were $5.93 billion at September 30, 2014, an increase of $11.1 million since year-end 2013. Securities represented 28% of total assets at September 30, 2014, compared to 32% at year-end 2013, as a portion of the proceeds from maturities, paydowns and sales were used to fund loan growth.

Total loans and leases held to maturity were $3.80 billion at September 30, 2014, compared to $3.50 billion at year-end 2013, an increase of $301.4 million or 11% annualized, with $103.6 million of this growth occurring in the third quarter, $117.0 million in the second quarter and $80.8 million during the first quarter. All of the loan growth during the first nine months of 2014 was organic, with commercial and commercial real estate loans representing the largest portion.

Total deposits were $4.73 billion as of September 30, 2014, compared to $4.67 billion at year-end 2013, an increase of $60.2 million or 2% annualized. The composition of Heartland's deposits remained favorable as no-cost demand deposits as a percentage of total deposits was 27% at September 30, 2014, while higher-cost certificates of deposit as a percentage of total deposits was 18% at September 30, 2014.

Common stockholders' equity was $401.7 million at September 30, 2014, compared to $357.8 million at year-end 2013. Book value per common share was $21.74 at September 30, 2014, compared to $19.44 at year-end 2013. Heartland's unrealized gains on securities available for sale, net of applicable taxes, were $1.9 million at September 30, 2014, compared to unrealized losses of $15.1 million at December 31, 2013.

Subsequent to the quarter-end, Heartland entered into a merger agreement with Community Banc-Corp of Sheboygan, Inc., the parent company of Community Bank & Trust in Sheboygan, Wisconsin. Under the agreement and subject to regulatory and shareholder approvals, Heartland will acquire Community Banc-Corp of Sheboygan, Inc. in an all stock transaction expected to close during the first quarter of 2015. Simultaneous with the closing, Community Bank & Trust will be merged into Heartland's Wisconsin Bank & Trust subsidiary. Community Bank & Trust had total assets of approximately $525.0 million as of September 30, 2014.

RESULTS OF OPERATIONS

Net Interest Income

Net interest margin, expressed as a percentage of average earning assets, was 3.96% during the third quarter of 2014 compared to 4.04% during the second quarter of 2014 and 3.81% during the third quarter of 2013. For the first nine months of 2014, net interest margin was 3.97% compared to 3.77% for the first nine months of 2013. Net interest margin during 2014 benefited from loan growth, better asset mix, improved yield on securities and a continued decrease in deposit costs. With deposit rates at close to the bottom of their manageable range and reinvestment rates on maturing securities at dramatically lower levels, the sustainability of net interest margin as a percentage at current levels will be contingent on management's ability to shift dollars from the securities portfolio into the loan portfolio. Management believes net interest margin in dollars will continue to increase as the amount of earning assets grows.

Interest income increased $11.7 million or 24% to $60.1 million in the third quarter of 2014 from the $48.4 million recorded in the third quarter of 2013. After adjustment to add $2.6 million for the third quarter of 2014 and $2.4 million for the third quarter of 2013 for income taxes saved on the interest earned on nontaxable securities and loans, on a tax-equivalent basis, interest income in the third quarter of 2014 was $62.7 million compared to $50.8 million in the third quarter of 2013. Interest income increased $32.8 million or 23% to $176.7 million for the first nine months of 2014 from the $143.9 million recorded in the first nine months of 2013. After adjustment to add $7.7 million for the first nine months of 2014 and $7.0 million for the first nine months of 2013 for income taxes saved on the interest earned on nontaxable securities and loans, on a tax-equivalent basis, interest income in the first nine months of 2014 was $184.4 million compared to $150.9 million in the first nine months of 2013. These increases in interest income were primarily due to increases in average earning assets combined with small increases in the interest rate earned on those assets. The average interest rate earned on total earning assets was 4.59% during the third quarter of 2014 compared to 4.58% during the third quarter of 2013, and 4.61% during the first nine months of 2014 compared to 4.56% during the first nine months of 2013. Average earning assets increased $1.03 billion or 23% during the third quarter of 2014 compared to the third quarter of 2013, with approximately $816.9 million attributable to the Morrill & Janes Bank and Trust Company acquisition completed during the fourth quarter of 2013. Average earning assets increased $921.8 million or 21% during the first nine months of 2014 compared to the first nine months of 2013, with approximately $810.7 million attributable to the Morrill & Janes Bank and Trust Company. The composition of average earning assets shifted to a more favorable mix as loans, generally a higher-yielding asset, comprised 69% of total average earning assets during the third quarter of 2014 compared to 66% during the third quarter of 2013 and 68% during the first nine months of 2014 compared to 65% during the first nine months of 2013.

Interest expense for the third quarter of 2014 was $8.6 million, an increase of $100,000 or 1% from $8.5 million in the third quarter of 2013. For the first nine months of 2014, interest expense was $25.7 million compared to $26.4 million during the first nine months of 2013, a decrease of $671,000 or 3%. Even though average interest bearing liabilities increased $686.3 million or 20% for the quarter ended September 30, 2014, as compared to the same quarter in 2013, the average interest rate paid on Heartland's interest bearing deposits and borrowings declined 16 basis points decreasing from 0.99% in the third quarter of 2013 to 0.83% in the third quarter of 2014. For the nine months ended on September 30, average interest bearing liabilities increased $674.6 million or 20% for 2014 as compared to 2013 and the average interest rate paid on these interest bearing deposits and borrowings declined 19 basis points decreasing from 1.03% in the first nine months of 2013 to 0.84% in the first nine months of 2014. Contributing to these improvements in interest expense was a continued favorable change in the mix of deposits. Average savings balances, the lowest cost interest-bearing deposits, as a percentage of total average interest bearing deposits were 75% during the third quarter of 2014, compared to 71% for the third quarter of 2013 and 75% during the first nine months of 2014 compared to 70% during the first nine months of 2013. The average interest rate paid on savings deposits was 0.31% during the third quarter of 2014 compared to 0.30% during the third quarter of 2013 and the average interest rate paid on time deposits was 1.22% during the third quarter of 2014 compared to 1.59% during the third quarter of 2013. The average interest rate paid on savings deposits was 0.32% during the first nine months of 2014 compared to 0.31% during the first nine months of 2013 and the average interest rate paid on time deposits was 1.19% during the first nine months of 2014 compared to 1.63% during the first nine months of 2013. Management continues to look for opportunities to reduce Heartland's funding costs. The greatest potential resides in the certificates of deposit portfolio with approximately $100 million maturing next quarter at average interest rates around 1.10%. For the past several months, the average renewal interest rate on maturing certificates of deposit has been ranging between 0.40% and 0.50%. The rates currently paid on Heartland's non-maturity deposits are effectively approaching a floor and management believes there is less flexibility to pay lower rates on these deposits in the future.

Net interest income increased $11.6 million or 29% to $51.5 million in the third quarter of 2014 from the $39.9 million recorded in the third quarter of 2013. Net interest income on a tax-equivalent basis totaled $54.1 million during the third quarter of 2014, an increase of $11.8 million or 28% from the $42.3 million recorded during the third quarter of 2013. For the first nine months of 2014, net interest income increased $33.4 million or 28% to $150.9 million in 2014 from the $117.5 million recorded in 2013. Net interest income on a tax-equivalent basis totaled $158.6 million during the first nine months of 2014, an increase of $34.1 million or 27% from the $124.5 million recorded during the first nine months of 2013.

Heartland attempts to manage its balance sheet to minimize the effect that a change in interest rates has on its net interest margin. Heartland plans to continue to work toward improving both its earning assets and funding mix through targeted organic growth strategies, which management believes will result in additional net interest income. Heartland believes its net interest income simulations reflect a well-balanced and manageable interest rate posture. Approximately 35% of Heartland's commercial and agricultural loan portfolios consist of floating rate loans that reprice based upon a change in the national prime or LIBOR interest rate. Since approximately 65% of these floating rate loans have interest rate floors that are currently in effect, an upward movement in LIBOR or the national prime interest rate would not have an immediate positive effect on Heartland's interest income. Item 3 of this Form 10-Q contains additional information about the results of Heartland's most recent net interest income simulations. Note 6 to the quarterly consolidated financial statements contains a detailed discussion of the derivative instruments Heartland has utilized to manage its interest rate risk.

The following table sets forth certain information relating to Heartland's average consolidated balance sheets and reflects the yield on average earning assets and the cost of average interest bearing liabilities for the periods indicated, in thousands. Dividing income or expense by the average balance of assets or liabilities derives such yields and costs. Average balances are derived from daily balances, and nonaccrual loans and loans held for sale are included in each respective loan category. Assets with tax favorable treatment are evaluated on a tax-equivalent basis assuming a federal income tax rate of 35%. Tax favorable assets generally have lower contractual pre-tax yields than fully taxable assets. A tax-equivalent yield is calculated by adding the tax savings to the interest earned on tax favorable assets and dividing by the average balance of the tax favorable assets.

ANALYSIS OF AVERAGE BALANCES, TAX-EQUIVALENT YIELDS AND RATES(1) For the Quarters Ended September 30, 2014 and 2013
	2014							2013
	Average Balance			Interest		Rate		Average Balance			Interest		Rate
Earning Assets
Securities:
Taxable	$	1,279,612		$	7,547	2.34	%	$	1,086,302		$	4,803	1.75	%
Nontaxable(1)	367,791			4,997		5.39		401,083			5,297		5.24
Total securities	1,647,403			12,544		3.02		1,487,385			10,100		2.69
Interest bearing deposits	8,098			6		0.29		9,054			3		0.13
Federal funds sold	344			1		1.15		237			—		—
Loans and leases:(2)
Commercial and commercial real estate(1)	2,656,438			32,249		4.82		2,020,895			25,461		5.00
Residential mortgage	435,965			4,589		4.18		327,185			3,423		4.15
Agricultural and agricultural real estate(1)	398,571			5,030		5.01		327,266			4,274		5.18
Consumer	321,244			6,704		8.28		262,162			6,144		9.30
Fees on loans				1,603		—					1,377		—
Less: allowance for loan and lease losses	(41,727		)	—		—		(38,044		)	—		—
Net loans and leases	3,770,491			50,175		5.28		2,899,464			40,679		5.57
Total earning assets	5,426,336			62,726		4.59	%	4,396,140			50,782		4.58	%
Nonearning assets	456,456							505,832
Total assets	$	5,882,792						$	4,901,972
Interest Bearing Liabilities
Savings	$	2,592,630		$	2,032	0.31	%	$	1,985,496		$	1,495	0.30	%
Time, $100,000 and over	320,849			924		1.14		301,633			1,056		1.39
Other time deposits	534,544			1,699		1.26		517,826			2,218		1.70
Short-term borrowings	316,874			227		0.28		277,041			131		0.19
Other borrowings	334,629			3,741		4.44		331,209			3,623		4.34
Total interest bearing liabilities	4,099,526			8,623		0.83	%	3,413,205			8,523		0.99	%
Noninterest bearing liabilities
Noninterest bearing deposits	1,262,154							1,056,669
Accrued interest and other liabilities	45,674							40,928
Total noninterest bearing liabilities	1,307,828							1,097,597
Stockholders' Equity	475,438							391,170
Total Liabilities and Stockholders' Equity	$	5,882,792						$	4,901,972
Net interest income(1)				$	54,103						$	42,259
Net interest spread(1)						3.76	%						3.59	%
Net interest income to total earning assets(1)						3.96	%						3.81	%
Interest bearing liabilities to earning assets	75.55		%					77.64		%
(1) Tax-equivalent basis is calculated using an effective tax rate of 35%.
(2) Nonaccrual loans are included in average loans outstanding.

ANALYSIS OF AVERAGE BALANCES, TAX-EQUIVALENT YIELDS AND RATES(1) For the Nine Months Ended September 30, 2014 and 2013
	2014							2013
	Average Balance			Interest		Rate		Average Balance			Interest		Rate
Earning Assets
Securities:
Taxable	$	1,303,152		$	22,755	2.33	%	$	1,153,876		$	14,174	1.64	%
Nontaxable(1)	380,154			15,506		5.45		388,195			15,386		5.30
Total securities	1,683,306			38,261		3.04		1,542,071			29,560		2.56
Interest bearing deposits	7,256			20		0.37		9,216			9		0.13
Federal funds sold	450			1		0.30		672			—		—
Loans and leases:(2)
Commercial and commercial real estate(1)	2,580,868			93,978		4.87		2,000,590			76,288		5.10
Residential mortgage	421,571			13,554		4.30		331,854			10,334		4.16
Agricultural and agricultural real estate(1)	381,406			14,508		5.09		321,671			12,843		5.34
Consumer	308,873			19,372		8.39		252,855			17,894		9.46
Fees on loans	—			4,704		—					4,009		—
Less: allowance for loan and lease losses	(41,249		)	—		—		(38,230		)	—		—
Net loans and leases	3,651,469			146,116		5.35		2,868,740			121,368		5.66
Total earning assets	5,342,481			184,398		4.61	%	4,420,699			150,937		4.56	%
Nonearning assets	475,679							486,737
Total assets	$	5,818,160						$	4,907,436
Interest Bearing Liabilities
Savings	$	2,572,492		$	6,184	0.32	%	$	1,986,083		$	4,637	0.31	%
Time, $100,000 and over	329,976			2,641		1.07		310,333			3,395		1.46
Other time deposits	548,171			5,185		1.26		532,291			6,879		1.73
Short-term borrowings	308,000			655		0.28		250,326			387		0.21
Other borrowings	334,881			11,084		4.43		339,923			11,122		4.37
Total interest bearing liabilities	4,093,520			25,749		0.84	%	3,418,956			26,420		1.03	%
Noninterest bearing liabilities
Noninterest bearing deposits	1,219,431							1,016,413
Accrued interest and other liabilities	43,346							67,650
Total noninterest bearing liabilities	1,262,777							1,084,063
Stockholders' Equity	461,863							404,417
Total Liabilities and Stockholders' Equity	$	5,818,160						$	4,907,436
Net interest income(1)				$	158,649						$	124,517
Net interest spread(1)						3.77	%						3.53	%
Net interest income to total earning assets(1)						3.97	%						3.77	%
Interest bearing liabilities to earning assets	76.62		%					77.34		%
(1)Tax-equivalent basis is calculated using an effective tax rate of 35%.
(2) Nonaccrual loans are included in average loans outstanding.

Provision For Loan And Lease Losses

The allowance for loan and lease losses is established through a provision charged to expense to provide, in Heartland management's opinion, an appropriate allowance for loan and lease losses. The provision for loan losses was $2.6 million for the third quarter of 2014 compared to $5.1 million for the third quarter of 2013. Included in the provision for loan and lease losses during the third quarter of 2013 was a $2.2 million impairment reserve on one credit. For the first nine months of 2014, the provision for loan losses was $11.6 million compared to $7.6 million for the first nine months of 2013. The first quarter 2014 provision included approximately $4.5 million to compensate for a charge-off on a single large credit.

In determining that the allowance for loan and lease losses is appropriate, management uses factors that include the overall composition of the loan portfolio, general economic conditions, types of loans, loan collateral values, past loss experience, loan delinquencies, substandard credits, and doubtful credits. For additional details on the specific factors considered, refer to the discussion of critical accounting policies set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Heartland's Annual Report on Form 10-K for the year ended December 31, 2013, and under the caption "Allowance For Loan and Lease Losses" in this report. Heartland believes the allowance for loan and lease losses as of September 30, 2014, was at a level commensurate with the overall risk exposure of the loan portfolio. However, if economic conditions should become more unfavorable, certain borrowers may experience difficulty and the level of nonperforming loans, charge-offs and delinquencies could rise and require further increases in the provision for loan and lease losses.

Noninterest Income

The tables below show Heartland's noninterest income for the three and nine months ended September 30, 2014 and 2013, in thousands:

	Three Months Ended September 30,
	2014			2013			Change			% Change
Service charges and fees	$	4,857		$	4,487		$	370		8	%
Loan servicing income	1,319			598			721			121
Trust fees	3,194			2,918			276			9
Brokerage and insurance commissions	1,044			1,277			(233		)	(18	)
Securities gains, net	825			1,118			(293		)	(26	)
Gain (loss) on trading account securities, net	—			263			(263		)	(100	)
Gains on sale of loans held for sale	8,384			8,637			(253		)	(3	)
Loss on sales/valuations of other real estate and repossessed assets, net	(444		)	(339		)	(105		)	(31	)
Valuation adjustment on mortgage servicing rights	—			—			—			—
Income on bank owned life insurance	371			409			(38		)	(9	)
Other noninterest income	612			1,011			(399		)	(39	)
Total noninterest income	$	20,162		$	20,379		$	(217	)	(1	)%

	Nine Months Ended September 30,
	2014			2013			Change			% Change
Service charges and fees	$	15,007		$	12,775		$	2,232		17	%
Loan servicing income	4,223			865			3,358			388
Trust fees	9,747			8,764			983			11
Brokerage and insurance commissions	3,325			3,315			10			—
Securities gains, net	2,460			6,612			(4,152		)	(63	)
Gain (loss) on trading account securities, net	(38		)	839			(877		)	(105	)
Gains on sale of loans held for sale	23,559			34,842			(11,283		)	(32	)
Loss on sales/valuations of other real estate and repossessed assets, net	(1,365		)	(2,440		)	1,075			44
Valuation adjustment on mortgage servicing rights	—			496			(496		)	(100	)
Income on bank owned life insurance	1,073			1,129			(56		)	(5	)
Other noninterest income	1,635			2,407			(772		)	(32	)
Total noninterest income	$	59,626		$	69,604		$	(9,978	)	(14	)%

During 2014, Heartland made reclassification changes to two components of noninterest income. These reclassifications are presented in both the current and prior reporting periods and did not affect the financial results. Heartland believes these reclassifications are more consistent with industry reporting practices. The first change was the reclassification of mortgage servicing rights income from loan servicing income to gain on sale of loans held for sale. For the three-month period ended on

September 30, 2013, $3.4 million was reclassified from loan servicing income to gain on sale of loans held for sale. For the nine-month period ended September 30, 2013, $10.6 million was reclassified from loan servicing income to gain on sale of loans held for sale. The second change was the reclassification of loss on sales/valuations of other real estate and repossessed assets, net, from other real estate and loan collection expenses to a new noninterest income category. For the three months ended September 30, 2013, losses of $339,000 were reclassified from other real estate and loan collection expenses to loss on sales/valuations of other real estate and repossessed assets, net. For the nine months ended September 30, 2013, losses of $2.4 million were reclassified from other real estate and loan collection expenses to loss on sales/valuations of other real estate and repossessed assets, net.

Noninterest income of $20.2 million during the third quarter of 2014 was consistent with the $20.4 million recorded during the third quarter of 2013. For the nine-month period ended on September 30, noninterest income was $59.6 million in 2014 compared to $69.6 million in 2013, a decrease of $10.0 million or 14%. These decreases were primarily due to reductions in the amount of gains on sale of loans held for sale and securities gains. The negative impact of these decreases was partially offset by higher service charges and fees, loan servicing income, trust fees and brokerage and insurance commissions.

Service charges and fees increased $370,000 or 8% during the quarters under comparison and $2.2 million or 17% during the nine-month periods under comparison, with approximately $254,000 for the quarter and $1.8 million for the nine-month period attributable to the service charges and fees collected at Morrill & Janes Bank and Trust Company. Service charges on checking and savings accounts recorded during the third quarter of 2014 were $1.3 million compared to $1.2 million during the third quarter of 2013, an increase of $12,000 or 1%. For the nine months ended September 30, service charges on checking and savings accounts totaled $3.8 million during 2014 compared to $3.6 million during 2013, an increase of $221,000 or 6%. Overdraft fees were $1.7 million during the third quarter of 2014 compared to $1.5 million during the third quarter of 2013, an increase of $164,000 or 11%. For the nine months ended September 30, overdraft fees totaled $4.6 million during 2014 compared to $4.2 million during 2013, an increase of $358,000 or 8%. Interchange revenue from activity on bank debit cards, along with surcharges on ATM activity, resulted in service charges and fees of $1.9 million during the third quarter of 2014 compared to $1.5 million during the third quarter of 2013, an increase of $334,000 or 22%. These same fees were $5.4 million during the first nine months of 2014 compared to $4.4 million during the first nine months of 2013, an increase of $988,000 or 23%. These increases are primarily attributable to a larger demand deposit customer base in 2014, a portion of which is due to the Morrill & Janes Bank and Trust Company acquisition completed during the last quarter of 2013. Morrill & Janes Bank and Trust Company contributed $212,000 to these fees for credit card services during the third quarter of 2014 and $705,000 during the first nine months of 2014. During the fourth quarter of 2014, Heartland will begin to provide the enhanced credit card services provided by Morrill & Janes Bank and Trust Company at its other bank subsidiaries.

Loan servicing income totaled $1.3 million during the third quarter of 2014 compared to $598,000 during the third quarter of 2013. On a nine-month comparative basis, loan servicing income totaled $4.2 million during the first nine months of 2014 compared to $865,000 during the same period in 2013. Loan servicing income includes the fees collected for the servicing of mortgage loans for others, which are dependent upon the aggregate outstanding balance of these loans, rather than quarterly production and sales of mortgage loans. Fees collected for the servicing of mortgage loans for others were $2.2 million during the third quarter of 2014 compared to $1.9 million during the third quarter of 2013, an increase of $320,000 or 17%. For the first nine months of the year, the fees collected for the servicing of mortgage loans for others were $6.4 million compared to $4.9 million during the same period in 2013, an increase of $1.5 million or 30%. The portfolio of mortgage loans serviced for others by Heartland totaled $3.36 billion at September 30, 2014, compared to $2.89 billion at September 30, 2013. Also included in loan servicing income is the amortization of mortgage servicing rights which was $1.4 million during the third quarter of 2014 compared to $1.8 million during the third quarter of 2013, a decrease of $387,000 or 21%. For the first nine months of the year, the amortization of mortgage servicing rights was $3.8 million during 2014 compared to $5.5 million during 2013, a decrease of $1.8 million or 32%. As the average life of Heartland’s mortgage servicing rights increased during the first quarter of 2014 to 84 months from 60 months one year ago and continued at that level during the second and third quarters of 2014, the monthly amortization expense was lower during the first nine months of 2014 in comparison with the first nine months of 2013.

Gains on sale of loans held for sale totaled $8.4 million during the third quarter of 2014 compared to $8.6 million during the third quarter of 2013, a decrease of $253,000 or 3%. During the first nine months of 2014, gains on sale of loans held for sale totaled $23.6 million compared to $34.8 million during the same period in 2013, a decrease of $11.3 million or 32%. These decreases were related to the flat or moderately increasing interest rate environment that existed throughout much of the first nine months of 2014, as opposed to a low interest rate environment that existed throughout much of the first nine months of 2013 that encouraged mortgage loan refinancings. The volume of mortgage loans sold totaled $283.7 million during the third quarter of 2014, a 16% decrease from the $336.8 million sold during the third quarter of 2013. The following table summarizes Heartland's residential mortgage loan activity during the most recent five quarters, in thousands:

	As Of and For the Quarter Ended
	9/30/2014			6/30/2014			3/31/2014			12/31/2013			9/30/2013
Mortgage Servicing Fees	$	2,225		$	2,119		$	2,067		$	1,951		$	1,903
Mortgage Servicing Rights Amortization	(1,424		)	(1,276		)	(1,079		)	(1,766		)	(1,811		)
Total Residential Mortgage Loan Servicing Income	$	801		$	843		$	988		$	185		$	92
Valuation Adjustment on Mortgage Servicing Rights	$	—		$	—		$	—		$	—		$	—
Gains On Sale of Residential Mortgage Loans	$	8,260		$	8,583		$	6,341		$	2,503		$	8,665
Total Residential Mortgage Loan Applications	$	445,039		$	460,533		$	316,829		$	293,115		$	416,128
Residential Mortgage Loans Originated	$	312,428		$	277,895		$	175,249		$	232,150		$	349,012
Residential Mortgage Loans Sold	$	283,677		$	208,429		$	149,993		$	214,334		$	336,780
Residential Mortgage Loan Servicing Portfolio	$	3,362,717		$	3,198,510		$	3,107,589		$	3,045,893		$	2,887,667

Trust fees increased $276,000 or 9% during the third quarter of 2014 compared to the same quarter in 2013. For the nine-month period ended September 30, 2014, trust fees increased $983,000 or 11% compared to the same nine-month period in 2013. A large portion of trust fees is based upon the market value of the trust assets under management, which was $1.82 billion at September 30, 2014, compared to $1.54 billion at September 30, 2013. Those values fluctuate throughout the year as market conditions improve or decline.

Securities gains totaled $825,000 during the third quarter of 2014 compared to $1.1 million during the third quarter of 2013, and totaled $2.5 million during the first nine months of 2014 compared to $6.6 million during the first nine months of 2013.

These decreases were related to the flat or moderately increasing interest rate environment that existed throughout much of the first nine months of 2014, as opposed to a low interest rate environment that existed throughout the first nine months of 2013 that encouraged rebalancing of the securities portfolio.

Trading securities contributed a net loss of $38,000 during the first nine months of 2014 compared to a net gain of $839,000 during the first nine months of 2013. The net gains in 2013 were primarily attributable to shares of Fannie Mae preferred stock Heartland held in its trading securities portfolio from 2008 until they were sold during the first quarter of 2014.

Noninterest Expenses

The tables below show Heartland's noninterest expenses for the three and nine months ended September 30, 2014 and 2013, in thousands:

	Three Months Ended September 30,
	2014			2013			Change			% Change
Salaries and employee benefits	$	33,546		$	28,847		$	4,699		16	%
Occupancy	3,807			3,387			420			12
Furniture and equipment	2,033			1,917			116			6
Professional fees	4,429			4,486			(57		)	(1	)
FDIC insurance assessments	888			745			143			19
Advertising	1,383			1,360			23			2
Intangible assets amortization	521			196			325			166
Other real estate and loan collection expenses	215			730			(515		)	(71	)
Other noninterest expenses	7,389			5,140			2,249			44
Total Noninterest Expenses	$	54,211		$	46,808		$	7,403		16	%
Efficiency ratio, fully taxable equivalent(1)	72.67		%	75.35		%
(1) See the reconciliation of Non-GAAP measure below.

	Nine Months Ended September 30,
	2014			2013			Change			% Change
Salaries and employee benefits	$	98,428		$	88,103		$	10,325		12	%
Occupancy	11,841			9,796			2,045			21
Furniture and equipment	6,008			6,033			(25		)	—
Professional fees	13,169			12,262			907			7
FDIC insurance assessments	2,848			2,508			340			14
Advertising	4,082			3,836			246			6
Intangible assets amortization	1,736			594			1,142			192
Other real estate and loan collection expenses	1,785			2,446			(661		)	(27	)
Other noninterest expenses	20,590			14,642			5,948			41
Total Noninterest Expenses	$	160,487		$	140,220		$	20,267		14	%
Efficiency ratio, fully taxable equivalent(1)	73.10		%	73.51		%
(1) See the reconciliation of Non-GAAP measure below.

Reconciliation of Non-GAAP Measure	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Efficiency ratio(1)	76.54	%	79.15	%	77.13	%	77.70	%
Intangible assets amortization	(0.74	)%	(0.33	)%	(0.83	)%	(0.33	)%
Loss on sales/valuations of repossessed assets, net	(0.48	)%	(0.45	)%	(0.50	)%	(1.04	)%
Taxable equivalent yield adjustment	(2.65	)%	(3.02	)%	(2.70	)%	(2.82	)%
Efficiency ratio, fully taxable equivalent(2)	72.67	%	75.35	%	73.10	%	73.51	%
(1) Efficiency ratio is defined by the Federal Reserve guidance as noninterest expense divided by the sum of net interest income plus noninterest income, excluding investment securities gains (losses), net.
(2) Efficiency ratio, fully taxable equivalent, is noninterest expense, divided by the sum of taxable equivalent net interest income plus noninterest income, excluding investment securities gains (losses), net, loss on sales/valuations of repossessed assets, net, and intangible assets amortization. This efficiency ratio is presented on a taxable equivalent basis, which adjusts net interest income for the tax favored status of certain loans and investment securities. Management believes this measure to be the preferred industry measurement of net interest income as it enhances the comparability of net interest income arising from taxable and tax exempt sources, and it excludes certain specific revenue items (such as investment securities gains (losses), net). This is a non-GAAP measure.

As discussed earlier under the Noninterest Income heading of this report, losses of $339,000 were reclassified from other real estate and loan collection expenses to loss on sales/valuations of other real estate and repossessed assets, net, for the three months ended September 30, 2013. For the nine months ended September 30, 2013, losses of $2.4 million were reclassified from other real estate and loan collection expenses to loss on sales/valuations of other real estate and repossessed assets, net. This reclassification results in other real estate and loan collection expenses for the third quarter of 2013 decreasing from $1.1 million as previously reported to $730,000. For the nine months ended September 30, 2013, this reclassification resulted in other real estate and loan collection expenses decreasing from $3.8 million to $2.4 million.

For the third quarter of 2014, noninterest expense totaled $54.2 million, an increase of $7.4 million or 16% from the same quarter of 2013. For the first nine months of 2014, noninterest expenses totaled $160.5 million, an increase of $20.3 million or 14% from the first nine months of 2013. These increases were largely due to expenses at the Morrill & Janes Bank and Trust Company, which was acquired during the last quarter of 2013, totaling $4.9 million for the third quarter of 2014 and $14.5 million for the first nine months of 2014. Included in the 2014 third quarter noninterest expenses were $1.4 million in costs associated with partnership investments in a commercial and a residential real estate project, both of which qualify for historic rehabilitation tax credits. These credits are included as a reduction to income tax expense. The net result of these transactions positively impacted net income and negatively impacted the efficiency ratio. Excluding the effect of the acquisition and the costs associated with tax credit investments, other noninterest expenses increased $1.1 million or 2% during the third quarter of 2014 in comparison to the third quarter of 2013 and $4.4 million or 3% during the first nine months of 2014 in comparison to the first nine months of 2013. One of Heartland's top priorities for 2014 is improving its efficiency ratio to achieve a ratio of 65% in 2016. To that end, four banking centers were closed in the past twelve months and management has undertaken a company-wide process improvement initiative covering all subsidiaries and business lines. The systems conversion of Morrill & Janes Bank and Trust Company, which was completed in June 2014, and the planned combination of Heartland's Illinois subsidiary banks Riverside Community Bank and Galena State Bank and Trust Company under one charter named Illinois Bank & Trust, which is expected to occur in January 2015, are also expected to contribute to improvement in Heartland's efficiency ratio.

The largest component of noninterest expenses, salaries and employee benefits, increased $4.7 million or 16% during the third quarter of 2014 as compared to the same quarter in 2013 and $10.3 million or 12% for the nine-month period ended on September 30, 2014, as compared to the same period in 2013. The salaries and employee benefits at Morrill & Janes Bank and Trust Company comprised $1.8 million of the increase for the quarterly comparative period and $6.4 million for the nine-month comparative period. Full-time equivalent employees totaled 1,646 on September 30, 2014, of which 89 were at Morrill & Janes Bank and Trust Company, compared to 1,655 on September 30, 2013.

Intangible assets amortization was $521,000 during the third quarter of 2014 compared to $196,000 during the third quarter of 2013, and $1.7 million during the first nine months of 2014 compared to $594,000 during the first nine months of 2013. These increases are primarily a result of the core deposit intangibles attributable to the Morrill & Janes Bank and Trust Company acquisition completed in the last quarter of 2013.

For the third quarter of 2014, other noninterest expenses increased $2.2 million or 44% over the third quarter of 2013, primarily as a result of the previously discussed $1.4 million in costs associated with partnership investments in real estate projects that qualify for historic rehabilitation tax credits and $762,000 of other noninterest expenses at Morrill & Janes Bank and Trust Company. For the nine-month comparative periods ended on September 30, other noninterest expenses increased $5.9 million or 41%. Exclusive of the $1.4 million in costs associated with the tax credit partnerships and $2.2 million of other noninterest expenses at Morrill & Janes Bank and Trust Company, other noninterest expenses increased $2.3 million or 16%, with $925,000 of this increase attributable to increased software maintenance and amortization expense and $581,000 attributable to non-recurring writedowns on two bank-owned properties.

Income Taxes

Heartland's effective tax rate was 19.58% for the third quarter of 2014 compared to 17.97% for the third quarter of 2013. Included in Heartland's income taxes for the third quarter of 2014 were federal historic rehabilitation tax credits totaling $1.8 million associated with Heartland's ownership interest in qualifying real estate projects. Federal low-income housing tax credits included in Heartland's income taxes totaled $166,000 during the third quarter of 2014 compared to $200,000 during the third quarter of 2013. Heartland's effective tax rate is also affected by the level of tax-exempt interest income which, as a percentage of pre-tax income, was 32.59% during the third quarter of 2014 compared to 53.31% during the third quarter of 2013. The tax-equivalent adjustment for this tax-exempt interest income was $2.6 million during the third quarter of 2014 compared to $2.4 million during the third quarter of 2013.

Heartland's effective tax rate was 22.83% for the first nine months of 2014 compared to 26.24% for the first nine months of 2013. Included in Heartland's income taxes for the first nine months of 2014 was the $1.8 million of historic rehabilitation tax credits recorded during the third quarter. Also included in Heartland's income taxes for the nine-month comparative periods ended on September 30, were federal low-income housing tax credits of $566,000 during 2014 and $599,000 during 2013. The level of tax-exempt interest income which, as a percentage of pre-tax income, was 37.46% during the first nine months of 2014 compared to 33.37% during the first nine months of 2013. The tax-equivalent adjustment for this tax-exempt interest income was $7.7 million during the first nine months of 2014 compared to $7.0 million during the first nine months of 2013.

Segment Reporting

Heartland has two reportable segments: community and other banking and retail mortgage banking. Revenues from community and other banking operations consist primarily of interest earned on loans and investment securities and fees from deposit services. Retail mortgage banking operating revenues consist of interest earned on mortgage loans held for sale, gains on sales of loans into the secondary market, the servicing of mortgage loans for various investors and loan origination fee income. See Note 8 to our consolidated financial statements for further information regarding our segment reporting.

Income before taxes for the community and other banking segment for the third quarter of 2014 was $16.6 million compared to $10.6 million for the third quarter of 2013, a $6.0 million or 56% increase, primarily as a result of increased net interest income and reduced provision for loan and lease losses, the effect of which was partially offset by increased noninterest expenses. Net interest income from the community and other banking segment improved by $11.5 million or 29% for the third quarter of 2014 as compared to the third quarter of 2013, primarily as a result of strong loan growth and the acquisition of the Morrill & Janes Bank and Trust Company completed during the fourth quarter of 2013. Noninterest expenses allocable to the community and other banking segment increased $7.3 million or 20% during the third quarter of 2014 as compared to the third quarter of 2013, a large portion of which was a result of the added expenses at Morrill & Janes Bank and Trust Company. Income before taxes for the community and other banking segment for the nine months ended September 30 was $43.3 million for 2014 compared to $39.3 million for 2013, a $4.0 million or 10% increase. The increase was primarily a result of increased net interest income, which was partially offset by an increase in noninterest expenses. Driven by strong loan growth and the Morrill & Janes Bank and Trust Company acquisition, net interest income from the community and other banking segment increased $32.9 million or 28% from $116.0 million during the first nine months of 2013 to $148.9 million during the first nine months of 2014. Provision for loan and lease losses for the community and other banking segment was $11.6 million for the first nine months of 2014 compared of $7.6 million for the first nine months of 2013, an increase of $4.0 million, primarily as a result of a charge-off on one significant credit during the first quarter of 2014. Noninterest expenses allocable to the community and other banking segment totaled $127.7 million during the first nine months of 2014 compared to $104.2 million during the first nine months of 2013, an increase of $23.5 million or 23%, primarily a result of the added expenses at Morrill & Janes Bank and Trust Company.

The retail mortgage banking segment recorded a loss before taxes of $1.7 million for the third quarter of 2014 compared to a loss before taxes of $2.3 million for the third quarter of 2013. For the nine-month comparative period ended on September 30, the retail mortgage banking segment recorded a loss before taxes of $4.9 million in 2014 compared to a loss before taxes of

$100,000 in 2013. These losses were reflective of the change in long-term interest rates and the effect higher interest rates have on the volume of residential mortgage loans originated for sale and the associated gains on sale of these loans into the secondary market. Noninterest income from the retail mortgage banking segment totaled $9.0 million during the third quarter of 2014 compared to $8.4 million during the third quarter of 2013, a $630,000 or 7% increase. For the nine-month comparative periods ended September 30, noninterest income from the retail mortgage banking segment totaled $25.9 million in 2014 compared to $34.4 million in 2013, an $8.5 million or 25% decrease. Noninterest expenses allocable to the retail mortgage banking segment were $11.4 million during the third quarter of 2014 compared to $11.3 million during the third quarter of 2013. For the nine-month comparative period ended September 30, noninterest expenses allocable to the retail mortgage banking segment totaled $32.7 million during 2014 compared to $36.0 million during 2013, a $3.3 million or 9% decrease.

FINANCIAL CONDITION

Total assets were $5.93 billion at September 30, 2014, an increase of $11.1 million since year-end 2013.

Lending Activities

Total loans and leases held to maturity were $3.80 billion at September 30, 2014, compared to $3.50 billion at year-end 2013, an increase of $301.4 million or 11% annualized, with $103.6 million of this growth occurring in the third quarter, $117.0 million in the second quarter and $80.8 million during the first quarter. All of the loan growth during the first nine months of 2014 was organic with commercial and commercial real estate loans representing the largest portion. Heartland management expects loan growth for the last quarter of 2014 to soften a bit, to approximately $50 million.

Commercial and commercial real estate loans, which totaled $2.71 billion at September 30, 2014, increased $229.7 million or 12% annualized since year-end 2013, with $59.0 million of this growth occurring during the third quarter, $102.9 million during the second quarter and $67.8 million during the first quarter. Residential mortgage loans, which totaled $360.3 million at September 30, 2014, increased $11.0 million or 4% annualized since year-end 2013. Agricultural and agricultural real estate loans, which totaled $404.4 million at September 30, 2014, increased $27.7 million or 10% annualized since year-end 2013. Consumer loans, which totaled $326.1 million at September 30, 2014, increased $32.0 million or 15% annualized since year-end 2013. Within the commercial and agricultural portfolios, 35% of the new loan production during the third quarter of 2014 was in commercial and industrial and 29% was in commercial real estate, of which 34% is owner-occupied.

The table below presents the composition of the loan portfolio as of September 30, 2014, and December 31, 2013, in thousands:

LOAN PORTFOLIO	September 30, 2014					December 31, 2013
	Amount			Percent		Amount			Percent
Loans and leases receivable held to maturity:
Commercial	$	1,024,712		26.96	%	$	950,197		27.16	%
Commercial real estate	1,684,832			44.34		1,529,683			43.70
Agricultural and agricultural real estate	404,423			10.64		376,735			10.76
Residential mortgage	360,309			9.48		349,349			9.98
Consumer	326,148			8.58		294,145			8.40
Gross loans and leases receivable held to maturity	3,800,424			100.00	%	3,500,109			100.00	%
Unearned discount	(98		)			(168		)
Deferred loan fees	(2,021		)			(2,989		)
Total net loans and leases receivable held to maturity	3,798,305					3,496,952
Loans covered under loss share agreements:
Commercial and commercial real estate	1,188			30.86	%	2,314			40.24	%
Agricultural and agricultural real estate	573			14.88		543			9.45
Residential mortgage	1,762			45.77		2,280			39.66
Consumer	327			8.49		612			10.65
Total loans covered under loss share agreements	3,850			100.00	%	5,749			100.00	%
Allowance for loan and lease losses	(41,698		)			(41,685		)
Loans and leases receivable, net	$	3,760,457				$	3,461,016

Loans and leases secured by real estate, either fully or partially, totaled $2.44 billion or 64% of gross loans and leases at September 30, 2014. Of the non-farm, nonresidential real estate loans, 55% are owner occupied. The largest categories within Heartland's real estate secured loans at September 30, 2014, and December 31, 2013, are listed below, in thousands:

LOANS SECURED BY REAL ESTATE
	September 30, 2014		December 31, 2013
Residential real estate, excluding residential construction and residential lot loans	$	696,175	$	566,397
Industrial, manufacturing, business and commercial	327,975		240,502
Agriculture	243,886		199,998
Retail	186,246		154,786
Office	214,959		160,343
Land development and lots	123,792		98,157
Hotel, resort and hospitality	101,831		97,514
Multi-family	142,236		98,214
Food and beverage	78,301		73,588
Warehousing	73,402		65,724
Health services	58,937		49,070
Residential construction	76,822		36,865
All other	116,902		99,396
Loans acquired during fourth quarter 2013	—		272,157
Total loans secured by real estate	$	2,441,464	$	2,212,711

Allowance For Loan and Lease Losses

The process utilized by Heartland to determine the appropriateness of the allowance for loan and lease losses is considered a critical accounting practice for Heartland. The allowance for loan and lease losses represents management's estimate of identified and unidentified probable losses in the existing loan portfolio. For additional details on the specific factors considered, refer to the critical accounting policies section of our Annual Report on Form 10-K for the year ended December 31, 2013.

Exclusive of loans covered under loss sharing agreements, the allowance for loan and lease losses at September 30, 2014, was 1.10% of loans and leases and 138.40% of nonperforming loans compared to 1.19% of loans and leases and 98.27% of nonperforming loans at December 31, 2013, and 1.42% of loans and leases and 87.73% of nonperforming loans at September 30, 2013.

Net charge-offs on loans during the third quarter of 2014 were $1.7 million compared to $1.5 million during the third quarter of 2013. For the first nine months of 2014, net charge-offs on loans were $11.6 million, up $6.5 million as compared to $5.1 million recorded during the first nine months of 2013. This increase was primarily due to a $6.8 million credit which was fully charged off during the first quarter of 2014.

Nonperforming loans, exclusive of those covered under the loss sharing agreements, were $30.1 million or 0.79% of total loans and leases at September 30, 2014, compared to $42.4 million or 1.21% of total loans and leases at December 31, 2013. Approximately 34%, or $10.1 million, of Heartland's nonperforming loans have individual loan balances exceeding $1.0 million, the largest of which is $3.8 million. These nonperforming loans with individual loan balances exceeding $1.0 million, to an aggregate of four borrowers, are spread over three different industry classifications with 66% located in Heartland's Western markets and the remainder in the Midwest. The portion of Heartland's nonperforming loans covered by government guarantees was $1.8 million at September 30, 2014.

Other real estate owned was $20.5 million at September 30, 2014, compared to $29.9 million at December 31, 2013. Liquidation strategies have been identified for all the assets held in other real estate owned. Management continues to market these properties through an orderly liquidation process instead of a quick liquidation process in order to avoid discounts greater than the projected carrying costs.

Delinquencies in each of the loan portfolios continue to be well managed. Loans delinquent 30 to 89 days as a percent of total loans were 0.32% at September 30, 2014, compared to 0.30% at December 31, 2013.

The table below presents the changes in the allowance for loan and lease losses during the periods indicated, in thousands:

ANALYSIS OF ALLOWANCE FOR LOAN AND LEASE LOSSES	Nine Months Ended September 30,
	2014			2013
Balance at beginning of period	$	41,685		$	38,715
Provision for loan and lease losses	11,635			7,648
Recoveries on loans and leases previously charged off	3,022			3,298
Recoveries on loans and leases covered by loss share agreements	63			—
Charge-offs on loans and leases not covered by loss share agreements	(14,658		)	(8,237		)
Charge-offs on loans and leases covered by loss share agreements	(49		)	(113		)
Balance at end of period	$	41,698		$	41,311
Annualized ratio of net charge offs to average loans and leases	0.42		%	0.23		%

The table below presents the amounts of nonperforming loans and leases and other nonperforming assets on the dates indicated, in thousands:

NONPERFORMING ASSETS	September 30,						December 31,
	2014			2013			2013			2012
Not covered under loss share agreements:
Nonaccrual loans and leases	$	30,130		$	47,088		$	42,394		$	43,156
Loan and leases contractually past due 90 days or more	—			—			24			—
Total nonperforming loans and leases	30,130			47,088			42,418			43,156
Other real estate	19,873			32,753			29,794			35,470
Other repossessed assets	506			469			397			542
Total nonperforming assets not covered under loss share agreements	$	50,509		$	80,310		$	72,609		$	79,168
Covered under loss share agreements:
Nonaccrual loans and leases	$	297		$	805		$	783		$	1,259
Loan and leases contractually past due 90 days or more	—			—			—			—
Total nonperforming loans and leases	297			805			783			1,259
Other real estate	602			265			58			352
Other repossessed assets	—			4			—			—
Total nonperforming assets covered under loss share agreements	$	899		$	1,074		$	841		$	1,611
Performing troubled debt restructured loans(1)	$	11,994		$	19,371		$	19,353		$	21,121
Nonperforming loans and leases not covered under loss share agreements to total loans and leases	0.79		%	1.62		%	1.21		%	1.53		%
Nonperforming assets not covered under loss share agreements to total loans and leases plus repossessed property	1.32		%	2.74		%	2.06		%	2.77		%
Nonperforming assets not covered under loss share agreements to total assets	0.85		%	1.63		%	1.23		%	1.59		%
(1) Represents accruing troubled debt restructured loans performing according to their restructured terms.

The schedules below summarize the changes in Heartland's nonperforming assets, including those covered by loss share agreements, during the third quarter of 2014 and the first nine months of 2014, in thousands:

	Nonperforming Loans			Other Real Estate Owned			Other Repossessed Assets			Total Nonperforming Assets
June 30, 2014	$	29,373		$	24,395		$	414		$	54,182
Loan foreclosures	(431		)	424			7			—
Net loan charge-offs	(1,747		)	—			—			(1,747		)
New nonperforming loans	5,911			—			—			5,911
Reduction of nonperforming loans(1)	(2,679		)	—			—			(2,679		)
OREO/Repossessed assets sales proceeds	—			(4,306		)	(7		)	(4,313		)
OREO/Repossessed assets writedowns, net	—			(38		)	—			(38		)
Net activity at Citizens Finance Co.	—			—			92			92
September 30, 2014	$	30,427		$	20,475		$	506		$	51,408
(1) Includes principal reductions and transfers to performing status.

	Nonperforming Loans			Other Real Estate Owned			Other Repossessed Assets			Total Nonperforming Assets
December 31, 2013	$	43,201		$	29,852		$	397		$	73,450
Loan foreclosures	(6,528		)	6,521			7			—
Net loan charge-offs	(11,622		)	—			—			(11,622		)
New nonperforming loans	15,503			—			—			15,503
Reduction of nonperforming loans(1)	(10,127		)	—			—			(10,127		)
OREO/Repossessed assets sales proceeds	—			(14,876		)	(46		)	(14,922		)
OREO/Repossessed assets writedowns, net	—			(1,022		)	2			(1,020		)
Net activity at Citizens Finance Co.	—			—			146			146
September 30, 2014	$	30,427		$	20,475		$	506		$	51,408
(1) Includes principal reductions and transfers to performing status.

Securities

The composition of Heartland's securities portfolio is managed to maximize the return on the portfolio while considering the impact it has on Heartland's asset/liability position and liquidity needs. Securities represented 28% of total assets at September 30, 2014, compared to 32% at year-end 2013, as a portion of the proceeds from maturities, paydowns and sales were used to fund loan growth. Total available for sale securities as of September 30, 2014, were $1.37 billion, a decrease of $264.2 million or 16% from $1.63 billion at December 31, 2013.

The table below presents the composition of the securities portfolio, including trading, available for sale and held to maturity, by major category, as of September 30, 2014 and December 31, 2013, in thousands:

SECURITIES PORTFOLIO COMPOSITION	September 30, 2014				December 31, 2013
	Amount		Percent		Amount		Percent
U.S. government corporations and agencies	$	13,946	0.86	%	$	218,303	11.52	%
Mortgage-backed securities	1,170,682		71.14		1,149,920		60.68
Obligation of states and political subdivisions	435,318		26.45		498,149		26.29
Other securities	25,583		1.55		28,672		1.51
Total securities	$	1,645,529	100.00	%	$	1,895,044	100.00	%

The composition of the securities portfolio changed slightly as a larger portion of the securities sales and maturities were in the lower-yielding U.S. government corporations and agency securities. The percentage of Heartland's securities portfolio comprised of mortgage-backed securities was 71% at September 30, 2014, and 61% at December 31, 2013. Approximately

97% of Heartland's mortgage-backed securities were issuances of government-sponsored enterprises at September 30, 2014. Heartland's securities portfolio had an expected duration of 4.30 years as of September 30, 2014, compared to 4.50 years at year-end 2013.

The Volcker Rule prohibits insured depository institutions and their holding companies from engaging in proprietary trading except in limited circumstances, and prohibits them from owning equity interests in excess of 3% of Tier 1 Capital in private equity and hedge funds. The Volcker Rule will not have a material impact on Heartland’s investment securities portfolio.

At September 30, 2014, Heartland had $25.6 million of other securities, including capital stock in the various Federal Home Loan Banks of which its bank subsidiaries are members and all of which were classified as other securities held at cost.

Deposits And Borrowed Funds

Total deposits were $4.73 billion as of September 30, 2014, compared to $4.67 billion at year-end 2013, an increase of $60.2 million or 2% annualized. Demand deposits totaled $1.27 billion at September 30, 2014, an increase of $35.9 million or 4% annualized since year-end 2013. Savings deposits grew to $2.60 billion, an increase of $64.6 million or 3% annualized, during the first nine months of 2014. Certificates of deposit totaled $852.4 million at September 30, 2014, a decrease of $40.2 million or 6% annualized.

Short-term borrowings generally include federal funds purchased, securities sold under agreements to repurchase, short-term FHLB advances and discount window borrowings from the Federal Reserve Bank. These funding alternatives are utilized in varying degrees depending on their pricing and availability. All of Heartland's bank subsidiaries own FHLB stock in either the Chicago, Dallas, Des Moines, Seattle, San Francisco or Topeka FHLB, enabling them to borrow funds from their respective FHLB for short- or long-term purposes under a variety of programs. The amount of short-term borrowings was $348.3 million at September 30, 2014, compared to $408.8 million at year-end 2013, including short-term FHLB advances of $76.0 million at September 30, 2014, in comparison with $105.0 million at December 31, 2013.

All of the Heartland bank subsidiaries provide retail repurchase agreements to their customers as a cash management tool, sweeping excess funds from demand deposit accounts into these agreements. This source of funding does not increase the bank's reserve requirements. Although the aggregate balance of these retail repurchase agreements is subject to variation, the account relationships represented by these balances are principally local. The balances of retail repurchase agreements were $220.6 million at September 30, 2014, compared to $234.7 million at December 31, 2013.

Also included in short-term borrowings is the revolving credit line Heartland has with an unaffiliated bank, primarily to provide liquidity to Heartland. On June 14, 2013, Heartland replaced its $5.0 million unsecured revolving credit line with a $20.0 million unsecured revolving credit line with the same unaffiliated bank. There was no balance outstanding on Heartland's revolving credit line at both September 30, 2014, and December 31, 2013. This credit agreement contains specific covenants, with which Heartland was in compliance on September 30, 2014.

Other borrowings include all debt arrangements Heartland and its subsidiaries have entered into with original maturities that extend beyond one year, including long-term FHLB borrowings, term borrowings under term notes and senior notes, and obligations under trust preferred capital securities. As of September 30, 2014, the amount of other borrowings was $334.5 million, a decrease of $15.6 million or 4% since year-end 2013.

Long-term FHLB borrowings with an original term beyond one year totaled $113.8 million at September 30, 2014, compared to $113.5 million at December 31, 2013, an increase of $300,000. Total long-term FHLB borrowings at September 30, 2014, had an average rate of 2.67% and an average maturity of 1 year. The interest rate on $74.5 million of these advances changes quarterly at a spread over 3-month LIBOR. When considering the earliest possible call date on these advances, the average maturity is shortened to .70 years. Structured wholesale repurchase agreements totaled $45.0 million at September 30, 2014, compared to $60.0 million at December 31, 2013, a decrease of $15.0 million or 25%, due to the maturity of one contract.

The outstanding balance on Heartland's amortizing term loan with an unaffiliated bank was $10.7 million at September 30, 2014, compared to $11.7 million at December 31, 2013. Heartland also had senior notes totaling $37.5 million outstanding at both September 30, 2014, and December 31, 2013.

A schedule of Heartland's trust preferred securities outstanding as of September 30, 2014, is as follows, in thousands:

	Amount Issued		Issuance Date	Interest Rate	Interest Rate as of 9/30/14(1)	Maturity Date	Callable Date
Heartland Financial Statutory Trust III	$	20,619	10/10/2003	8.25%	8.25%	10/10/2033	09/30/2014
Heartland Financial Statutory Trust IV	25,774		03/17/2004	2.75% over LIBOR	2.98%(2)	03/17/2034	09/17/2014
Heartland Financial Statutory Trust V	20,619		01/31/2006	1.33% over LIBOR	1.56%(3)	04/07/2036	10/07/2014
Heartland Financial Statutory Trust VI	20,619		06/21/2007	6.75%	6.75%(4)	09/15/2037	09/15/2014
Heartland Financial Statutory Trust VII	20,619		06/26/2007	1.48% over LIBOR	1.71%(5)	09/01/2037	09/01/2014
Morrill Statutory Trust I	8,524		12/26/2002	3.25% over LIBOR	3.49%(6)	12/26/2032	09/26/2014
Morrill Statutory Trust II	8,086		12/17/2003	2.85% over LIBOR	3.08%(7)	12/17/2033	09/17/2014
	$	124,860
(1) Effective weighted average interest rate as of September 30, 2014, was 5.91% due to interest rate swap transactions on the variable rate securities as discussed in Note 6 to Heartland's consolidated financial statements.
(2) Effective interest rate as of September 30, 2014, was 5.00% due to an interest rate swap transaction as discussed in Note 6 to Heartland's consolidated financial statements.
(3) Effective interest rate as of September 30, 2014, was 4.69% due to an interest rate swap transaction as discussed in Note 6 to Heartland's consolidated financial statements.
(4) Interest rate is fixed at 6.75% through June 15, 2017, then resets to 1.48% over LIBOR for the remainder of the term.
(5) Effective interest rate as of September 30, 2014, was 4.70% due to an interest rate swap transaction as discussed in Note 6 to Heartland's consolidated financial statements.
(6) Effective interest rate as of September 30, 2014, was 4.92% due to an interest rate swap transaction as discussed in Note 6 to Heartland's consolidated financial statements.
(7) Effective interest rate as of September 30, 2014, was 4.51% due to an interest rate swap transaction as discussed in Note 6 to Heartland's consolidated financial statements.

CAPITAL REQUIREMENTS

Bank regulatory agencies have adopted capital standards by which all bank holding companies will be evaluated, including requirements to maintain certain core capital amounts included as Tier 1 capital at minimum levels relative to total assets (the “Tier 1 Leverage Capital Ratio”) and at minimum levels relative to “risk-weighted assets” which is calculated by assigning value to assets, and off balance sheet commitments, based on their risk characteristics (the “Tier 1 Risk-Based Capital Ratio”), and to maintain total capital at minimum levels relative to risk-weighted assets (the “Total Risk-Based Capital Ratio”). Starting in 2015, bank holding companies will also be subject to a new Common Tier 1 Capital Ratio, and to increasing capital ratios for the other three measures based upon the new Basel III rules. Heartland and its bank subsidiaries have been, and will continue to be, managed so they meet the well-capitalized requirements under the regulatory framework for prompt corrective action. To be categorized as well capitalized under the regulatory framework, bank holding companies and banks must maintain a Tier 1 Leverage Capital Ratio of 4%, a Tier 1 Risk-Based Capital Ratio of 6% and a Total Risk-Based Capital Ratio of 10%. The most recent notification from the FDIC categorized Heartland and each of its bank subsidiaries as well capitalized under the regulatory framework for prompt corrective action, and Heartland and its bank subsidiaries would have continued to be well capitalized had the Basel III rules been effective for the period covered by such notification. There are no conditions or events since that notification that management believes have changed each institution's category.

Heartland's capital ratios were as follows for the dates indicated, in thousands:

CAPITAL RATIOS	September 30, 2014				December 31, 2013
	Amount		Ratio		Amount		Ratio
Risk-Based Capital Ratios
Tier 1 capital	$	566,367	13.07	%	$	537,964	13.19	%
Tier 1 capital minimum requirement	173,280		4.00	%	163,126		4.00	%
Excess	$	393,087	9.07	%	$	374,838	9.19	%
Total capital	$	623,444	14.39	%	$	599,038	14.69	%
Total capital minimum requirement	346,560		8.00	%	326,252		8.00	%
Excess	$	276,884	6.39	%	$	272,786	6.69	%
Total risk-adjusted assets	$	4,331,997			$	4,078,154
Leverage Capital Ratios
Tier 1 capital	$	566,367	9.70	%	$	537,964	9.67	%
Tier 1 capital minimum requirement(1)	233,641		4.00	%	222,432		4.00	%
Excess	$	332,726	5.70	%	$	315,532	5.67	%
Average adjusted assets (less goodwill and other intangible assets)	$	5,841,037			$	5,560,796
(1) Management of Heartland has established a minimum target leverage ratio of 4.00%. Based on Federal Reserve guidelines, a bank holding company generally is required to maintain a leverage ratio of 3.00% plus additional capital of at least 100 basis points.

Heartland filed a universal shelf registration statement with the Securities and Exchange Commission on August 28, 2013, which became effective on September 9, 2013, to register up to $75.0 million in securities. The shelf registration statement provides Heartland with increased flexibility to raise capital, subject to Securities and Exchange Commission rules and limitations, if Heartland’s board of directors decides to do so.

Common stockholders' equity was $401.7 million at September 30, 2014, compared to $357.8 million at December 31, 2013. Book value per common share was $21.74 at September 30, 2014, compared to $19.44 at year-end 2013. Changes in common stockholders' equity and book value per common share are the result of earnings, dividends paid, stock transactions and mark-to-market adjustment for unrealized gains and losses on securities available for sale. Heartland's unrealized gains on securities available for sale, net of applicable taxes, were $1.9 million at September 30, 2014, compared to unrealized losses of $15.1 million at December 31, 2013.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

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 the creditworthiness of customers to which they extend a credit commitment on a case-by-case basis and may require collateral to secure any credit extended. The amount of collateral obtained 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 September 30, 2014, and December 31, 2013, commitments to extend credit aggregated $1.40 billion and $1.14 billion, and standby letters of credit aggregated $36.6 million and $39.7 million, respectively.

Contractual obligations and other commitments were presented in Heartland's Annual Report on Form 10-K for the year ended December 31, 2013. There have been no other material changes in Heartland's contractual obligations and other commitments since that report was filed.

On October 22, 2014, Heartland entered into a merger agreement with Community Banc-Corp of Sheboygan, Inc., parent company of Community Bank & Trust in Sheboygan, Wisconsin. Under the agreement, which has been unanimously approved by the boards of directors of both companies, Community Banc-Corp of Sheboygan, Inc. will, subject to certain conditions,

including receipt of regulatory approvals and approval by shareholders of Community Banc-Corp of Sheboygan, Inc., be merged with and into Heartland as the surviving corporation, and the shareholders of Community Banc-Corp of Sheboygan, Inc. will receive shares of Heartland common stock. The transaction is intended to be a tax-free reorganization with respect to the stock consideration received by the stockholders of Community Banc-Corp of Sheboygan, Inc. The aggregate purchase price is estimated at approximately $52.0 million. The transaction is expected to close in the first quarter of 2015. Simultaneous with closing of the transaction, Community Bank & Trust, with total assets of approximately $525.0 million as of September 30, 2014, will be merged into Heartland’s Wisconsin Bank & Trust subsidiary. Upon completion of this merger, Heartland expects Wisconsin to become its third state with banking assets greater than $1 billion.

Heartland has committed to sell one branch of its Morrill & Janes Bank and Trust Company subsidiary. The branch sale is expected to close on November 7, 2014. The branch had loans of approximately $9.0 million and deposits of $28.0 million at September 30, 2014. The anticipated premium on the branch sale is 2% of average deposits.

Heartland continues to explore opportunities to expand its footprint of independent community banks. Given the current issues in the banking industry, management has changed its strategic growth initiatives from de novo banks and branching to acquisitions. Attention will be focused on markets currently served, where there would be an opportunity to grow market share, achieve efficiencies and provide greater convenience for existing customers. Future expenditures relating to expansion efforts, in addition to those identified above, are not estimable at this time.

On a consolidated basis, Heartland maintains a large balance of short-term securities that, when combined with cash from operations, management believes are adequate to meet Heartland's funding obligations.

At the parent company level, routine funding requirements consist primarily of dividends paid to stockholders, including the U.S. Treasury, which holds Heartland Series C Fixed Rate Non-Cumulative Perpetual preferred stock, debt service on revolving credit arrangements and trust preferred securities issuances, debt repayment obligations under other obligations and payments for acquisitions. The parent company obtains the funding to meet these obligations from dividends collected from its subsidiaries and the issuance of debt securities. Heartland believes that the regulatory permissible dividends from its subsidiary banks are adequate to meet these funding obligations for the next 12 months and maintains a revolving credit agreement with an unaffiliated bank that provides a maximum borrowing capacity of $20.0 million, of which none has been used during the past 9 months. The credit agreement contains specific financial covenants, all of which Heartland was in compliance with as of September 30, 2014.

LIQUIDITY

Liquidity refers to Heartland's ability to maintain cash flow that is adequate to meet maturing obligations and existing commitments, to withstand fluctuations in deposit levels, to fund operations and to provide for customers' credit needs. The liquidity of Heartland principally depends on cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings and its ability to borrow funds in the money or capital markets.

Operating activities provided $29.1 million of cash during the first nine months of 2014 compared to $95.9 million during the first nine months of 2013. The biggest contributor to this change was the activity in loans originated for sale and the proceeds on sales of loans held for sale, which used cash of $46.4 million during the first nine months of 2014 compared to providing cash of $34.8 million during the first nine months of 2013.

Investing activities used cash of $64.7 million during the first nine months of 2014 compared to using cash of $103.3 million during the first nine months of 2013. Cash used for the purchase of securities totaled $573.2 million during the first nine months of 2014 compared to $545.8 million during the first nine months of 2013. The proceeds from securities sales, paydowns and maturities were $817.1 million during the first nine months of 2014 compared to $540.8 million during the first nine months of 2013. A net increase in loans and leases used $317.6 million of cash during the first nine months of 2014 compared to $97.7 million during the first nine months of 2013.

Financing activities used cash of $21.8million during the first nine months of 2014 compared to providing cash of $4.3 million during the first nine months of 2013. The net increase in demand and savings deposits provided cash of $100.5 million during the first nine months of 2014 compared to $138.4 million during the first nine months of 2013.Activity in short-term borrowings used cash of $60.4 million during the first nine months of 2014 compared to using $578,000 of cash during the first nine months of 2013. Repayment of other borrowings used cash of $20.6 million during the first nine months of 2014 compared to $66.6 million during the first nine months of 2013.

Management of investing and financing activities, and market conditions, determine the level and the stability of net interest cash flows. Management attempts to mitigate the impact of changes in market interest rates to the extent possible, so that balance sheet growth is the principal determinant of growth in net interest cash flows.

Heartland's short-term borrowing balances are dependent on commercial cash management and smaller correspondent bank relationships and, as such, will normally fluctuate. Management believes these balances, on average, to be stable sources of funds; however, management intends to rely on deposit growth and additional FHLB borrowings in the future.

In the event of short-term liquidity needs, Heartland's bank subsidiaries may purchase federal funds from each other or from correspondent banks and may also borrow from the Federal Reserve Bank. Additionally, the bank subsidiaries’ FHLB memberships give them the ability to borrow funds for short- and long-term purposes under a variety of programs.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market prices and rates. Heartland's market risk is comprised primarily of interest rate risk resulting from its core banking activities of lending and deposit gathering. Interest rate risk measures the impact on earnings from changes in interest rates and the effect on current fair market values of Heartland's assets, liabilities and off-balance sheet contracts. The objective is to measure this risk and manage the balance sheet to avoid unacceptable potential for economic loss.

Management continually develops and applies strategies to mitigate market risk. Exposure to market risk is reviewed on a regular basis by the asset/liability committees of the banks and, on a consolidated basis, by Heartland's executive management and board of directors. Darling Consulting Group, Inc. has been engaged to provide asset/liability management position assessment and strategy formulation services to Heartland and its bank subsidiaries. At least quarterly, a detailed review of the balance sheet risk profile is performed for Heartland and each of its bank subsidiaries. Included in these reviews are interest rate sensitivity analyses, which simulate changes in net interest income in response to various interest rate scenarios. These analyses consider current portfolio rates, existing maturities, repricing opportunities and market interest rates, in addition to prepayments and growth under different interest rate assumptions. Selected strategies are modeled prior to implementation to determine their effect on Heartland's interest rate risk profile and net interest income. Management does not believe that Heartland's primary market risk exposures have changed significantly in the first nine months of 2014.

The core interest rate risk analysis utilized by Heartland examines the balance sheet under increasing and decreasing interest scenarios that are neither too modest nor too extreme. All rate changes are ramped over a 12-month horizon based upon a parallel shift in the yield curve and then maintained at those levels over the remainder of the simulation horizon. Using this approach, management is able to see the effect that both a gradual change of rates (year 1) and a rate shock (year 2 and beyond) could have on Heartland's net interest income. Starting balances in the model reflect actual balances on the “as of” date, adjusted for material and significant transactions. Pro-forma balances remain static. This enables interest rate risk embedded within the existing balance sheet structure to be isolated from the interest rate risk often caused by growth in assets and liabilities. Due to the low interest rate environment, the simulations under a decreasing interest rate scenario were prepared using a 100 basis point shift in rates. The most recent reviews at September 30, 2014, and September 30, 2013, provided the following results, in thousands:

	2014				2013
	Net Interest Margin		% Change From Base		Net Interest Margin		% Change From Base
Year 1
Down 100 Basis Points	$	182,980	(0.65	)%	$	153,787	(1.17	)%
Base	$	184,171			$	155,613
Up 200 Basis Points	$	189,081	2.67	%	$	155,500	(0.07	)%
Year 2
Down 100 Basis Points	$	177,377	(3.69	)%	$	147,662	(5.11	)%
Base	$	184,924	0.41	%	$	154,341	(0.82	)%
Up 200 Basis Points	$	201,276	9.29	%	$	161,017	3.47	%

Heartland uses derivative financial instruments to manage the impact of changes in interest rates on its future interest income or interest expense. Heartland is exposed to credit-related losses in the event of nonperformance by the counterparties to these derivative instruments, but believes it has minimized the risk of these losses by entering into the contracts with large, stable

financial institutions. The estimated fair market values of these derivative instruments are presented in Note 6 to the consolidated financial statements.

Heartland enters into financial instruments with off balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. 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 and may require collateral from the borrower. Standby letters of credit are conditional commitments issued by Heartland to guarantee the performance of a customer to a third party up to a stated amount and with specified terms and conditions. These commitments to extend credit and standby letters of credit are not recorded on the balance sheet until the instrument is exercised.

Heartland periodically holds a securities trading portfolio that would also be subject to elements of market risk. These securities are carried on the balance sheet at fair value. At September 30, 2014, Heartland held no securities in its securities trading portfolio. At December 31, 2013, the securities held in Heartland's securities trading portfolio had a carrying value of $1.8 million, which was less than 2% of total assets.

ITEM 4. CONTROLS AND PROCEDURES

Under the direction of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2014. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

There were no significant changes to Heartland's disclosure controls or internal controls over financial reporting during the quarter ended September 30,2014, that have materially affected or are reasonably likely to materially affect Heartland's internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which Heartland or its subsidiaries are a party other than ordinary routine litigation incidental to their respective businesses. 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.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors applicable to Heartland from those disclosed in Part I, Item 1A. “Risk Factors” in Heartland's 2013 Annual Report on Form 10-K. Please refer to that section of Heartland's Form 10-K for disclosures regarding the risks and uncertainties related to Heartland's business.

ITEM 2. UNREGISTERED SALES OF ISSUER SECURITIES AND USE OF PROCEEDS

Heartland's board of directors has authorized management to acquire and hold up to 500,000 shares of common stock as treasury shares at any one time. Heartland and its affiliated purchasers made no purchases of its common stock during the nine months ended September 30, 2014.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits

10.1	Merger Agreement between Community Banc-Corp of Sheboygan, Inc. and Heartland Financial USA, Inc. dated October 22, 2014
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Financial statement formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Changes in Equity, and (vi) the Notes to Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.

HEARTLAND FINANCIAL USA, INC.

(Registrant)

Principal Executive Officer

/s/ Lynn B. Fuller

By: Lynn B. Fuller

President and Chief Executive Officer

Principal Financial and Accounting Officer

/s/ Bryan R. McKeag

By: Bryan R. McKeag

Executive Vice President and Chief Financial Officer

Dated: November 7, 2014

EX-10.1

MERGER AGREEMENT

between

Community Banc-Corp. of Sheboygan, Inc.

and

Heartland Financial USA, Inc.

dated

October 22, 2014

TABLE OF CONTENTS
		Page
ARTICLE 1 DEFINITIONS		1
ARTICLE 2 MERGER		8
2.1	The Merger	8
2.2	Effect of Merger	8
2.3	Conversion of CBCS Capital Stock	9
2.4	Additional Heartland Common Stock; Adjustments	10
2.5	Rights of Holders of CBCS Common Stock; Capital Stock of Heartland	11
2.6	Payment/Exchange of Certificates	11
2.7	Dissenting Shares	12
2.8	The Closing	13
2.9	Tax-Free Reorganization	14
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF HEARTLAND		15
3.1	Organization and Qualification	15
3.2	Authority Relative to this Agreement; Non-Contravention	15
3.3	Validity of Heartland Common Stock	16
3.4	Capital Stock	16
3.5	Exchange Act Reports.	16
3.6	No Material Adverse Changes	17
3.7	Reports and Filings	17
3.8	Regulatory Approvals	17
3.9	Certain Tax Matters	17
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER		17
4.1	Organization and Qualification	17
4.2	Authority Relative to this Agreement; Non-Contravention	18
4.3	Capitalization	19
4.4	Financial Statements.	19
4.5	Absence of Undisclosed Liabilities	20
4.6	Loans	20
4.7	Reports and Filings	21
4.8	Subsidiaries	21
4.9	Books and Records	21
4.10	No Material Adverse Changes	22
4.11	Absence of Certain Developments	22
4.12	Properties	23
4.13	Environmental Matters	24
4.14	Tax Matters	26
4.15	Contracts and Commitments	29
4.16	Litigation	30

4.17	No Brokers or Finders	30
4.18	Employees	31
4.19	Employee Benefit Plans	33
4.20	Insurance	36
4.21	Affiliate Transactions	36
4.22	Compliance with Laws; Permits	36
4.23	Administration of Fiduciary Accounts	37
4.24	Disclosure	37
4.25	Regulatory Approvals	37
4.26	Interest Rate Risk Management Instruments	37
4.27	Disclosures in Schedules	38
ARTICLE 5 CONDUCT OF BUSINESS PENDING THE MERGER		38
5.1	Conduct of Business	38
5.2	Access to Information; Confidentiality	40
5.3	Notice of Developments	41
5.4	Certain Loans and Related Matters	41
5.5	Monthly Financial Statements and Pay Listings	41
5.6	Consents and Authorizations	42
5.7	Filing of Tax Returns and Adjustments	42
5.8	No Solicitation	42
ARTICLE 6 ADDITIONAL COVENANTS AND AGREEMENTS		44
6.1	The Bank Merger	44
6.2	Filings and Regulatory Approvals	44
6.3	Expenses	44
6.4	Title Insurance and Surveys.	44
6.5	Shareholder Approval; Registration Statement	45
6.6	Establishment of Accruals	47
6.7	Employee Matters	47
6.8	Tax Treatment	49
6.9	Updated Schedules	49
ARTICLE 7 CONDITIONS		49
7.1	Conditions to Obligations of Each Party	49
7.2	Additional Conditions to Obligation of CBCS	50
7.3	Additional Conditions to Obligation of Heartland	51
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER		52
8.1	Reasons for Termination	52
8.2	Effect of Termination	54
8.3	Expenses	54

8.4	CBCS Termination Payments	55
8.5	Amendment	55
8.6	Waiver	55
ARTICLE 9 GENERAL PROVISIONS		55
9.1	Press Releases and Announcements	55
9.2	Notices	55
9.3	Assignment	56
9.4	No Third Party Beneficiaries	57
9.5	Schedules	57
9.6	Interpretation	57
9.7	Severability	57
9.8	Complete Agreement	57
9.9	Governing Law	57
9.10	Specific Performance	57
9.11	Waiver of Jury Trial	58
9.12	Investigation of Representations, Warranties and Covenants	58
9.13	No Survival of Representations	58

MERGER AGREEMENT

This MERGER AGREEMENT (the “Agreement”), dated October 22, 2014, is made and entered into by and between Heartland Financial USA, Inc., a Delaware corporation (“Heartland”), and Community Banc-Corp. of Sheboygan, Inc., a Wisconsin corporation (“CBCS”).

WHEREAS, the respective Boards of Directors of Heartland and CBCS have determined that it is advisable and in the best interests of Heartland and CBCS and their respective shareholders to consummate the merger of CBCS with and into Heartland as described in article 2 of this Agreement (the “Merger”);

WHEREAS, as a result of the Merger, all of the common stock, no par value, of CBCS (the “CBCS Common Stock”), and Series C Perpetual, Convertible Preferred Stock, no par value, of CBCS (the “CBSC Convertible Preferred Stock”), will be converted into shares of the common stock, $1.00 par value, of Heartland (“Heartland Common Stock”) on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, CBCS owns all of the issued and outstanding capital stock of Community Bank & Trust, a Wisconsin state bank (“CBT”), and Heartland owns all of the issued and outstanding capital stock of Wisconsin Bank and Trust, a Wisconsin state bank (“WBT”), and Heartland and CBCS desire that CBT be merged with and into WBT simultaneous with, or immediately after, the Merger (the “Bank Merger”); and

WHEREAS, Heartland and CBCS desire that the Merger be made on the terms and subject to the conditions set forth in this Agreement and that the Merger qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

NOW, THEREFORE, in consideration of the representations, warranties and covenants contained herein, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

“Acquisition Proposal” means any offer, proposal, inquiry or indication of interest (other than an offer, proposal, inquiry or indication of interest by Heartland) contemplating or otherwise relating to any Acquisition Transaction.

“Acquisition Transaction” means any transaction or series of transactions involving (a) any merger, consolidation, share exchange, business combination, issuance of securities, acquisition of securities, tender offer, exchange offer or other similar transaction (i) in which CBCS, CBT or any other Subsidiary is a constituent corporation, (ii) in which a Person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of Persons directly or indirectly acquires beneficial or record ownership of securities representing more than 15% of the outstanding securities of any class of voting securities of the CBCS, CBT or any other Subsidiary or (iii) in which CBCS, CBT or any other Subsidiary issues or sells securities

representing more than 20% of the outstanding securities of any class of voting securities of the CBCS, CBT or any other Subsidiary; or (b) any sale (other than sales in the Ordinary Course of Business), lease (other than in the Ordinary Course of Business), exchange, transfer (other than in the Ordinary Course of Business), license (other than nonexclusive licenses in the Ordinary Course of Business), acquisition or disposition of any business or businesses or assets that constitute or account for 20% or more of the consolidated net revenues, net income or assets of CBCS, CBT or any other Subsidiary.

“Adjusted Tangible Assets” means, as of the Determination Date, the Tangible Assets of CBCS, less the sum of (A) any Transaction Costs, and (B) any Severance Costs.

“Adjusted Tangible Shareholders’ Equity” means the sum of (a) the excess of the Adjusted Tangible Assets of CBCS over the liabilities (calculated in accordance with GAAP) of CBCS as of the Determination Date, without giving effect to any Heartland Accruals, and (b) $17,500 multiplied by the number of days from the Determination Date through the Closing Date.

“Aggregate Merger Consideration” means the Adjusted Tangible Shareholders’ Equity of CBCS as of the close of business on the Determination Date multiplied by 1.55.

“Agreement” has the meaning set forth in the first paragraph of this Agreement.

“Affiliate” has the meaning set forth in Rule 12b-2 under the Exchange Act.

“Average Closing Price” means (a) the sum, for each of the twenty (20) trading days ending five calendar days prior to the Closing Date, of the product of (i) the closing price of Heartland Common Stock as quoted on the Nasdaq Global Select Market for such trading day multiplied by, (ii) the trading volume of Heartland Common Stock reported on the Nasdaq Global Select Market for such trading day, divided by (b) the aggregate trading volume over such twenty (20) day period.

“Business Day” means any day other than Saturday, Sunday or a day on which a state bank is required to be closed under Wisconsin Law.

“CBCS Common Stock” has the meaning set forth in the recitals.

“CBCS Convertible Preferred Stock” has the meaning set forth in the recitals.

“Cash Merger Consideration” means the Aggregate Merger Consideration less the Stock Merger Consideration.

“Charter” means (x) with respect to any corporation or banking association, those instruments that at that time constitute its charter as filed or recorded under the general corporation or other applicable law of the jurisdiction of incorporation or association, including the articles or certificate of incorporation or association, any amendments thereto and any articles or certificates of merger or consolidation, and (y) with respect to any partnership, those agreements and instruments that at that time constitute the partnership agreement as filed or

recorded under the partnership or other applicable law of the jurisdiction of organization, or executed by the partners of such partnership, including any amendments thereto.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock Equivalent Shares Outstanding” means, immediately before the Effective Time, (a) the number of shares of CBCS Common Stock issued and outstanding, plus (b) 4166 2/3 multiplied by the number of shares of CBCS Convertible Preferred Stock Outstanding .

“Common Share Cash Consideration Per Share” means (a) the Cash Merger Consideration, divided by (b) the Common Stock Equivalent Shares Outstanding.

“Common Share Stock Consideration Per Share” means a number of shares of Heartland’s common stock equal to (a) the Stock Merger Consideration divided by (b) the product of (i) the Common Stock Equivalent Shares Outstanding and (ii) the Average Closing Price.

“Consent” means any authorization, consent, approval, filing, waiver, exemption or other action by or notice to any Person.

“Contract” means a contract, agreement, lease, commitment or binding understanding, whether oral or written, that is in effect as of the date of this Agreement or any time after the date of this Agreement.

“Determination Date” shall mean the last day of the month preceding the Effective Time.

“Disclosure Schedule” means the schedules delivered by CBCS to Heartland on or prior to the date of this Agreement, which will neither be attached to this Agreement nor publicly available.

“Encumbrance” means any charge, claim, community property interest, easement, covenant, condition, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Governmental Authorization” means any approval, consent, license, permit, waiver, registration or other authorization issued, granted, given, made available or otherwise required by any Governmental Entity or pursuant to Law.

“Governmental Entity” means any federal, state, local, foreign, international or multinational entity or authority exercising executive, legislative, judicial, regulatory, administrative or taxing functions of or pertaining to government.

“Governmental Order” means any judgment, injunction, writ, order, ruling, award or decree by any Governmental Entity or arbitrator.

“Knowledge,” “Knowledge of CBCS”, “Knowledge of Heartland” or other similar phrase means the actual knowledge of a director or executive officer of CBCS or Heartland, as the case may be, and the knowledge that a person performing fully the duties normally assigned to a person in such capacity would have acquired.

“Law” means any constitution, law, ordinance, principle of common law, regulation, statute or treaty of any Governmental Entity.

“Liability” means any liability or obligation whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due, whether known or unknown, and regardless of when asserted.

“Litigation” means any claim, action, arbitration, mediation, audit, hearing, investigation, proceeding, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity or arbitrator or mediator.

“Material Adverse Effect” means any change, effect, event or condition, individually or in the aggregate, that has had, or, with the passage of time, could reasonably be expected to have, a material adverse effect on (i) the business, assets, properties, condition (financial or otherwise) or results of operations of CBCS and its Subsidiaries, taken as a whole, or Heartland and its Subsidiaries, taken as a whole, as the case may be, or (ii) the consummation of the transactions contemplated hereby, provided, however, that none of the following changes that arise at or after execution of this Agreement shall be taken into account in determining whether there has been, or will be a Material Adverse Effect: (a) changes that generally affect the banking business in the United States as a whole; (b) changes in the economy or financial or securities markets in the United States in general, (c) changes that are the direct result of acts of war, terrorism or natural disasters in the United States; (d) changes in GAAP; (e) changes in Law or regulation; (f) changes caused by the announcement of this Agreement, actions or omissions required by this Agreement, or by actions taken or omitted to be taken at the written request or written consent of the other party to this Agreement; or (g) failure by CBCS to meet internal or third party projections or forecasts or any published revenue or earnings projections for any period (provided that this exception (g) shall not prevent or otherwise affect any determination that any event, condition, change, occurrence, development or state of facts underlying such failure has or resulted in, or contributed to, a Material Adverse Effect); provided, however, that the foregoing clauses (a) through (e) shall not apply if such effect, change, event, development or circumstance disproportionately adversely affects CBCS and its Subsidiaries, or Heartland and its Subsidiaries, as the case may be, in each case taken as a whole, compared to other Persons that operate in the banking industry.

“Ordinary Course of Business” means the ordinary course of business of CBCS, CBT and the other Subsidiaries consistent with past custom and practice (including with respect to quantity and frequency).

“Outstanding CBCS Shares” shall mean the number of shares of CBCS Common Stock issued and outstanding immediately prior to the Effective Time.

“Permitted Encumbrances” means (i) Encumbrances for Taxes and other governmental charges and assessments that are not yet due and payable or which are being contested in good faith by appropriate proceedings (provided required payments have been made in connection with any such contest), (ii) Encumbrances of carriers, warehousemen, mechanics’ and materialmen and other like Encumbrances arising in the Ordinary Course of Business (provided lien statements have not been filed as of the Closing Date), (iii) easements, rights of way and restrictions, zoning ordinances and other similar Encumbrances affecting the Real Property and which do not unreasonably restrict the use thereof in the Ordinary Course of Business, (iv) statutory Encumbrances in favor of lessors arising in connection with any property leased to CBCS, CBT or any other Subsidiary, (v) Encumbrances reflected in the Latest Financial Statements or arising under Material Contracts and (vi) Encumbrances that will be removed prior to or in connection with the Closing.

“Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, Governmental Entity or other entity.

“Plan” means every plan, fund, contract, program and arrangement (whether written or not) for the benefit of present or former employees, including those intended to provide (i) medical, surgical, health care, hospitalization, dental, vision, workers’ compensation, life insurance, death, disability, legal services, severance, sickness or accident benefits (whether or not defined in Section 3(1) of ERISA), (ii) pension, profit sharing, stock bonus, retirement, supplemental retirement or deferred compensation benefits (whether or not tax qualified and whether or not defined in Section 3(2) of ERISA) or (iii) salary continuation, unemployment, supplemental unemployment, severance, termination pay, change-in-control, vacation or holiday benefits (whether or not defined in Section 3(3) of ERISA), (w) that is maintained or contributed to by CBCS, CBT or any entity under common control with CBCS within the meaning of Section 414(b), (c), (m), (o), or (t) of the Code (a “Commonly Controlled Entity”), (x) that CBCS, CBT or any other Commonly Controlled Entity has committed to implement, establish, adopt or contribute to in the future, (y) for which CBCS, CBT or any other Commonly Controlled Entity is or may be financially liable as a result of the direct sponsor’s affiliation with CBCS, its Subsidiaries or CBCS’s stockholders (whether or not such affiliation exists at the date of this Agreement and notwithstanding that the Plan is not maintained by CBCS, CBT or any other Commonly Controlled Entity for the benefit of its employees or former employees) or (z) for or with respect to which CBCS, CBT or any other Commonly Controlled Entity is or may become liable under any common law successor doctrine, express successor liability provisions of Law, provisions of a collective bargaining agreement, labor or employment Law or agreement with a predecessor employer. Plan does not include any arrangement that has been terminated and completely wound up prior to the date of this Agreement and for which neither CBCS, CBT nor any other Commonly Controlled Entity has any present or potential liability.

“Preferred Share Cash Consideration Per Share” means (a) the Cash Merger Consideration multiplied by 4166 2/3, and divided by (b) the Common Equivalent Shares Outstanding.

Preferred Share Stock Consideration Per Share” means a number of shares of Heartland Common Stock equal to (a) the Stock Merger Consideration multiplied by 4166 2/3, and divided

by (b) the product of (i) the Common Equivalent Shares Outstanding and (ii) the Average Closing Price.

“Remedies Exception,” when used with respect to any Person, means except to the extent enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

“Return” means any return, declaration, report, estimate, information return and statement pertaining to any Taxes.

“Severance Costs” means, except to the extent (a) paid before the Determination Date or (b) reflected in an accrual taken before the Determination Date and therefore reflected in the Determination Balance Sheet, any and all amounts paid or payable by agreement to any employee of CBCS, CBT or any Subsidiary, as determined on an after-tax basis, that is contingent upon a change in the ownership of CBCS or a sale of a substantial portion of the assets of CBCS, regardless of whether such payment is due or made before, at or after the Effective Time, including, without limitation, all such payments that could become due after a change in ownership upon voluntary termination of employment of an executive under the Supplemental Executive Retirement Plan agreements of CBCS, CBT or any other Subsidiary. For the avoidance of doubt, Heartland and CBCS agree that the amount of the aggregate accrual as of September 30, 2014 for amounts payable under certain agreements (the “Designated Agreements”) with six current and past executives of CBCS (the “Designated Executives”) are set forth on the attached Confidential Schedule 1, and to the extent the obligation to make payments under the Designated Agreements are not extinguished prior to preparation of, or the amount set forth in Confidential Schedule 1 is not accrued for in the Determination Balance Sheet, such amount shall be a “Severance Cost,” deductible from Adjusted Tangible Assets and the only such Severance Cost so deductible with respect to the Designated Agreements.

“Stock Merger Consideration” means 100% of the Aggregate Merger Consideration; provided, however, that if the Average Closing Price is $22.00 or less, the percentage of the Aggregate Merger Consideration that constitutes the Stock Merger Consideration may be adjusted downward by Heartland to a percentage of not less than 75%.

“Subsidiary” means any Person in which any ownership interest is owned, directly or indirectly, by another Person. When used without reference to CBCS, Subsidiary means both a Direct Subsidiary (as defined in Section 4.1(a), including CBT) and a Bank Subsidiary (as defined in Section 4.1(b)).

“Superior Proposal” means any Acquisition Proposal by a third party on terms which the Board of Directors of CBCS determines in its good faith judgment, after consultation with, and receipt of written advice from, its financial advisors (which advice will be communicated to Heartland), to be more favorable from a financial point of view to its shareholders than the Merger and the other transactions contemplated hereby, after taking into account the likelihood of consummation of such transaction on the terms set forth therein, taking into account all legal, financial (including the financing terms of any such proposal), regulatory and other aspects of such proposal, the likelihood of consummation of any such proposal and any other relevant

factors permitted under applicable law, after giving Heartland at least five Business Days to respond to such third-party Acquisition Proposal once the Board has notified Heartland that in the absence of any further action by Heartland it would consider such Acquisition Proposal to be a Superior Proposal, and then taking into account any amendment or modification to this Agreement proposed by Heartland.

“Tangible Assets” shall mean the assets of CBCS calculated (except as provided in Section 6.4) in accordance with Generally Accepted Accounting Principles consistently applied (“GAAP”), less any assets that are considered intangible assets under GAAP, provided that (i) mortgage and SBA servicing assets, regardless of their treatment under GAAP, shall not be considered intangible assets and shall not be deducted from Tangible Assets, and (ii) the bank-owned life insurance held by CBCS shall be valued at book value plus $1,422,000.

“Tax Affiliate” means each of CBCS, CBT and the other Subsidiaries and any other Person that is or was a member of an affiliated, combined or unitary group of which CBCS, CBT or any other Subsidiary is or was a member.

“Taxes” means all taxes, charges, fees, levies or other assessments, including all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, social security, unemployment, excise, estimated, severance, stamp, occupation, property or other taxes, customs, duties, fees, assessments or charges of any kind whatsoever, including all interest and penalties thereon, and additions to tax or additional amounts imposed by any Governmental Entity upon CBCS or any Tax Affiliate.

“Transaction Costs” shall mean, except to the extent paid or reflected in an accrual taken before the Determination Date and therefore reflected in the Determination Balance Sheet, any and all amounts incurred by CBCS, CBT or any other Subsidiary, whether or not paid by CBCS and whether incurred before or after the date of this Agreement, as determined on an after tax basis, that arise out of or in connection with the negotiation and preparation of this Agreement and the consummation and performance of the transactions contemplated hereby, including CBCS’s legal and accounting fees (including those associated with the preparation of the balance sheet referred to in Section 2.3(a)), brokerage commissions, finder’s fees or similar fees or commissions (including any fees payable pursuant to any agreement described in Section 4.17), but excluding any costs incurred pursuant to Section 6.4(d).

The following terms not defined above are defined in the sections indicated below:

Definition	Defined
1933 Act	3.2
Annual Financial Statements	4.4(a)
Board Recommendation	6.5(a)
Blue Sky Laws	3.2
Bank Holding Company Act	3.1
Change of Board Recommendation	6.5(a)
Closing	2.8
Closing Date	2.8
Converted Common Shares	2.3(b)

Converted Preferred Shares	2.3(b)
Converted Shares	2.3(b)
DGCL	2.1
Determination Balance Sheet	2.3(a)
Determination Date	2.3(a)
Dissenting Shares	2.7(b)
Dissenting Stockholders	2.7(a)
Effective Date	2.2(d)
Effective Time	2.2(d)
Exchange Act	3.2
FDIA	4.1(b)
FDIC	2.1
FRB	2.1
Heartland Notice	6.4(c)
Independent Auditor	2.3(a)
Nasdaq	3.2
Regulatory Approvals	3.2
Required Consents	5.6
SEC	3.5(a)
Surviving Corporation	2.1
Shareholder Meeting	6.5(a)
Title Objection	6.4(c)
WBCL	2.1
WDFI	2.1

ARTICLE 2

MERGER

2.1The Merger. Subject to the satisfaction or waiver of the conditions set forth in article 7, on a date mutually satisfactory to the parties as soon as practicable following receipt of all necessary regulatory approvals of the Federal Deposit Insurance Corporation (the “FDIC”), the Department of Financial Institutions of the State of Wisconsin (the “WDFI”), and appropriate notification to Board of Governors of the Federal Reserve System (“FRB”), CBCS shall be merged with and into Heartland. Heartland, in its capacity as the corporation surviving the Merger, is sometimes referred to herein as the “Surviving Corporation.” The Merger will be effected pursuant to the provisions of, and with the effect provided in, Section 252 of the Delaware General Corporation Law (the “DGCL”), and Section 180.1101 of the Wisconsin Business Corporation Law (the “WBCL”).

2.2Effect of Merger.

(a)    At the Effective Time, CBCS shall be merged with and into Heartland, and the separate existence of CBCS shall cease. The Charter and the Bylaws of Heartland, as in effect immediately prior to the Effective Time, shall be the Charter and the Bylaws of the Surviving Corporation, until the same may be amended as provided therein and in accordance with applicable law. The directors and officers of Heartland immediately prior to the Effective

Time will be the directors and officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and shall qualify.

(b)    At the Effective Time and thereafter, the Surviving Corporation shall be responsible and liable for all the liabilities, debts, obligations and penalties of each of Heartland and CBCS.

(c)    At the Effective Time and thereafter, the Surviving Corporation shall possess all the rights, privileges, immunities and franchises, of a public as well as of a private nature, of each of Heartland and CBCS; all property, real, personal and mixed, and all debts due on whatever account, and all and every other interest, of or belonging to or due to each of Heartland and CBCS, shall be taken and deemed to be transferred to and vested in the Surviving Corporation without further act or deed; and the title to any real estate or any interest therein, vested in Heartland or CBCS, shall not revert or be in any way impaired by reason of the Merger.

(d)    To effect the Merger, the parties hereto will cause an appropriate certificate of merger and articles of merger relating to the Merger to be filed with the Secretary of State of Delaware and the WDFI. The Merger shall become effective upon the filing of such certificate of merger and articles of merger. As used herein, the term “Effective Date” shall mean the date on which the Merger shall become effective as provided in the preceding sentence and the term “Effective Time” shall mean the time on the Effective Date when the Merger shall become effective. The Effective Date and the Effective Time shall take place on the Closing Date (as defined below).

2.3    Conversion of CBCS Capital Stock.

(a)    As soon as practicable, and in any event at least five (5) Business Days prior to the Effective Time, CBCS shall prepare and deliver to Heartland (i) a balance sheet, prepared in accordance with GAAP consistently applied with CBCS’s historical accounting practices (the “Determination Balance Sheet”), showing its consolidated financial position as at the Determination Date, and containing adequate detail to compute the Adjusted Tangible Shareholder’s Equity. Without limiting the generality of the foregoing, CBCS shall accompany the Balance Sheet with (i) a schedule of all Transaction Costs, including Transaction Costs to be incurred after the date of the delivery of the same based upon inquiry of vendors with respect thereto, and (ii) a calculation of Severance Costs, assuming completion of the Merger. CBCS shall give the representatives of Heartland access to CBCS and its records to permit Heartland to review CBCS’s calculations. Without limiting the generality of the foregoing, CBCS shall continue to make provision for loan losses and other reserves on the balance sheets of CBT in a manner consistent with past practices, and CBCS shall not alter or vary its practices and policies relating to classified loans and loan write-offs in preparing the Balance Sheet.

If CBCS and Heartland agree to such calculations and to Adjusted Tangible Shareholder’s Equity, the Determination Balance Sheet and such amounts shall be final and conclusive. If Heartland and CBCS disagree as to such calculations and are unable to reconcile their differences in writing within five (5) Business Days, the Effective Time shall be postponed and the items in dispute shall be submitted to a mutually acceptable independent national accounting firm in the United States (the “Independent Auditors”) for final determination, and

the calculations shall be deemed adjusted in accordance with the determination of the Independent Auditors and shall become binding, final and conclusive upon all of the parties hereto. The Independent Auditors shall consider only the items in dispute and shall be instructed to act within five (5) Business Days (or such longer period as Heartland and CBCS may agree) to resolve all items in dispute. CBCS and Heartland shall share equally the payment of reasonable fees and expenses of the Independent Auditors.

(b)    To effectuate the Merger, at the Effective Time, and without any further action of Heartland, CBCS or any holder of CBCS Capital Stock,

(i)    each issued and outstanding share of CBCS Common Stock (other than shares to be canceled pursuant to Section 2.3(c) and Dissenting Shares)(the “Converted Common Shares”) shall be canceled and extinguished and be converted into and become a right to receive the Common Share Stock Consideration Per Share plus the Common Share Cash Consideration Per Share; and

(ii)    each issued and outstanding share of CBCS Convertible Preferred Stock (other than shares to be canceled pursuant to Section 2.3(c) and Dissenting Shares) (the “Converted Preferred Shares” and together with “Converted Common Shares,” the “Converted Shares”) shall be canceled and extinguished and be converted into and become a right to receive the Preferred Share Stock Consideration Per Share plus the Preferred Share Cash Consideration Per Share.

No fractional shares of Heartland Common Stock shall be issued for Converted Shares, and in lieu of any fractional share, Heartland shall pay to each holder of Converted Shares who otherwise would be entitled to receive a fractional share of Heartland Common Stock, an amount of cash (without interest) equal to the product of (a) the Average Closing Price multiplied by (b) the fractional share interest to which such holder would otherwise be entitled (the “Fractional Share Amount”).

(c)     Each share of CBCS Capital Stock held as treasury stock of CBCS or held directly or indirectly by Heartland, other than shares held in a fiduciary capacity or in satisfaction of a debt previously contracted, shall be canceled, retired and cease to exist, and no exchange or payment shall be made with respect thereto.

2.4    Additional Heartland Common Stock; Adjustments. If, between the date hereof and the Effective Time, shares of Heartland Common Stock shall be changed into a different number of shares or a different class of shares by reason of any reclassification, recapitalization, split-up, combination, exchange of shares or readjustment, or if a stock dividend thereon shall be declared with a record date within such period, then the number of shares of Heartland Common Stock issued to holders of Converted Shares at the Effective Time pursuant to this Agreement will be appropriately and proportionately adjusted so that the number of such shares of Heartland Common Stock (or such class of shares into which shares of Heartland Common Stock have been changed) that will be issued in exchange for the Converted Shares will equal the number of such shares that the holders of Converted Shares would have received pursuant to such classification, recapitalization, split-up, combination, exchange of shares,

readjustment or stock dividend had the record date therefor been immediately following the Effective Time.

2.5    Rights of Holders of CBCS Common Stock; Capital Stock of Heartland.

(a)     At and after the Effective Time and until surrendered for exchange, each outstanding stock certificate which immediately prior to the Effective Time represented the Converted Shares shall be deemed for all purposes to evidence the right to receive the Merger Consideration, and the record holder of such outstanding stock certificate shall, after the Effective Time, be entitled to vote the shares of Heartland Common Stock into which such shares of CBCS Common Stock shall have been converted on any matters on which the holders of record of Heartland Common Stock, as of any date subsequent to the Effective Time, shall be entitled to vote. In any matters relating to such stock certificates, Heartland may rely conclusively upon the record of shareholders maintained by CBCS containing the names and addresses of the holders of record of CBCS Common Stock at the Effective Time.

(b)    At and after the Effective Time, each share of capital stock of Heartland issued and outstanding immediately prior to the Effective Time shall remain an issued and existing share of capital stock of the Surviving Corporation and shall not be affected by the Merger.

2.6    Payment/Exchange of Certificates.

(a)     Payment of Merger Consideration; Exchange of Certificates. Within ten (10) Business Days after the Closing, Heartland will cause to be distributed to each holder of CBCS Common Stock and CBCS Convertible Preferred Stock, letters of transmittal or other appropriate materials to facilitate the surrender of certificates representing such stock for the Merger Consideration. Within ten (10) Business Days after surrender to Heartland or to a paying agent appointed by Heartland of any certificate which prior to the Effective Date represented a Converted Share, Heartland or such paying agent shall distribute to the person in whose name such certificate is registered, a certificate or certificates representing the Stock Merger Consideration, cash in the amount of any Fractional Share Amount and cash representing the Cash Merger Consideration.

(b)    Failure to Surrender Certificates. If outstanding certificates formerly representing Converted Shares are not surrendered prior to the date on which the Merger Consideration to which any holder of such shares is entitled as a result of the Merger would otherwise escheat to or become the property of any governmental unit or agency, the unclaimed consideration shall, to the extent permitted by abandoned property and any other applicable law, become the property of Heartland (and to the extent not in Heartland’s possession shall be paid over to Heartland), free and clear of any and all claims or interest of any person. Notwithstanding the foregoing, neither Heartland nor any other person shall be liable to any former holder of CBCS Common Stock for any amount delivered to a public official pursuant to applicable abandoned property, escheat or other similar laws.

(c)    Lost Certificates. In the event that any certificate representing CBCS Common Stock shall have been lost, stolen or destroyed, Heartland shall issue and pay in

exchange for such lost, stolen or destroyed certificate, upon the making of an affidavit of that fact by the holder thereof in form satisfactory to Heartland’s transfer agent, the Merger Consideration; provided, however, that Heartland’s transfer agent may, as a condition precedent to the issuance and payment of the Merger Consideration to which the holder of such certificate is entitled as a result of the Merger, require the owner of such lost, stolen or destroyed certificate to deliver a a bond in such sum as it may direct as indemnity against any claim that may be made against Heartland, CBCS or any other party with respect to the certificate alleged to have been lost, stolen or destroyed.

(d)    Dividends. Until outstanding certificates formerly representing Converted Shares are surrendered as provided in Section 2.6(a) and (c), no dividend or distribution payable to holders of record of Heartland Common Stock shall be paid to any holder of such outstanding certificates, but upon surrender of such outstanding certificates by such holder there shall be paid to such holder the amount of any dividends or distributions (without interest) theretofore paid with respect to such whole shares of Heartland Common Stock, but not paid to such holder, and which dividends or distributions had a record date occurring on or subsequent to the Effective Time.

(e)    Full Satisfaction. All Merger Consideration issued and paid upon the surrender for exchange of Converted Shares in accordance with the terms and conditions of this Agreement shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to such Converted Shares.

2.7    Dissenting Shares.

(a)    Notwithstanding any provision of this Agreement to the contrary, any shares of CBCS Common Stock held by a holder (a “Dissenting Shareholder”) who has demanded and perfected his demand for appraisal of his Shares in accordance with Subchapter XIII of the WBCL and as of the Effective Time has neither effectively withdrawn nor lost his right to such appraisal shall not represent a right to receive Merger Consideration pursuant to Section 2.3 above, but in lieu thereof the holder thereof shall be entitled to only such rights as are granted by the WBCL. Heartland shall make any and all payments to holders of shares of CBCS Common Stock with respect to such demands.

(b)    Notwithstanding the provisions of Section 2.7(a) above, if any Dissenting Shareholder demanding appraisal of such Dissenting Shareholder’s shares of CBCS Common Stock (“Dissenting Shares”) under the WBCL shall effectively withdraw or lose (through failure to perfect or otherwise) such Shareholder’s right to appraisal, then as of the Effective Time or the occurrence of such event, whichever later occurs, such Dissenting Shares shall automatically be converted into and represent only the right to receive the Merger Consideration as provided in Section 2.3 above upon surrender of the certificate or certificates representing such Dissenting Shares.

(c)    CBCS shall give Heartland prompt notice of any demands by a Dissenting Shareholder for payment, or notices of intent to demand payment received by CBCS under Chapter XIII of the WBCL and Heartland shall have the right, at its expense, to participate in all negotiations and proceedings with respect to such demands. CBCS shall not, except with the

prior written consent of Heartland (which will not be unreasonably withheld or delayed) or as otherwise required by law, make any payment with respect to, or settle, or offer to settle, any such demands.

2.8    The Closing.The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at the offices of Heartland or at a location otherwise agreed upon by CBCS and Heartland. The Closing will take place as soon as practicable once the conditions in Article 6 have been satisfied but in any event (x) within ten (10) Business Days after the date on which all such conditions have been satisfied, or (y) on an earlier date after such conditions have been satisfied that is within thirty (30) days after CBCS has paid and extinguished obligations under the Designated Agreements if it has made such payments, unless the parties otherwise agree (the “Closing Date”). The failure of the Closing will not ipso facto result in termination of this Agreement and will not relieve any party of any obligation under this Agreement.

(a)    Subject to the conditions set forth in this Agreement, on the Closing Date, CBCS will deliver to Heartland:

(i)     the certificate of CBCS, dated the Closing Date, required by

Section 7.3(c);

(ii)    the certificate of CBCS, dated the Closing Date, required by

Section 7.3(d):

(iii)    a certificate of CBCS dated the Closing Date (A) stating the number of shares of CBCS Common Stock and CBCS Convertible Preferred Stock outstanding immediately prior to the Closing, and (B) stating that there are no other shares of CBCS capital stock or options, warrants, rights to acquire, or securities convertible into CBCS capital stock, outstanding as of the Closing Date, and the number of shares of CBCS Common Stock for which dissenters’ rights are applicable.

(iv)    a copy of the text of the resolutions adopted by the board of directors of CBCS authorizing the execution, delivery and performance of this Agreement, certified by an appropriate officer of CBCS;

(v)    a copy of the text of the resolutions adopted by the shareholders of CBCS approving the Merger, certified by an appropriate officer of CBCS;

(vi)    duly executed copies of all Required Consents;

(vii)    a copy of the text of the resolutions adopted by the board of directors of CBT, and by CBCS as the sole shareholder of CBT, authorizing the Bank Merger;

(viii)    certificates representing all outstanding shares of CBT capital stock, which shall be free of any Encumbrance;

(ix)    the minute books, stock transfer records, corporate seal and other materials related to the corporate administration of CBCS, CBT and any Subsidiary;

(x)    resignations in writing (effective as of the Closing Date) from the directors of CBT and any other Subsidiaries, as Heartland may have requested prior to the Closing Date;

(xi)    evidence of title insurance commitments, policies, riders and surveys in accordance with Section 6.4;

(xii)    releases of all Encumbrances on the Operating Real Property, other than Permitted Encumbrances;

(xiii)    certificates dated as of a date not earlier than the third Business Day prior to the Closing as to the good standing of CBCS executed by the appropriate officials of the State of Wisconsin and each jurisdiction in which CBCS is licensed or qualified to do business as a foreign corporation and payment of all applicable state Taxes by CBCS; and

(xiv)    such other certificates, documents and instruments that Heartland

reasonably requests for the purpose of (1) evidencing the accuracy of CBCS’s representations and warranties, (2) evidencing the performance and compliance by CBCS with agreements contained in this Agreement, (3) evidencing the satisfaction of any condition referred to in Section 7.3(c) or (4) otherwise facilitating the consummation of the transactions contemplated by this Agreement.

(b)    Subject to the conditions set forth in this Agreement, on the Closing Date, Heartland will deliver to CBCS:

(i)    the certificate of Heartland, dated the Closing Date, required by

Section 7.2(c);

(ii)    the certificate of Heartland, dated the Closing Date, required by Section 7.2(d);

(iii)    such other certificates, documents and instruments that CBCS reasonably requests for the purpose of (1) evidencing the accuracy of Heartland’s representations and warranties, (2) evidencing the performance and compliance by Heartland with agreements contained in this Agreement, (3) evidencing the satisfaction of any condition referred to in Section 7.2 or (4) otherwise facilitating the consummation of the transactions contemplated by this Agreement.

2.9    Tax-Free Reorganization.The acquisition contemplated by this Agreement is intended to be a reorganization within the meaning of Section 368(a)(1)(A) of the Code and this

Agreement is intended to be a “plan of reorganization” within the meaning of the Treasury Regulations promulgated under Section 368 of the Code. Each party to this Agreement agrees to treat this acquisition as a reorganization within the meaning of Section 368(a)(1)(A) of the Code and agrees to treat this Agreement as a “plan of reorganization” within the meaning of the Treasury Regulations under Section 368 of the Code, unless and until there is a determination, within the meaning of Section 1313 of the Code, that such treatment is not correct.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF HEARTLAND

Heartland hereby represents and warrants to CBCS as follows:

3.1    Organization and Qualification.Heartland is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the requisite corporate power to carry on its business as now conducted. Heartland is registered as a bank holding company under Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”). Heartland is licensed or qualified to do business in every jurisdiction in which the nature of its business or its ownership of property requires it to be licensed or qualified, except where the failure to be so licensed or qualified would not have or would not reasonably be expected to have a Material Adverse Effect on Heartland.

3.2    Authority Relative to this Agreement; Non-Contravention.Heartland has the requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Heartland and the consummation by Heartland of the transactions contemplated hereby have been duly authorized by the Board of Directors of Heartland, and no other corporate proceedings on the part of Heartland are necessary to authorize this Agreement, the Merger and such transactions. This Agreement has been duly executed and delivered by Heartland and constitutes a valid and binding obligation of Heartland, enforceable in accordance with its terms, subject to the Remedies Exception. Heartland is not subject to, or obligated under, any provision of (a) its Charter or Bylaws, (b) any agreement, arrangement or understanding, (c) any license, franchise or permit or (d) subject to obtaining the approvals referred to in the next sentence, any law, regulation, order, judgment or decree, which would be breached or violated, or in respect of which a right of termination or acceleration or any encumbrance on any of its or any of its subsidiaries’ assets would be created, by its execution, delivery and performance of this Agreement or the consummation by it of the transactions contemplated hereby, other than any such breaches or violations which will not, individually or in the aggregate, have a Material Adverse Effect on Heartland, or the consummation of the transactions contemplated hereby. Other than in connection with obtaining any approvals from the FRB for the Merger required under Bank Holding Company Act and any approvals from WDFI for the Merger required under Section 221.0901 of the Wisconsin Banking Law (the “WBL”); approvals from the Federal Deposit Insurance Corporation (“FDIC”) for the Bank Merger required under Bank Merger Act and from the WDFI for the Bank Merger required under the WBL (such approvals under Bank Holding Company Act, the WBL and Bank Merger Act being hereafter collectively referred to as the “Regulatory Approvals”); approvals to issue the Parent Common Stock under the Securities Act of 1933, as amended, and the rules and regulations thereunder (the “1933 Act”), under state securities or blue sky laws, and the rules and regulations thereunder (“Blue Sky Laws”), and under the rules of the Nasdaq Stock Market, Inc. (the “NASDAQ”); filings with respect to the

Merger under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the “Exchange Act”); and the filing with respect to the Merger of a certificate of merger with the Secretary of State of Delaware and the articles of merger with the WDFI, no authorization, consent or approval of, or filing with, any public body, court or authority is necessary on the part of Heartland for the consummation by it of the transactions contemplated by this Agreement, except for such authorizations, consents, approvals and filings as to which the failure to obtain or make would not, individually or in the aggregate, have a Material Adverse Effect on Heartland or the consummation of the transactions contemplated hereby.

3.3    Validity of Heartland Common Stock.The shares of Heartland Common Stock to be issued pursuant to this Agreement will be, when issued (a) duly authorized, validly issued, fully paid and nonassessable and free and clear of any Encumbrance and (b) authorized for listing on The NASDAQ Global Select Market or other national securities exchange upon official notice of issuance.

3.4    Capital Stock.The authorized capital stock of Heartland consists of 25,000,000 shares of Heartland Common Stock, par value $1.00 per share, and 200,000 shares of preferred stock, par value $1.00 per share, of which 16,000 shares have been designated Series A Junior Participating Preferred Stock, 81,698 shares have been designated Series B Fixed Rate Cumulative Perpetual Preferred Stock, and 81,698 shares have been designated Series C Fixed Rate Cumulative Perpetual Preferred Stock. As of September 30, 2014, (a) 18,455,550 shares of Heartland Common Stock were issued and outstanding (including no shares of Heartland Common Stock held in treasury), and 368,026 shares of Heartland Common Stock were reserved for issuance pursuant to Heartland’s employee stock option, incentive, and employee stock purchase plans; (b) no shares of Series A Junior Participating Preferred Stock were issued and outstanding; (c) no shares of Series B Fixed Rate Cumulative Perpetual Preferred Stock were issued and outstanding and (d) 81,698 shares of Series C Fixed Rate Cumulative Perpetual Preferred Stock were issued and outstanding.

3.5    Exchange Act Reports.

(a)    Prior to the execution of this Agreement, Heartland has made available to CBCS complete and accurate copies of (i) Heartland’s Annual Reports on Form 10-K for the years ended December 31, 2011, 2012 and 2013, as amended (the “Heartland 10-K Reports”), as filed under the Exchange Act with the Securities and Exchange Commission (the “SEC”), (ii) all Heartland proxy statements and annual reports to shareholders used in connection with meetings of Heartland shareholders held since January 1, 2011, and (iii) Heartland’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (the “Heartland 10-Q Report”), as filed under the Exchange Act with the SEC. As of their respective dates, such documents (x) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (y) complied as to form in all material respects with the applicable laws and rules and regulations of the SEC. Since January 1, 2011, Heartland has filed all reports that it was required to file with the SEC pursuant to the Exchange Act.

(b)    Heartland financial statements (including any footnotes thereto) contained in Heartland 10-K Reports and Heartland 10-Q Report were prepared in accordance with GAAP

applied on a consistent basis during the periods involved and fairly present the consolidated financial position of Heartland and its subsidiaries as of the dates thereof and the consolidated results of operations, changes in shareholders’ equity and cash flows for the periods then ended.

3.6    No Material Adverse Changes.Since June 30, 2014, and except as otherwise disclosed in reports filed with the SEC, there has been no material adverse change in, and no event, occurrence or development in the business of Heartland or its subsidiaries, taken as a whole, that, taken together with other events, occurrences and developments with respect to such business, has had or would reasonably be expected to have a Material Adverse Effect.

3.7    Reports and Filings.Since January 1, 2011, each of Heartland and its subsidiaries has filed each report or other filing it was required to file with any federal or state banking or bank holding company or other regulatory authority having jurisdiction over it (together with all exhibits thereto, the “Heartland Regulatory Reports”), except for such reports and filings which the failure to so file would not have a Material Adverse Effect on Heartland. As of their respective dates or as subsequently amended prior to the date hereof, each Heartland Regulatory Report was true and correct in all material respects and complied in all material respects with applicable laws, rules and regulations.

3.8    Regulatory Approvals.As of the date hereof, Heartland is not aware of any fact that would likely result in the Regulatory Approvals not being obtained.

3.9    Certain Tax Matters.Neither Heartland nor any Affiliate has taken or agreed to take any action or knows of any circumstances that would prevent the acquisition contemplated by this Agreement from qualifying as a reorganization within the meaning of Section 368(a)(1)(A) of the Code.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER

CBCS hereby represents and warrants to Heartland that, except as described in the Disclosure Schedules:

4.1    Organization and Qualification

(a)CBCS is a bank holding company registered under Bank Holding Company Act. CBCS is a corporation duly organized, validly existing and in good standing under the laws of the State of Wisconsin, and has the requisite corporate power to carry on its business as now conducted. Except for CBT and Sheboygan Statutory Trust I (the “Direct Subsidiary”), CBCS has no direct Subsidiary. Each Direct Subsidiary is a corporation, or statutory trust duly organized and validly existing under the laws of its jurisdiction of formation and in good standing under all laws, rules, and regulations of any other jurisdiction in which the nature of its business or its ownership of property requires it to be qualified, except where the failure to be so qualified would not have a Material Adverse Effect. Each Direct Subsidiary has all requisite power and authority (including all licenses, franchises, permits and other governmental authorizations as are legally required) to carry on its business as now being conducted, to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and to carry on the business and activities now conducted by such Direct

Subsidiary. CBCS is, and as of the Closing Date will be, the lawful record and beneficial owner of all of the outstanding securities of CBT and each Direct Subsidiary, free and clear of any Encumbrance (other than transfer restrictions imposed by applicable federal and state securities laws). The copies of the Charter and Bylaws, if applicable, of each of CBCS and each Direct Subsidiary which have been provided to Heartland prior to the date of this Agreement are correct and complete and reflect all amendments made thereto through the date hereof.

(b)    CBT is a Wisconsin state banking association duly organized, validly existing and in good standing under the laws of the state of Wisconsin. CBT has the requisite corporate power and authority (including all Governmental Authorizations as are legally required) to carry on its business as now being conducted, to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and to carry on the business and activities now conducted by it. CBT is an insured bank as defined in the Federal Deposit Insurance Act, as amended (the “FDIA”). Except for those Subsidiaries set forth on Schedule 4.1(b) (the “Bank Subsidiaries”), CBT does not own or control any Affiliate or Subsidiary. The nature of the business of CBT does not require it to be qualified to do business in any jurisdiction other than the State of Wisconsin. Except for the specific ownership interests in the Bank Subsidiaries set forth on Schedule 4.1(b), CBT has no equity interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or other business enterprise or entity, except as acquired through settlement of indebtedness, foreclosure, the exercise of creditors’ remedies or in a fiduciary capacity. Each Bank Subsidiary is a corporation or limited liability company duly organized and validly existing under the laws of its jurisdiction of formation and in good standing under all laws, rules, and regulations of any other jurisdiction in which the nature of its business or its ownership of property requires it to be qualified, except where the failure to be so qualified would not have a Material Adverse Effect. Each Bank Subsidiary has all requisite corporate power and authority (including all Governmental Authorizations as are legally required) to carry on its business as now being conducted, to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and to carry on the business and activities now conducted by it. CBT is, and as of the Closing Date will be, the lawful record and beneficial owner of all of the outstanding securities of each Bank Subsidiary, free and clear of any liens, claims, encumbrances, security interests or restrictions of any kind (other than transfer restrictions imposed by applicable federal and state securities laws).

4.2    Authority Relative to this Agreement; Non-Contravention.CBCS has the requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by CBCS and the consummation by CBCS of the transactions contemplated hereby have been duly authorized by the Board of Directors of CBCS and, other than the approval of the Merger by holders of a majority of the CBCS Common Stock (the “Required CBCS Shareholder Vote”), no other corporate proceedings on the part of CBCS are necessary to authorize this Agreement, the Merger and such transactions. This Agreement has been duly executed and delivered by CBCS and constitutes a valid and binding obligation of CBCS, enforceable in accordance with its terms, subject to the Remedies Exception. Except as disclosed on Schedule 4.2(a), neither CBCS nor any Subsidiary is subject to, or obligated under, any provision of (i) its Charter or Bylaws, (ii) any agreement, arrangement or understanding, (iii) any license, franchise or permit or (iv) subject to obtaining the approvals referred to in the next sentence, any law, regulation, order, judgment or decree, which would be breached or violated, or in respect of which a right of

termination or acceleration or any encumbrance on any of its assets would be created, by the execution, delivery or performance of this Agreement, or the consummation of the transactions contemplated hereby, other than any such breaches or violations which will not, individually or in the aggregate, have a Material Adverse Effect. Other than the Regulatory Approvals and the filing of a certificate of merger with the Secretary of State of Delaware and the articles of merger with the WDFI, no Governmental Authorization is necessary on the part of CBCS or any Subsidiary for the consummation by CBCS of the transactions contemplated by this Agreement, except for such Governmental Authorizations as to which the failure to obtain or make would not, individually or in the aggregate, have a Material Adverse Effect.

4.3    Capitalization. The authorized, issued and outstanding capital stock of CBCS consists of (a) 3,000,000 shares of CBSC Common Stock, of which 1,926,607 shares are issued and outstanding, and (b) 100,000 shares of Nonvoting Preferred Stock, no par value, issuable in series, of which (i) 16,456 shares have been designated Series A Cumulative, Nonvoting Preferred Stock, of which no shares are issued or outstanding, (ii) 500 shares have been designated Series B Cumulative, Nonvoting Preferred Stock, of which no shares are issued or outstanding, and (iii) 200 shares have been designated Series C Perpetual, Convertible Preferred Stock, of which 98 shares are issued and outstanding. Except as set forth on Schedule 4.3, all of the issued and outstanding shares of capital stock of CBT and each of the other Subsidiaries are owned by CBCS, free and clear of any lien, pledge, security interest, encumbrance or charge of any kind, other than encumbrances arising as a result of requisite regulatory approvals for transfer. The issued and outstanding shares of capital stock of each of CBCS and the Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and have not been issued in violation of any preemptive rights. There are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments obligating CBCS or any Subsidiary to issue, sell, purchase or redeem any shares of their capital stock or securities or obligations of any kind convertible into or exchangeable for any shares of their capital stock or of any of their subsidiaries or affiliates, nor are there any stock appreciation, phantom or similar rights outstanding based upon the book value or any other attribute of any of the capital stock of CBCS or any Subsidiary, or the earnings or other attributes of CBCS or any Subsidiary.

4.4    Financial Statements.

(a)    CBCS has furnished Heartland with copies of its audited consolidated balance sheets as of December 31, 2011, 2012 and 2013 and the related statements of operations, changes in shareholders’ equity and cash flows for the years then ended (collectively, together with any notes thereto, the “CBCS Annual Financial Statements”). CBCS has furnished Heartland with copies of its unaudited consolidated balance sheets as of June 30, 2014 and 2013, and the related statements of operations for the six-month periods then ended. The consolidated balance sheet of CBCS and Subsidiaries as of June 30, 2014 is herein referred to as the “Latest CBCS Balance Sheet,” and the related statements of operations are herein referred to as the “Related CBCS Statements.” The Annual CBCS Financial Statements, the Latest CBCS Balance Sheet and the Related CBCS Statements are collectively referred to as the “CBCS Financial Statements.” The CBCS Financial Statements are based upon the books and records of CBCS and the Subsidiaries, and have been prepared in accordance with GAAP (except as disclosed on Schedule 4.4(a)) applied on a consistent basis during the periods involved. The CBCS Financial Statements fairly present the consolidated financial position of CBCS and Subsidiaries as of the

dates thereof and the consolidated results of operations and, as applicable, changes in shareholders’ equity and cash flows for the periods then ended.

(b)    CBCS has furnished Heartland with copies of the audited balance sheets of CBT as of December 31, 2011, 2012 and 2013 and the related statements of operations, changes in shareholders’ equity and cash flows for the years then ended (together with any notes thereto, the “CBT Annual Financial Statements”). CBCS has furnished Heartland with copies of the balance sheets of CBT as of June 30, 2014 and 2013 and the related statement of operations for the six-month periods then ended. The balance sheet of CBT as of June 30, 2014 is herein referred to as the “Latest CBT Balance Sheet,” and the related statement of income for the six-month period then ended is herein referred to as the “Related CBT Statements.” The Annual CBT Financial Statements, the Latest CBT Balance Sheet and the Related CBCS Statements are collectively referred to as the “CBT Financial Statements.” The CBT Financial Statements are based upon the books and records of CBT and have been prepared in accordance with GAAP (except as disclosed on Schedule 4.4(b)) applied on a consistent basis during the periods involved. The CBT Financial Statements fairly present the financial position of CBT as of the dates thereof and the results of operations and, as applicable, changes in shareholder’s equity and cash flows for the periods then ended.

(c)    The Latest CBCS Balance Sheet and the Latest CBT Balance Sheet are collectively referred to as the “Latest Balance Sheets,” and the Related CBCS Statements and the Related CBT Statements are collectively referred to as the “Related Statements.”

4.5    Absence of Undisclosed Liabilities. Except as reflected or expressly reserved against in the Latest Balance Sheets, neither CBCS, CBT nor any other Subsidiary has any Liability, except (a) Liabilities that have arisen after the date of the Latest Balance Sheet in the Ordinary Course of Business, (b) Liabilities not required to be reflected in a balance sheet prepared in accordance with GAAP or disclosed in the footnotes thereto; or (c) obligations under Contracts listed on a Disclosure Schedule to this Agreement or under a Contract not required to be listed on such a Disclosure Schedule; provided that in the case of all of the exceptions set forth in clauses (a), (b) and (c), (i) none of such Liabilities is a material uninsured Liability for breach of Contract, breach of warranty, tort, infringement, Litigation or violation of Governmental Order, Governmental Authorization or Law, and (ii) none of such Liabilities, individually or in the aggregate, would have a Material Adverse Effect. As of the date of this Agreement, and except as set forth in Schedule 4.5, there are no agreements or commitments binding upon CBCS or any Subsidiary, including CBT, to extend credit, in the amount per “one borrower” (as combined and aggregated as set forth in 12 C.F.R. §32.5), of $500,000 or more, except as set forth on Schedule 4.5.

4.6    Loans

(a)    The documentation relating to each loan made by CBT and relating to all security interests, mortgages and other liens with respect to all collateral for each such loan are adequate for the enforcement of the material terms of each such loan and of the related security interests, mortgages and other liens. The terms of each such loan and of the related security interests, mortgages and other liens comply in all material respects with all applicable laws, rules

and regulations (including, without limitation, laws, rules and regulations relating to the extension of credit).

(b)    Except as shown on the books and records of CBCS as provided to Heartland on or prior to the date hereof, there are no loans, leases, other extensions of credit or commitments to extend credit of CBCS, CBT or any other Subsidiary that have been or, to the Knowledge of CBCS, should have been classified by CBCS, CBT or any other Subsidiary as non-accrual, as restructured, as 90 days past due, as still accruing and doubtful of collection or any comparable classification. CBCS and CBT have disclosed all of the substandard, doubtful, loss, nonperforming or problem loans of CBT on the internal watch list of CBT, a copy of which as of September 30, 2014, has been provided to Heartland. In response to a request for information by Heartland, CBCS has provided to Heartland other written information concerning the loan portfolios of CBT that is true, correct and complete in all material respects, and no material information with respect to the loan portfolios of CBT has been withheld from Heartland.

4.7    Reports and Filings. Since January 1, 2011, each of CBCS and the Subsidiaries, including CBT, has filed each report or other filing that it was required to file with any federal or state banking, bank holding company or other applicable Governmental Authority having jurisdiction over it, including the FRB, the FDIC and the WDFI (together with all exhibits thereto, the “CBCS Regulatory Reports”). CBCS has provided or made available to Heartland copies of all of CBCS Regulatory Reports. As of their respective dates or as subsequently amended prior to the date hereof, each of CBCS Regulatory Reports was true and correct and complied in all material respects with applicable laws, rules and regulations.

4.8    Subsidiaries. Except for the stock of CBT owned by CBCS and except as otherwise disclosed on Schedule 4.8, neither CBCS nor CBT owns any stock, partnership interest, joint venture interest or any other security issued by any other corporation, organization or entity, except securities owned by CBT in the ordinary course of its business. Except as otherwise disclosed on Schedule 4.8, all of the Subsidiaries set forth in Schedule 4.8 have ceased conducting business, are inactive and are not subject to any Liability.

4.9    Books and Records. The books of account of CBCS and the Subsidiaries, including CBT, are complete and correct and have been maintained in accordance with sound business practices. To the Knowledge of CBCS, each transaction is properly and accurately recorded on the books and records of CBCS or CBT, and each document upon which entries in CBCS or CBT’s books and records are based is complete and accurate in all respects. CBCS, CBT and each other Subsidiary, maintains a system of internal control over financial reporting sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP, including reasonable assurance (A) that transactions are executed in accordance with management’s general or specific authorizations and recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability and (B) regarding prevention or timely detection of any unauthorized acquisition, use or disposition of assets that could have a material effect on the Company’s financial statements. The minute books and stock or equity records of each of CBCS and the Subsidiaries, including CBT, all of which have been made available to Heartland, are complete and correct. The minute books of each of CBCS and the

Subsidiaries, including CBT, contain accurate records of all meetings held and actions taken by the holders of stock or equity interests, the boards of directors and committees of the boards of directors or other governing body of each of CBCS and the Subsidiaries, including CBT, and no meeting of any such holders, boards of directors or other governing body or committees has been held for which minutes are not contained in such minute books. At the Closing, all such books and records will be in the possession of CBCS.

4.10    No Material Adverse Changes. Since the date of the Latest Balance Sheets, there has been no material adverse change in, and no event, occurrence or development in the business of CBCS or CBT that, taken together with other events, occurrences and developments with respect to such business, has had, or would reasonably be expected to have, a Material Adverse Effect.

4.11    Absence of Certain Developments. Except as contemplated by this Agreement or as set forth in the Latest Balance Sheets, the Related Statements or on Schedule 4.11, since June 30, 2014, neither CBCS, CBT nor any other Subsidiary has:

(a)    issued or sold any of its equity securities, securities convertible into or exchangeable for its equity securities, warrants, options or other rights to acquire its equity securities, or any bonds or other securities, except deposit and other bank obligations and investment securities in the ordinary course of business;

(b)    redeemed, purchased, acquired or offered to acquire, directly or indirectly, any shares of its capital stock or other securities;

(c)    split, combined or reclassified any of its outstanding shares of capital stock or declared, set aside or paid any dividends or other distribution payable in cash, property or otherwise with respect to any shares of its capital stock of CBCS or CBT or other securities;

(d)    incurred any Liability (other than Liabilities not required to be reflected in a balance sheet prepared in accordance with GAAP or the disclosed in the footnotes thereto), whether due or to become due, other than in the Ordinary Course of Business and consistent with safe and sound banking practices;

(e)    discharged or satisfied any Encumbrance or paid any Liability other than in the Ordinary Course of Business and consistent safe and sound banking practices;

(f)    mortgaged or subjected to Encumbrance any of its property, business or assets, tangible or intangible except (i) for Permitted Encumbrances, (ii) for pledges of assets to secure public funds deposits, and (iii) for those assets and properties disposed of for fair value in the Ordinary Course of Business since June 30, 2014;

(g)    sold, transferred or otherwise disposed of any of its assets or canceled any material debts or claims or waived any rights of material value, other than in the Ordinary Course of Business and consistent with prudent banking practices;

(h)    suffered any theft, damage, destruction or loss of or to any property or properties owned or used by it, whether or not covered by insurance, which would, individually or in the aggregate, have a Material Adverse Effect;

(i)    made or granted any bonus or any wage, salary or compensation increase or severance or termination payment to, or promoted, any director, officer, employee, group of employees or consultant, entered into any employment contract or hired any employee, in each case, other than in the Ordinary Course of Business and consistent with past practice as such past practice has been disclosed to Heartland;

(j)    made or granted any increase in the benefits payable under any employee benefit plan or arrangement, amended or terminated any existing employee benefit plan or arrangement or adopted any new employee benefit plan or arrangement, except as required by law;

(k)    made any single or group of related capital expenditures or commitment therefor in excess of $50,000 or entered into any lease or group of related leases with the same party which involves aggregate lease payments payable of more than $50,000 for any individual lease or involves more than $100,000 for any group of related leases in the aggregate;

(l)    acquired (by merger, exchange, consolidation, acquisition of stock or assets or otherwise) any corporation, partnership, joint venture or other business organization or division or material assets thereof, or assets or deposits that are material to CBCS;

(m)    taken any other action or entered into any other transaction other than in the Ordinary Course of Business;

(n)    made any change in its accounting methods or practices, other than changes required by law or regulation made in accordance with GAAP or regulatory accounting principles generally applicable to depository institutions such as CBT, as the case may be; or

(o)    agreed to do any of the foregoing.

4.12    Properties.

(a)    The real properties owned by, or demised by the leases to, CBCS, CBT and the other Subsidiaries are listed on Schedule 4.12, and constitute all of the real property owned, leased (whether or not occupied and including any leases assigned or leased premises sublet for which CBCS remains liable), owned, used or occupied by CBCS, CBT or any other Subsidiary

(b)    CBCS or CBT owns good and marketable title to each parcel of real property identified on Schedule 4.12 as being owned by CBCS or CBT (the “Owned Real Property”), free and clear of any Encumbrance, except for Permitted Encumbrances.

(c)    The leases of real property listed on Schedule 4.12 as being leased by CBCS, CBT or another Subsidiary (the “Leased Real Property” and together with the Owned Real Property is hereafter referred to as the “Real Property,” and the Real Property occupied by

CBCS, CBT or another Subsidiary in the conduct of their respective businesses is hereafter referred to as the “Operating Real Property”) are in full force and effect, and CBCS, CBT or another Subsidiary holds a valid and existing leasehold interest under each of the leases for the term listed on Schedule 4.12. The Leased Real Property is subject to no Encumbrance or interests that would entitle the holder thereof to interfere with or disturb use or enjoyment of the Leased Real Property or the exercise by the lessee of its rights under such lease so long as the lessee is not in default under such lease.

(d)    Each parcel of Operating Real Property has access sufficient for the conduct of the business as conducted by CBCS, CBT or any Subsidiary on such parcel of Operating Real Property to public roads and to all utilities, including electricity, sanitary and storm sewer, potable water, natural gas, telephone, fiberoptic, cable television, and other utilities used in the operation of the business at that location. The zoning for each parcel of Operating Real Property permits the existing improvements and the continuation of the business being conducted thereon as a conforming use. To the Knowledge of CBCS, neither CBCS, CBT nor any other Subsidiary is in violation of any applicable zoning ordinance or other Law relating to the Operating Real Property, and neither CBCS, CBT nor any other Subsidiary has received any written notice of any such violation or the existence of any condemnation or other proceeding with respect to any of the Operating Real Property. The buildings and other improvements are located within the boundary lines of each parcel of Operating Real Property and do not encroach over applicable setback lines. To the Knowledge of CBCS, there are no improvements contemplated to be made by any Governmental Entity, the costs of which are to be assessed as assessments, special assessments, special Taxes or charges against any of the Operating Real Property

(e)    Each of CBCS, CBT and the other Subsidiaries has good and marketable title to, or a valid leasehold interest in, the buildings, machinery, equipment and other tangible assets and properties used by it, located on its premises or shown in the Latest Balance Sheet, free and clear of all Encumbrances, except for Permitted Encumbrances and properties and assets disposed of in the Ordinary Course of Business since the date of the Latest Balance Sheet.

(f)    Except as set forth in Schedule 4.12, all of the buildings, fixtures, furniture and equipment necessary for the conduct of the business of CBCS or CBT are in adequate condition and repair, ordinary wear and tear excepted, and are usable in the Ordinary Course of Business. Each of CBCS and CBT owns, or leases under valid leases, all buildings, fixtures, furniture, personal property, land improvements and equipment necessary for the conduct of its business as it is presently being conducted.

4.13    Environmental Matters.

(a)    As used in this Section 4.13(a), the following terms have the following meanings:

(i)    “Environmental Costs” means any and all costs and expenditures, including any fees and expenses of attorneys and of environmental consultants or engineers incurred in connection with investigating, defending, remediating or otherwise responding to any Release of Hazardous Materials, any violation or alleged violation of Environmental Law, any fees, fines, penalties or charges

associated with any governmental authorization, or any actions necessary to comply with any Environmental Law.

(ii)    “Environmental Law” means any law, governmental authorization or governmental order relating to pollution, contamination, Hazardous Materials or protection of the environment.

(iii)    “Hazardous Materials” means any dangerous, toxic or hazardous pollutant, contaminant, chemical, waste, material or substance as defined in or governed by any law relating to such substance or otherwise relating to the environment or human health or safety, including any waste, material, substance, pollutant or contaminant that might cause any injury to human health or safety or to the environment or might subject the owner or operator of the Real Property to any Environmental Costs or liability under any Environmental Law.

(iv)    “List” means the United States Environmental Protection Agency’s National Priorities List of Hazardous Waste Sites or any other list, schedule, log, inventory or record, however defined, maintained by any governmental entity with respect to sites from which there has been a Release of Hazardous Materials.

(v)    “Regulatory Action” means any litigation with respect to CBCS or any Subsidiary brought or instigated by any governmental entity in connection with any Environmental Costs, Release of Hazardous Materials or any Environmental Law.

(vi)    “Release” means the spilling, leaking, disposing, discharging, emitting, depositing, ejecting, leaching, escaping or any other release or threatened release, however defined, whether intentional or unintentional, of any Hazardous Material.

(vii)    “Third-Party Environmental Claim” means any litigation (other than a Regulatory Action) based on negligence, trespass, strict liability, nuisance, toxic tort or any other cause of action or theory relating to any Environmental Costs, Release of Hazardous Materials or any violation of Environmental Law.

(b)    No Third-Party Environmental Claim or Regulatory Action is pending or, to the Knowledge of CBCS, threatened against CBCS or any Subsidiary.

(c)    The Owned Real Property is not, and to CBCS’s Knowledge the Leased Real Property is not, listed on a List.

(d)    All transfer, transportation or disposal of Hazardous Materials by CBCS, CBT or any other Subsidiary to properties not owned, leased or operated by CBCS, CBT or any other Subsidiary has been in compliance with applicable Environmental Law. CBCS has not transported or arranged for the transportation of any Hazardous Materials to any location that is (i) listed on a List, (ii) listed for possible inclusion on any List or (iii) the subject of any Regulatory Action or Third-Party Environmental Claim.

(e)    To CBCS’s Knowledge, no Owned Real Property has ever been used as a landfill, dump or other disposal, storage, transfer, handling or treatment area for Hazardous Materials, or as a gasoline service station or a facility for selling, dispensing, storing, transferring, disposing or handling petroleum and/or petroleum products.

(f)    There has not been any Release of any Hazardous Material by CBCS, CBT or any other Subsidiary, or any person under their respective control, or to the Knowledge of CBCS by any other person, on, under, about, from or in connection with the Real Property, including the presence of any Hazardous Materials that have come to be located on or under the Real Property from another location.

(g)    The Operating Real Property has been so used and operated in compliance with all applicable Environmental Law.

(h)    Each of CBCS, CBT and the other Subsidiaries has obtained all Governmental Authorizations relating to the Environmental Law necessary for the operations of CBCS and each of its Subsidiaries and all such Governmental Authorizations relating to the Environmental Law are listed on Schedule 4.13. To CBCS’s Knowledge, the Governmental Authorizations relating to the Environmental Law will be valid and in full force and effect upon consummation of the transactions contemplated by this Agreement. Each of CBCS, CBT and the other Subsidiaries has filed all reports and notifications required to be filed under and pursuant to all applicable Environmental Law.

(i)    No Hazardous Materials have been generated, treated, contained, handled, located, used, manufactured, processed, buried, incinerated, deposited or stored on, under or about any part of the Owned Real Property by CBCS, CBT or any Subsidiary, or to CBCS’s Knowledge, any other person. The Owned Real Property contains no asbestos, urea, formaldehyde, radon at levels above natural background, PCBs or pesticides. No aboveground or underground storage tanks are located on, under or about the Owned Real Property, or have been located on, under or about the Owned Real Property and then subsequently been removed or filled. If any such storage tanks exist on, under or about the Owned Real Property, such storage tanks have been duly registered with all appropriate governmental entities and are otherwise in compliance with all applicable Environmental Law.

(j)    To CBCS’s Knowledge, no expenditure will be required in order for Heartland, CBT or any CBCS Subsidiary to comply with any Environmental Law in effect at the time of Closing in connection with the operation or continued operation of the Owned Real Property in a manner consistent with the present operation thereof.

(k)    To CBCS’s Knowledge, no Encumbrance has been attached or filed against CBCS or any Subsidiary in favor of any Person for (i) any liability under or violation of any applicable Environmental Law, (ii) any Release of Hazardous Materials or (iii) any imposition of Environmental Costs.

4.14    Tax Matters

(a)Except as disclosed on Schedule4.14, each of CBCS and each Tax Affiliate, (i) has timely filed (or has had timely filed on its behalf) each Return required to be

filed or sent by it in respect of any Taxes or required to be filed or sent by it by any Governmental Entity, each of which was correctly completed and accurately reflected any liability for Taxes of CBCS and any Tax Affiliate covered by such Return, (ii) timely and properly paid (or had paid on its behalf) all Taxes due and payable for all Tax periods or portions thereof whether or not shown on such Returns, (iii) established on CBCS’ books of account, in accordance with GAAP and consistent with past practices, adequate reserves for the payment of any Taxes not then due and payable and (iv) complied with all applicable Laws relating to the withholding of Taxes and the payment thereof

(b)    Each of CBCS and any Tax Affiliate has made (or caused to be made on its behalf) all estimated tax payments required to have been made to avoid any underpayment penalties.

(c)    There are no Encumbrances for Taxes upon any assets of CBCS or any Tax Affiliate, except Encumbrances for Taxes not yet due.

(d)    Neither CBCS nor any Tax Affiliate has requested any extension of time within which to file any Return, which Return has not since been filed.

(e)    No deficiency for any Taxes has been proposed, asserted or assessed against CBCS or any Tax Affiliate that has not been resolved and paid in full. No waiver, extension or comparable consent given by CBCS or any Tax Affiliate regarding the application of the statute of limitations with respect to any Taxes or any Return is outstanding, nor is any request for any such waiver or consent pending. There has been no Tax audit or other administrative proceeding or court proceeding with regard to any Taxes or any Return for any Tax year subsequent to the year ended December 31, 2008, nor is any such Tax audit or other proceeding pending, nor has there been any notice to CBCS or any Tax Affiliate by any Governmental Entity regarding any such Tax audit or other proceeding, or is any such Tax audit or other proceeding threatened with regard to any Taxes or Returns. There are no outstanding subpoenas or requests for information with respect to any of the Returns of CBCS or any Tax Affiliate. Neither CBCS nor any Tax Affiliate has entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision under any other Law.

(f)    No additional Taxes will be assessed against CBCS or any Tax Affiliate for any Tax period or portion thereof ending on or prior to the Closing Date, and there are no unresolved questions, claims or disputes concerning the liability for Taxes of CBCS or any Tax Affiliate, that would exceed the estimated reserves established on its books of account.

(g)    Schedule 4.14(g) lists all federal, state, local and foreign income Returns filed with respect to CBCS or any Tax Affiliate for taxable periods ended on or after December 31, 2008, indicates those Returns that have been audited and indicates those Returns that currently are the subject of audit. True and complete copies of the Returns of CBCS and all Tax Affiliates, as filed with the IRS and all state tax jurisdictions for the years ended December 31, 2010, 2011, 2012 and 2013 have been delivered to Heartland.

(h)    Neither CBCS nor any Tax Affiliate has any liability for Taxes in a jurisdiction where it does not file a Return, nor has CBCS or any Tax Affiliate received notice

from a taxing authority in such a jurisdiction that it is or may be subject to taxation by that jurisdiction.

(i)    Neither CBCS nor any Tax Affiliate is a party to any Contract that would result, separately or in the aggregate, in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code, and the consummation of the transactions contemplated by this Agreement will not be a factor causing payments to be made by CBCS or any Tax Affiliate that are not deductible (in whole or in part) as a result of the application of Section 280G of the Code.

(j)    No property of CBCS or any Tax Affiliate is (i) property that CBCS or any Tax Affiliate is or will be required to treat as being owned by another Person under the provisions of Section 168(f)(8) of the Code (as in effect prior to amendment by the Tax Reform Act of 1986), (ii) “tax-exempt use property” within the meaning of Section 168(h) of the Code or (iii) “tax-exempt bond financed property” within the meaning of Section 168(g)(5) of the Code.

(k)    Neither CBCS nor any Tax Affiliate is required to include in income any adjustment under either Section 481(a) or Section 482 of the Code (or an analogous provision of Law) by reason of a voluntary change in accounting method or otherwise, and the IRS has not proposed any such adjustment or change in accounting method.

(l)    All transactions that could give rise to an underpayment of tax (within the meaning of Section 6662 of the Code) were reported by CBCS and each Tax Affiliate in a manner for which there is substantial authority or were adequately disclosed on the Returns as required in accordance with Section 6662(d)(2)(B) of the Code.

(m)    Neither CBCS nor any Tax Affiliate is a party to any Tax allocation or sharing agreement with any entity that is not a Tax Affiliate.

(n)    Neither CBCS, CBT nor any other Subsidiary (i) has been a member of an affiliated group filing a consolidated Return (other than a group the common parent of which was CBCS) or (ii) has any liability for the Taxes of any Person (other than CBCS, CBT or any other Subsidiary) under Treasury Regulations Section 1.1502-6 (or any similar provision of Law), as a transferee or successor, by Contract, or otherwise.

(o)    Neither CBCS, CBT nor any other Subsidiary constitutes either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of shares qualifying for tax-free treatment under Section 355 of the Code (i) that took place during the two-year period ending on the date of this Agreement or (ii) that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the purchase of the Shares.

(p)    None of the indebtedness of CBCS or any Tax Affiliate constitutes (i) “corporate acquisition indebtedness” (as defined in Section 279(b) of the Code) with respect to which any interest deductions may be disallowed under Section 279 of the Code or (ii) an “applicable high yield discount obligation” under Section 163(i) of the Code, and none of the

interest on any such indebtedness will be disallowed as a deduction under any other provision of the Code.

(q)    Neither CBCS nor any Tax Affiliate has engaged in any transaction that is subject to disclosure under present or former Treasury Regulations Sections 1.6011-4 or 1.6011-4T, as applicable.

(r)    There is no Contract, plan or arrangement, including this Agreement, by which any current or former employee of CBCS, CBT or any other Subsidiary would be entitled to receive any payment from CBCS, CBT or any other Subsidiary as a result of the transactions contemplated by this Agreement that would not be deductible pursuant to Section 404 or 162(m) of the Code.

(s)    Neither CBCS nor any Tax Affiliate has been a member of any partnership or joint venture or the holder of a beneficial interest in any trust for any period for which the statute of limitations for any Taxes potentially applicable as a result of such membership or holding has not expired.

(t)    Neither CBCS nor any Tax Affiliate is subject to accumulated earnings tax penalty or has received any notification regarding a personal holding company tax.

(u)    Neither CBCS nor any Tax Affiliate has a permanent establishment or otherwise has an office or fixed place of business outside the United States of America.

(v)    Neither CBCS nor any Tax Affiliate has participated in any confidential corporate tax shelter (within the meaning of Treasury Regulation §301.6111-2(a)(2)) or a potentially abusive tax shelter (within the meaning of Treasury Regulation §301.6112-1(b)).

(w)    Neither CBCS nor any Tax Affiliate has a pending private letter ruling from the IRS or any comparable ruling from any other taxing authority.

(x)    Neither CBCS nor any Tax Affiliate has engaged in any transactions that would cause any limitation under Code Section 382.

4.15    Contracts and Commitments

(a)    Schedule 4.15 lists the following Contracts to which CBCS, CBT or any other Subsidiary is a party or subject or by which it is bound (with the Contracts required to be listed on Schedule 4.15, the “Material Contracts”):

(i)    any employment, agency, collective bargaining Contract or consulting Contract;

(ii)    any written or oral Contract relating to any severance pay for any person;

(iii)    any written or oral agreement or understanding to repurchase assets previously sold (or to indemnify or otherwise compensate the purchaser in

respect of such assets), except for securities sold under a repurchase agreement providing for a repurchase date 30 days or less after the purchase date;

(iv)    any (A) contract or group of related contracts with the same party for the purchase or sale of products or services, under which the undelivered balance of such products and services has a purchase price in excess of $50,000 for any individual contract or $100,000 for any group of related contracts in the aggregate, or (B) other contract or group of related contracts with the same party continuing over a period of more than six months from the date or dates thereof, which is not entered into in the Ordinary Course of Business and is either not terminable by it on 30 days’ or less notice without penalty or involves more than $50,000 for any individual contract or $100,000 in the aggregate for any group of related contracts,

(v)    any Contract containing exclusivity, noncompetition or nonsolicitation provisions or that would otherwise prohibit CBCS, CBT or any other Subsidiary from freely engaging in business anywhere in the world or prohibiting the solicitation of the employees or contractors of any other entity;

(vi)    any stock purchase plan, stock option plan or stock incentive plan;

(vii)    any Contract for capital expenditures in excess of $50,000;

(viii)    any other Contract material to the business of CBCS, CBT and the other Subsidiaries, taken as a whole, which is not entered into in the Ordinary Course of Business.

(b)    Except as disclosed on Schedule 4.15(b), (i) each of CBCS, CBT and the other Subsidiaries has performed all obligations required to be performed by it prior to the date hereof in connection with the contracts or commitments set forth on Schedule 4.14(b), and neither CBCS nor any Subsidiary is in receipt of any claim of default under any contract or commitment set forth on Schedule 4.15(b), except for any failures to perform, breaches or defaults which would not, individually or in the aggregate, have a Material Adverse Effect; (ii) neither CBCS, CBT nor any other Subsidiary has any present expectation or intention of not fully performing any material obligation pursuant to any contract or commitment set forth on Schedule 4.15; and (iii) to the Knowledge of CBCS, there has been no cancellation, breach or anticipated breach by any other party to any contract or commitment set forth on Schedule 4.15, except for any cancellation, breach or anticipated breach which would not, individually or in the aggregate, have a Material Adverse Effect.

4.16    Litigation. Schedule 4.16 lists all Litigation pending or, to the Knowledge of CBCS, threatened against CBCS, CBT or any Subsidiary and each Governmental Order to which CBCS, CBT or any other Subsidiary is subject. None of the matters set forth on Schedule 4.16, individually or in the aggregate, will have or could reasonably be expected to have a Material Adverse Effect.

4.17    No Brokers or Finders. Except as disclosed on Schedule 4.17, there are no claims for brokerage commissions, finders’ fees, investment advisory fees or similar

compensation in connection with the transactions contemplated by this Agreement based on any arrangement, understanding, commitment or agreement made by or on behalf of CBCS or any Subsidiary.

4.18    Employees

(a)    Schedule 4.18(a) lists (i) each employee of CBCS, CBT or any other Subsidiary as of the date of this Agreement, and indicates for each such employee, and in the aggregate, (ii) whether such employee is full-time, part-time or on temporary status, (iii) whether such employee is a salaried employee, (iv) the employee’s annual salary, wages and any other compensation payable (including compensation payable pursuant to bonus, incentive, deferred compensation or commission arrangements), (v) the date of commencement of the employee’s employment, and (vi) the employee’s position. To CBCS’s Knowledge, and except as set forth in Schedule 4.18(a), no executive employee of CBCS, CBT or any other Subsidiary and no group of employees of CBCS or any Subsidiary has any plans to terminate his, her or their employment. Each of CBCS, CBT and the other Subsidiaries has complied in all material respects with all applicable laws relating to employment and employment practices and those relating to the calculation and payment of wages (including overtime pay, maximum hours of work and child labor restrictions), equal employment opportunity (including laws prohibiting discrimination and/or harassment or requiring accommodation on the basis of race, color, national origin, religion, gender, disability, age, sexual orientation or otherwise), affirmative action and other hiring practices, occupational safety and health, workers compensation, unemployment, the payment of social security and other Taxes, and unfair labor practices under the National Labor Relations Act or applicable state law. Neither CBCS, CBT nor any other Subsidiary has any labor relations problem pending or, to the Knowledge of CBCS, threatened and its labor relations are satisfactory. There are no workers’ compensation claims pending against CBCS, CBT or any other Subsidiary or, to the Knowledge of CBCS, any facts that would give rise to such a claim, that are not fully covered by insurance indemnity with respect to the amount of such claims. No employee of CBCS, CBT or any other Subsidiary is subject to any secrecy or noncompetition agreement or any other agreement or restriction of any kind that would impede in any way the ability of such employee to carry out fully all activities of such employee in furtherance of the business of CBCS.

(b)    Schedule 4.18(b) lists each employee of CBCS, CBT or any Subsidiary as of the date of this Agreement who holds a temporary work authorization, including H-1B, L-1, F-1 or J-1 visas or work authorizations (the “Work Permits”), and shows for each such employee the type of Work Permit and the length of time remaining on such Work Permit. With respect to each Work Permit, all of the information that CBCS, CBT or any other Subsidiary provided to the Department of Labor and the Immigration and Naturalization Service or the Department of Homeland Security (collectively, the “Department”) in the application for such Work Permit was true and complete. CBCS, CBT or a Subsidiary received the appropriate notice of approval from the Department with respect to each such Work Permit. Neither CBCS, CBT nor any other Subsidiary has received any notice from the Department that any Work Permit has been revoked. There is no action pending or, to the Knowledge of CBCS, threatened to revoke or adversely modify the terms of any of the Work Permit. Except as set forth in Schedule 4.18(b), no employee of CBCS, CBT or any Subsidiary is (a) a non-immigrant employee whose status would terminate or otherwise be affected by the transactions contemplated by this Agreement, or (b) an

alien who is authorized to work in the United States in non-immigrant status. For each employee of the CBCS, CBT or any other Subsidiary hired after November 6, 1986, CBCS or such Subsidiary has retained an Immigration and Naturalization Service Form I-9, completed in accordance with applicable Law.

(c)    The employment of all terminated former employees of CBCS, CBT and all other Subsidiaries has been terminated in accordance with any applicable contract terms and applicable law, and neither CBCS, CBT nor any other Subsidiary has any liability under any contract or applicable law toward any such terminated employee. Except as set forth in Schedule 4.18(c), the transactions contemplated by this Agreement will not cause CBCS, CBT or any other Subsidiary to incur or suffer any liability relating to, or obligation to pay, severance, termination or other payment to any Person.

(d)    All loans that CBCS, CBT or any other Subsidiary have outstanding to any employee were made in the Ordinary Course of Business on the same terms as would have been provided to a Person not Affiliated with CBCS or CBT, and all such loans with a principle balance exceeding $250,000, or that are nonaccrual or on a watch list, are set forth in Schedule 4.18(d).

(e)    Within the last five years, neither CBCS, CBT nor any other Subsidiary has experienced and, to the Knowledge of CBCS, there has not been threatened, any strike, work stoppage, slowdown, lockout, picketing, leafleting, boycott, other labor dispute, union organization attempt, demand for recognition from a labor organization or petition for representation under the National Labor Relations Act or applicable state law. No grievance, demand for arbitration or arbitration proceeding arising out of or under any collective bargaining agreement is pending or, to the Knowledge of CBCS, threatened. No Litigation is pending or, to the Knowledge of CBCS, threatened respecting or involving any applicant for employment, any current employee or any former employee, or any class of the foregoing, including:

(i)    the Equal Employment Opportunity Commission or any other corresponding state or local fair employment practices agency relating to any claim or charge of discrimination or harassment in employment;

(ii)    the United States Department of Labor or any other corresponding state or local agency relating to any claim or charge concerning hours of work, wages or employment practices;

(iii)    the Occupational Safety and Health Administration or any other corresponding state or local agency relating to any claim or charge concerning employee safety or health;

(iv)    the Office of Federal Contract Compliance or any corresponding state agency; and

(v)    the National Labor Relations Board or any corresponding state agency, whether relating to any unfair labor practice or any question concerning representation,

and there is no reasonable basis for any such Litigation.

(f)    No employee of CBCS, CBT or any other Subsidiary is covered by any collective bargaining agreement, and no collective bargaining agreement is being negotiated.

(g)    Each of CBCS, CBT and the other Subsidiaries has paid in full to all employees all wages, salaries, bonuses and commissions due and payable to such employees and has fully reserved in its books of account all amounts for wages, salaries, bonuses and commissions due but not yet payable to such employees.

(h)    There has been no lay-off of employees or work reduction program undertaken by or on behalf of CBCS, CBT or any other Subsidiary in the past two years, and no such program has been adopted by CBCS, CBT or any other Subsidiary or publicly announced

4.19    Employee Benefit Plans

(a)    Schedule 4.19 sets forth all Plans by name and brief description identifying: (i) the type of Plan, (ii) the funding arrangements for the Plan, (iii) the sponsorship of the Plan, (iv) the participating employers in the Plan, and (v) any one or more of the following characteristics that may apply to such Plan: (A) defined contribution plan as defined in Section 3(34) of ERISA or Section 414(i) of the Code, (B) defined benefit plan as defined in Section 3(35) of ERISA or Section 414(j) of the Code, (C) Plan that is or is intended to be tax qualified under Section 401(a) or 403(a) of the Code, (D) Plan that is or is intended to be an employee stock ownership plan as defined in Section 4975(e)(7) of the Code (and whether or not such Plan has entered into an exempt loan), (E) nonqualified deferred compensation arrangement, (F) employee welfare benefit plan as defined in Section 3(1) of ERISA, (G) multiemployer plan as defined in Section 3(37) of ERISA or Section 414(f) of the Code, (H) multiple employer plan maintained by more than one employer as defined in Section 413(c) of the Code, (I) Plan providing benefits after separation from service or termination of employment, (J) Plan that owns any CBCS or other employer securities as an investment, (K) Plan that provides benefits (or provides increased benefits or vesting) as a result of a change in control of CBCS, (L) Plan that is maintained pursuant to collective bargaining and (M) Plan that is funded, in whole or in part, through a voluntary employees’ beneficiary association exempt from Tax under Section 501(c)(9) of the Code.

(b)    Schedule 4.19 sets forth the identity of each corporation, trade or business (separately for each category below that applies): (i) which is (or was during the preceding five years) under common control with CBCS, CBT or any other Subsidiary within the meaning of Section 414(b) or (c) of the Code; (ii) which is (or was during the preceding five years) in an affiliated service group with CBCS, CBT or any other Subsidiary within the meaning of Section 414(m) of the Code; (iii) which is (or was during the preceding five years) the legal employer of persons providing services to CBCS, CBT or any other Subsidiary as leased employees within the meaning of Section 414(n) of the Code; and (iv) with respect to which CBCS, CBT or any other Subsidiary is a successor employer for purposes of group health or other welfare plan continuation rights (including Section 601 et. seq. of ERISA) or the Family and Medical Leave Act.

(c)    CBCS has furnished Heartland with true and complete copies of: (i) the most recent determination letter, if any, received by CBCS, CBT or any other Subsidiary from the Internal Revenue Service regarding each Plan; (ii) the most recent determination or opinion letter ruling, if any, from the Internal Revenue Service that each trust established in connection with plans which are intended to be tax exempt under Section 501(a) or (c) of the Code are so tax exempt; (iii) all pending applications, if any, for rulings, determinations, opinions, no-action letters and the like filed with any governmental agency (including but not limited to the Department of Labor, Internal Revenue Service, Pension Benefit Guaranty Corporation and the Securities and Exchange Commission); (iv) the financial statements for each Plan for the three most recent fiscal or Plan years (in audited form if required by ERISA) and, where applicable, Annual Report/Return (Form 5500) with schedules, if any, and attachments for each Plan; (v) the most recently prepared actuarial valuation report for each Plan (including but not limited to reports prepared for funding, deduction and financial accounting purposes); (vi) plan documents, trust agreements, insurance contracts, service agreements and all related contracts and documents (including any employee summaries and material employee communications) with respect to each Plan, if any; and (vii) collective bargaining agreements (including side agreements and letter agreements) relating to the establishment, maintenance, funding and operation of any Plan, if any.

(d)    Schedule 4.19 identifies each employee of CBCS, CBT or any other Subsidiary who is: (i) absent from active employment due to short or long term disability; (ii) absent from active employment on a leave pursuant to the Family and Medical Leave Act or a comparable state law; (iii) absent from active employment on any other leave or approved absence; (iv) absent from active employment due to military service (under conditions that give the employee rights to re-employment); or (v) not an “at will” employee.

(e)    With respect to continuation rights arising under federal or state law as applied to Plans that are group health plans (as defined in Section 601 et. seq. of ERISA), Schedule 4.19 identifies: (i) each employee, former employee or qualifying beneficiary who has elected continuation; and (ii) each employee, former employee or qualifying beneficiary who has not elected continuation coverage but is still within the period in which such election may be made.

(f)    (i) All Plans intended to be tax qualified under Section 401(a) or Section 403(a) of the Code have received a determination letter stating that they are so qualified; (ii) all trusts established in connection with Plans which are intended to be tax exempt under Section 501(a) or (c) of the Code have received a determination letter stating that they are so tax exempt; (iii) to the extent required either as a matter of law or to obtain the intended tax treatment and tax benefits, all Plans comply in all material respects with the requirements of ERISA and the Code; (iv) all Plans have been administered materially in accordance with the documents and instruments governing the Plans; (v) all reports and filings with governmental agencies (including but not limited to the Department of Labor, Internal Revenue Service, Pension Benefit Guaranty Corporation and the Securities and Exchange Commission) required in connection with each Plan have been timely made; (vi) all disclosures and notices required by law or Plan provisions to be given to participants and beneficiaries in connection with each Plan have been properly and timely made in all material respects; and (vii) each of CBCS and the Subsidiaries, including CBT, has made a good faith effort to comply with the reporting and taxation

requirements for FICA taxes with respect to any deferred compensation arrangements under Section 3121(v) of the Code.

(g)    (i) All contributions, premium payments and other payments required to be made in connection with the Plans have been made, (ii) a proper accrual has been made on the books of account of CBCS for all contributions, premium payments and other payments due in the current fiscal year, (iii) no contribution, premium payment or other payment has been made in support of any Plan that is in excess of the allowable deduction for federal income Tax purposes for the year with respect to which the contribution was made (whether under Section 162, Section 280G, Section 404, Section 419, Section 419A of the Code or otherwise) and (iv) with respect to each Plan that is subject to Section 301 et seq. of ERISA or Section 412 of the Code, CBCS is not liable for any “accumulated funding deficiency” as that term is defined in Section 412 of the Code and the projected benefit obligations do not exceed the assets of the Plan.

(h)    Absence of certain claims. Except as disclosed on Schedule 4.19:

(i)    no action, suit, charge, complaint, proceeding, hearing, investigation or claim is pending with regard to any Plan other than routine uncontested claims for benefits;

(ii)    the consummation of the transactions contemplated by this Agreement will not cause any Plan to increase benefits payable to any participant or beneficiary;

(iii)    the consummation of the transactions contemplated by this Agreement will not: (A) entitle any current or former employee of CBCS, CBT or any other Subsidiary to severance pay, unemployment compensation or any other payment, benefit or award, or (B) accelerate or modify the time of payment or vesting, or increase the amount of any benefit, award or compensation due any such employee;

(iv)    CBCS has not been notified that any Plan is currently under examination or audit by the Department of Labor, the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the Securities and Exchange Commission;

(v)    to CBCS’s Knowledge, neither CBCS, CBT nor any other Subsidiary has any actual or potential liability arising under Title IV of ERISA as a result of any Plan that has terminated or is in the process of terminating;

(vi)    to CBCS’s Knowledge, neither CBCS, CBT nor any other Subsidiary has any actual or potential liability under Section 4201 et. seq. of ERISA for either a complete withdrawal or a partial withdrawal from a multiemployer plan; and

(vii)    with respect to the Plans, to CBCS’s Knowledge neither CBCS, CBT nor any other Subsidiary has any liability (either directly or as a result of

indemnification) for (and the transaction contemplated by this Agreement will not cause any liability for): (A) any excise taxes under Section 4971 through Section 4980B, Section 4999, Section 5000 or any other section of the Code, or (B) any penalty under Section 502(i), Section 502(l), Part 6 of Title I or any other provision of ERISA, or (C) any excise taxes, penalties, damages or equitable relief as a result of any prohibited transaction, breach of fiduciary duty or other violation under ERISA or any other applicable law.

(i)    Except as disclosed on Schedule 4.19:

(i)    all accruals required under FAS 106 and FAS 112 have been properly accrued on the financial statements of each of CBCS, CBT and any other Subsidiary;

(ii)    no condition, agreement or Plan provision limits the right of CBCS or any Subsidiary to amend, cut back or terminate any Plan (except to the extent such limitation arises under ERISA or the Code); and

(iii)    neither CBCS, CBT nor any other Subsidiary has any liability for life insurance, death or medical benefits after separation from employment other than: (A) death benefits under the Plans identified on Schedule 4.19, or (B) health care continuation benefits described in Section 4980B of the Code.

(j)    Each Plan, or other nonqualified deferred compensation plan, that is subject to Section 409A of the Code has been designed and has been administered in compliance with Section 409A and the Treasury Regulations thereunder

4.20    Insurance.Schedule 4.20 hereto lists each insurance policy maintained by CBCS, CBT or any other Subsidiary with respect to its properties and assets. Prior to the date hereof, CBCS has delivered to Heartland complete and accurate copies of each of the insurance policies described on Schedule 4.20. All such insurance policies are in full force and effect, and neither CBCS nor CBT is in default with respect to its obligations under any of such insurance policies.

4.21    Affiliate Transactions.Except as set forth on Schedule 4.21, neither CBCS, CBT nor any other Subsidiary, nor any of their respective executive officers or directors, or any member of the immediate family of any such executive officer or director (which for the purposes hereof shall mean a spouse, minor child or adult child living at the home of any such executive officer or director), or any entity which any of such persons “controls” (within the meaning of Regulation O of the FRB), has any loan agreement, note or borrowing arrangement or any other agreement with CBCS, CBT or any other Subsidiary (other than normal employment arrangements or deposit account relationships) or any interest in any property, real, personal or mixed, tangible or intangible, used in or pertaining to the business of CBCS, CBT or any other Subsidiary.

4.22    Compliance with Laws; Permits.Each of CBCS, CBT and the other Subsidiaries is in compliance in all material respects with all Laws, Governmental Orders or Governmental Authorizations, including, without limitation, the Bank Holding Company Act, the FDIA, the Occupational Safety and Health Act of 1970, the Home Owners Loan Act, the

Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act of 1975, the Fair Housing Act, the Equal Credit Opportunity Act and the Federal Reserve Act, each as amended, and any other applicable Governmental Order or Governmental Authorization regulating or otherwise affecting bank holding companies, banks and banking; and no claims have been filed by any Governmental Authority against CBCS, CBT or the other Subsidiaries alleging such a violation of any such Law which have not been resolved to the satisfaction of such Governmental Authority; and no claims have been filed by any such governments or agencies against CBCS, CBT or any other Subsidiary alleging such a violation of any such law or regulation which have not been resolved to the satisfaction of such governments or agencies. Each of CBCS, CBT and the other Subsidiaries holds all of Governmental Authorizations required for the conduct of its business. Neither CBCS, CBT nor any other Subsidiary is subject to any Governmental Order, written agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is a recipient of any extraordinary supervisory agreement letter from, or has adopted any board resolutions at the request of, any Governmental Authority charged with the supervision or regulation of banks or bank holding companies or engaged in the insurance of bank deposits (collectively, the “Bank Regulators”), nor have any of CBCS, CBT or any other Subsidiaries been advised by any Bank Regulator that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, directive, written agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter, board resolutions or similar undertaking.

4.23    Administration of Fiduciary Accounts.CBT has properly administered in all material respects all accounts for which it acts as a fiduciary, including but not limited to accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in all material respects in accordance with the terms of the governing documents and applicable state and federal law and regulation and common law. None of CBCS, CBT, the other Subsidiaries or any of their respective officers or directors has committed any breach of trust with respect to any such fiduciary account which is material to or could reasonably be expected to be material to the business, operations or financial condition of CBCS, CBT or the other Subsidiaries and the accountings for each such fiduciary account are true and correct in all material respects and accurately reflect the assets of such fiduciary account in all material respects.

4.24    Disclosure.To the Knowledge of CBCS, the representations and warranties of CBCS contained in this Agreement do not omit any material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. There is no fact known to CBCS which has not been disclosed to Heartland pursuant to this Agreement and the Schedules hereto which would have or would reasonably be expected to have a Material Adverse Effect.

4.25    Regulatory Approvals.As of the date hereof, CBCS is not aware of any fact that would likely result in the regulatory approvals specified in Section 6.2 not being obtained.

4.26    Interest Rate Risk Management Instruments

(a)    Schedule 4.26 sets forth a true, correct and complete list of all interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements

to which CBCS or CBT is a party or by which any of their properties or assets may be bound. CBCS has delivered to Heartland true, correct and complete copies of all such interest rate risk management agreements and arrangements.

(b)    All interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements to which CBCS or CBT is a party or by which any of their properties or assets may be bound were entered into in the ordinary course of business and, to the Knowledge of CBCS, in accordance with prudent banking practice and applicable rules, regulations and policies of Bank Regulators and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations enforceable in accordance with their terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies), and are in full force and effect. Each of CBCS, CBT and the other Subsidiaries has duly performed in all material respects all of its obligations thereunder to the extent that such obligations to perform have accrued; and to the Knowledge of CBCS, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder.

4.27    Disclosures in Schedules.Any matter disclosed in any Schedule to this Agreement shall be deemed to have been disclosed in any other Schedule to this Agreement to which it is reasonably apparent such disclosure relates.

ARTICLE 5

CONDUCT OF BUSINESS PENDING THE MERGER

5.1    Conduct of Business.From the date of this Agreement to the Effective Time, unless Heartland shall otherwise agree in writing or as otherwise expressly contemplated or permitted by other provisions of this Agreement, including this Section 5.1:

(a)    the business of CBCS, CBT and the other Subsidiaries shall be conducted only in, and neither CBCS, CBT nor any other Subsidiary shall take any action except in, the Ordinary Course of Business and in accordance with all applicable laws, rules and regulations;

(b)    each of CBCS, CBT and the other Subsidiaries will (i) preserve its business organization and goodwill, keep available the services of its officers, employees and consultants and maintain satisfactory relationships with vendors, customers and others having business relationships with it, (ii) subject to applicable Laws, confer on a regular and frequent basis with representatives of Heartland to report operational matters and the general status of ongoing operations as requested by Heartland and (iii) not take any action that would render, or that reasonably may be expected to render, any representation or warranty made by CBCS in this Agreement untrue at the Closing as though then made and as though the Closing Date had been substituted for the date of this Agreement in such representation or warranty;

(c)    neither CBCS, CBT nor any other Subsidiary shall, directly or indirectly,

(i)    amend or propose to amend its Charter or Bylaws;

(ii)    issue or sell any of its equity securities, securities convertible intoor exchangeable for its equity securities, warrants, options or other rights to

acquire its equity securities, or any bonds or other securities, except deposit and other bank obligations in the ordinary course of business;

(iii)    redeem, purchase, acquire or offer to acquire, directly or indirectly, any shares of capital stock of or any other ownership interest in CBCS or any Subsidiary;

(iv)    split, combine or reclassify any outstanding shares of capital stock of CBCS or any Subsidiary, or declare, set aside or pay any dividend or other distribution payable in cash, property or otherwise with respect to shares of capital stock of CBCS, except that CBT shall be permitted to pay dividends on the shares of common stock of CBT owned by CBCS;

(v)    borrow any amount or incur or become subject to any material liability, except in the Ordinary Course of Business;

(vi)    discharge or satisfy any material Encumbrance on its properties or assets or pay any material liability, except otherwise in the Ordinary Course of Business;

(vii)    sell, assign, transfer, mortgage, pledge or subject to any Encumbrance any of its assets, except (A) in the Ordinary Course of Business; provided, that any such sale, assignment or transfer of any Operating Real Property shall not be considered in the Ordinary Course of Business, (B) Permitted Encumbrances and (C) Encumbrances which do not materially affect the value of, or interfere with the past or future use or ability to convey, the property subject thereto or affected thereby

(viii)    cancel any material debt or claims or waive any rights of material value, except in the Ordinary Course of Business;

(ix)    acquire (by merger, exchange, consolidation, acquisition of stock or assets or otherwise) any corporation, partnership, joint venture or other business organization or division or material assets thereof, or any Real Estate or assets or deposits that are material to CBCS, except in exchange for debt previously contracted, including OREO;

(x)    other than as set forth on Schedule 4.11, make any single or group of related capital expenditures or commitments therefor in excess of $50,000 or enter into any lease or group of related leases with the same party which involves aggregate lease payments payable of more than $75,000 for any individual lease or involves more than $100,000 for any group of related leases in the aggregate; or

(xi)    change any of its methods of accounting in effect on the date of the Latest Balance Sheet Date, other than changes required by GAAP or RAP;

(xii)    cancel or terminate its current insurance policies or allow any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse replacement policies providing coverage equal to or greater than the coverage under the canceled, terminated or lapsed policies for substantially similar premiums are in full force and effect;

(xiii)    enter into or modify any employment, severance or similar agreements or arrangements with, or grant any compensation increases to, any director, officer or management employee, except in the Ordinary Course of Business;

(xiv)    amend any bonus, profit sharing, stock option, pension, retirement, deferred compensation, or other employee benefit plan, trust, fund, contract or arrangement for the benefit or welfare of any employees, except as contemplated hereunder or by law or as disclosed on Schedule 4.19;

(xv)    enter into or propose to enter into, or modify or propose to modify, any agreement, arrangement or understanding with respect to any of the matters set forth in this Section 5.1(b); or

(xvi)    make any agreements or commitments binding it to extend credit except in a manner consistent with past practice and in accordance with CBT’s lending policies as disclosed to Heartland, and CBT shall not make any agreements or commitments binding it to extend credit in an amount in excess of $500,000, or sell, assign or otherwise transfer any participation in any loan, in each case without prior consultation (as defined below) with Heartland.

5.2    Access to Information; Confidentiality.

(a)    CBCS shall permit and shall cause CBT and the other Subsidiaries to permit Heartland full access on reasonable notice and at reasonable hours to its properties and shall disclose and make available (together with the right to copy) to Heartland and to the internal auditors, loan review officers, employees, attorneys, accountants and other representatives of Heartland all books, papers and records relating to the assets, stock, properties, operations, obligations and liabilities of CBCS, CBT and the other Subsidiaries including, without limitation, all books of account (including, without limitation, the general ledgers), tax records, minute books of directors’ and shareholders’ meetings, organizational documents, bylaws, contracts and agreements, filings with any regulatory authority, accountants’ work papers, litigation files (including, without limitation, legal research memoranda), documents relating to assets and title thereto (including, without limitation, abstracts, title insurance policies, surveys, environmental reports, opinions of title and other information relating to the real and personal property), Plans affecting employees, securities transfer records and shareholder lists, and any books, papers and records relating to other assets, business activities or prospects in which Heartland may have a reasonable interest, including, without limitation, its interest in planning for integration and transition with respect to the business of CBCS, CBT and the other Subsidiaries; provided, however, that (i) the foregoing rights granted to Heartland shall in no way affect the nature or scope of the representations, warranties and covenants of CBCS set forth

herein, and (ii) CBCS shall be permitted to keep confidential any information that CBCS reasonably believes is subject to legal privilege or other legal protection that would be compromised by disclosure to Heartland. In addition, CBCS shall cause CBT and the other Subsidiaries to instruct their officers, employees, counsel and accountants to be available for, and respond to any questions of, such Heartland representatives at reasonable hours and with reasonable notice by Heartland to such individuals, and to cooperate fully with Heartland in planning for the integration of the business of CBCS, CBT and the other Subsidiaries with the business of Heartland and its affiliates.

(b)    Any confidential information or trade secrets of CBCS, CBT or any other Subsidiary received by Heartland, its employees or agents in the course of the consummation of the Merger or Bank Merger shall be treated confidentially, and any correspondence, memoranda, records, copies, documents and electronic or other media of any kind containing either such confidential information, or trade secrets or both shall be destroyed by Heartland or, at CBCS’s request, returned to CBCS if this Agreement is terminated as provided in Article 8. Such information shall not be used by Heartland or its agents to the detriment of CBCS, CBT or any other Subsidiary.

(c)    In the event that this Agreement shall terminate, neither party shall disclose, except as required by law or pursuant to the request of an administrative agency or other regulatory body, the basis or reason for such termination, without the consent of the other party.

5.3    Notice of Developments.Each party shall, upon acquiring Knowledge thereof, promptly notify the other party in writing if it should discover that any representation or warranty made by it in this Agreement was when made, has subsequently become or will be on the Closing Date untrue in any material respect. Except as provided in Section 6.9, no disclosure pursuant to this Section 5.3 will be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any inaccuracy, misrepresentation, breach of warranty or breach of agreement.

5.4    Certain Loans and Related Matters.CBCS will furnish to Heartland a complete and accurate list as of the end of each calendar month after September 2014, within 15 Business Days after the end of each such calendar month, of (a) all of CBT’s periodic internal credit quality reports prepared during such calendar month (which reports will be prepared in a manner consistent with past practices), (b) all loans of CBT classified as non-accrual, as restructured, as 90 days past due, as still accruing and doubtful of collection or any comparable classification, (c) all OREO, including in-substance foreclosures and real estate in judgment, (d) all new loans where the principal amount advanced exceeds $100,000; (e) any current repurchase obligations of CBT with respect to any loans, loan participations or state or municipal obligations or revenue bonds and (f) any standby letters of credit issued by CBT.

5.5    Monthly Financial Statements and Pay Listings. CBCS shall furnish Heartland with CBCS’s and each Subsidiary’s (including CBT’s) balance sheets as of the end of each calendar month after September 2014 and the related statements of income, within 15 days after the end of each such calendar month. Such financial statements shall be prepared on a basis consistent with the Latest Balance Sheet and the Related Statements and on a consistent basis during the periods involved and shall fairly present the financial positions of CBCS and each of

the Subsidiaries, respectively, as of the dates thereof and the results of operations of CBCS and each of the Subsidiaries, respectively, for the periods then ended. CBCS shall make available to Heartland with CBCS’s and each Subsidiary’s payroll listings as of the end of each pay period after September 2014, within one week after the end of such pay period.

5.6    Consents and Authorizations. CBCS will use its commercially reasonable efforts to obtain (at no cost or burden to Heartland), prior to Closing, all material Consents (the “Required Consents”) necessary for the consummation of the transactions contemplated by this Agreement, including, without limitation, the consent to assignment of those certain trust preferred securities issued by Sheboygan Statutory Trust I from the trustee thereof, and those other consents listed on Schedule 5.6. CBCS will keep Heartland reasonably advised of the status of obtaining the Required Consents.

5.7    Filing of Tax Returns and Adjustments

(a)    CBCS, CBT and the other Subsidiaries shall file (or cause to be filed) at their own expense, on or prior to the due date, all Tax returns, including all Plan returns and reports, for all Tax periods ending on or before the Effective Time where the due date for such returns or reports (taking into account valid extensions of the respective due dates) falls on or before the Effective Time; provided, however, that neither CBCS, CBT nor any other Subsidiary shall file any such Tax returns, or other returns, elections or information statements with respect to any liabilities for Taxes (other than federal, state or local sales, use, withholding or employment tax returns or statements), or consent to any adjustment or otherwise compromise or settle any matters with respect to Taxes, without prior consultation with Heartland; provided, further, that neither CBCS, CBT nor any other Subsidiary shall make any election or take any other discretionary position with respect to Taxes, in a manner inconsistent with past practices, without the prior written approval of Heartland. In the event the granting or withholding of such approval by Heartland results in additional Taxes owing for any Tax period ending on or before the Effective Time, liability for such additional Taxes shall not cause any representation of CBCS relating to Taxes to be untrue. CBCS shall provide Heartland with a copy of appropriate workpapers, schedules, drafts and final copies of each federal and state income Tax return or election of CBCS and the Subsidiaries (including returns of all Plans) at least ten days before filing such return or election, and shall reasonably cooperate with any reasonable request by Heartland in connection therewith.

(b)    Heartland, in its sole and absolute discretion and at its sole expense, will file (or cause to be filed) all Tax returns of CBCS, CBT and the other Subsidiaries due after the Effective Time. After the Effective Time, Heartland, in its sole and absolute discretion and to the extent permitted by law, shall have the right to amend, modify or otherwise change all Tax returns of CBCS, CBT and the other Subsidiaries for all Tax periods.

5.8     No Solicitation

(a)    None of CBCS, CBT nor any other Subsidiary will, and they each will use their best efforts to cause their officers, directors, employees agents and authorized representatives (“Representatives”) not to, directly or indirectly, (i) solicit, initiate, encourage, induce or

facilitate the making, submission or announcement of any Acquisition Proposal or take any action that could reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any information regarding CBCS, CBT or any other Subsidiary to any Person in connection with or in response to an Acquisition Proposal or an inquiry or indication of interest that could reasonably be expected to lead to an Acquisition Proposal, (iii) engage in discussions or negotiations with any Person with respect to any Acquisition Proposal or that could reasonably be expected to lead to an Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into any letter of intent or similar document or any Contract contemplating or otherwise relating to any Acquisition Transaction; provided, however, that prior to the adoption of this Agreement by the Required CBCS Shareholder Vote, this Section 5.8(a) will not prohibit CBCS from furnishing nonpublic information regarding CBCS , CBT or any Subsidiary to, or entering into discussions or negotiations with, any Person in response to an Acquisition Proposal that the Board of Directors of CBCS has reasonably concluded is likely to result in Superior Proposal that is submitted to CBCS by such Person (and not withdrawn) if (1) neither CBCS, CBT nor any other Subsidiary nor any their respective Representatives have violated any of the restrictions set forth in this Section 5.8, (2) the board of directors of CBCS concludes in good faith, after having consulted with and considered the advice of outside counsel to CBCS, that such action is required in order for the board of directors of CBCS to comply with its fiduciary obligations to CBCS’s shareholders under applicable law, (3) at least two business days prior to furnishing any such nonpublic information to, or entering into discussions with, such Person, CBCS gives Heartland written notice of the identity of such Person and of CBCS’s intention to furnish nonpublic information to, or enter into discussions with, such Person, and CBCS receives from such Person an executed confidentiality agreement containing customary limitations on the use and disclosure of all nonpublic written and oral information furnished to such Person by or on behalf of the Company and (4) at least two business days prior to furnishing any such nonpublic information to such Person, CBCS furnishes such nonpublic information to Heartland (to the extent such nonpublic information has not been previously furnished by the CBCS to Heartland).

(b)    CBCS will promptly (and in no event later than 24 hours after receipt of any Acquisition Proposal, any inquiry or indication of interest that could reasonably be expected to lead to an Acquisition Proposal or any request for nonpublic information) advise Heartland orally and in writing of any Acquisition Proposal, any inquiry or indication of interest that could reasonably be expected to lead to an Acquisition Proposal or any request for nonpublic information relating to CBCS, CBT or any other Subsidiary (including the identity of the Person making or submitting such Acquisition Proposal, inquiry, indication of interest or request, and the terms thereof) that is made or submitted by any Person prior to the Closing Date. CBCS will keep Heartland fully informed with respect to the status of any such Acquisition Proposal, inquiry, indication of interest or request and any modification or proposed modification thereto.

(c)    CBCS, CBT and each other Subsidiary will immediately cease and cause to be terminated any existing discussions with any Person that relate to any Acquisition Proposal.

(d)    CBCS will not release or permit the release of any Person from, or waive or permit the waiver of any provision of, any confidentiality, “standstill” or similar agreement to which CBCS, CBT or any other Subsidiary is a party, and will enforce or cause to be enforced each such agreement at the request of Heartland. CBCS will promptly request each Person that

has executed, within 12 months prior to the date of this Agreement, a confidentiality agreement in connection with its consideration of a possible Acquisition Transaction or equity investment to return all confidential information heretofore furnished to such Person by or on behalf of CBCS.

ARTICLE 6

ADDITIONAL COVENANTS AND AGREEMENTS

6.1    The Bank Merger.To the extent not previously approved, CBCS shall cause the Board of Directors of CBT to approve the Bank Merger within three business days of execution of this Agreement, and shall vote all of the shares of CBT voting stock held by CBT for the Bank Merger. For the avoidance of doubt, the Bank Merger shall occur simultaneous with the Merger, and shall be conditioned upon regulatory approval and upon the Required CBCS Shareholder Vote.

6.2    Filings and Regulatory Approvals.Heartland and CBCS will use all reasonable efforts and will cooperate with each other in the preparation and filing of, and Heartland will file, as soon as practicable after the date of this Agreement (and in any event within 10 Business Days after the date of this Agreement), all applications or other documents required to obtain Regulatory Approvals and consents from the FDIC and the WDFI for the Bank Merger under the Bank Merger Act, and notification of the FRB of the Merger under the Bank Holding Company Act, and any other applicable regulatory authorities, and provide copies of the non-confidential portions of such applications, filings and related correspondence to the other party. Prior to filing each application, registration statement or other document with the applicable regulatory authority, each party will provide the other party with an opportunity to review and comment on the non-confidential portions of each such application, registration statement or other document and will discuss with the other party which portions of this Agreement shall be designated as confidential portions of such applications. Each party will use all reasonable efforts and will cooperate with the other party in taking any other actions necessary to obtain such regulatory or other approvals and consents, including participating in any required hearings or proceedings. Subject to the terms and conditions herein provided, each party will use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement.

6.3    Expenses.All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. Heartland and CBCS agree that the Determination Balance Sheet shall be adjusted to the extent necessary appropriately to effect the agreements set forth in this Section 6.3.

6.4    Title Insurance and Surveys.

(a)    In preparation for the Closing, as soon as reasonably possible and in no event later than December 31, 2014, CBCS will furnish to Heartland, at CBCS’s expense, with respect to each parcel of Operating Real Property, a title commitment with respect to a title policy conforming to be an ALTA Form 2006 Owner’s Policy of Title Insurance, or an

equivalent policy acceptable to Heartland if the Owned Real Property is located in a state in which an ALTA Owner’s Policy of Title Insurance is not available, issued by a title insurer satisfactory to Heartland insuring marketable fee title in Heartland as of the Closing, subject only to Permitted Encumbrances

(b)    With respect to each parcel of Operating Real Property as to which a title insurance policy is to be procured pursuant to this Section 6.4, CBCS will furnish to Heartland a current survey of the Real Property certified to Heartland and the title insurer prepared by a licensed surveyor in the state in which such parcel is located and conforming to current ALTA/ACSM Minimum Detail Requirements for Land Title Surveys, disclosing the location of all improvements, easements, party walls, encroachments, sidewalks, roadways, utility lines, set back lines and other matters shown customarily on such surveys, and showing access affirmatively to public streets and roads.

(c)    If (i) any title commitment or other evidence of title, or search of the appropriate real estate records, discloses that any party other than CBCS or CBT has title to any of the Operating Real Property; (ii) any title exception is disclosed in Schedule B to any title commitment that is not one of the Permitted Encumbrances or not one that CBCS specifies when delivering the title commitment to Heartland that CBCS will cause to be deleted from the title commitment concurrently with the Closing, including (A) any exceptions that pertain to Encumbrances securing any loans, and (B) any exceptions that Heartland reasonably believes could materially and adversely affect Heartland’s use and enjoyment of the Operating Real Property described therein; or (iii) any survey discloses any matter that Heartland reasonably believes could materially and adversely affect Heartland’s use and enjoyment of the Operating Real Property that is Owned Real Property described therein (a “Title Objection”), Heartland will notify CBCS in writing (“Heartland Notice”) of such matters within fifteen (15) Business Days after receiving all of the title commitments for the Operating Real Property. CBCS will use reasonable commercial efforts to cure each Title Objection (other than by payment of money) and take reasonable steps required by the title insurer to eliminate each Title Objection as an exception to the title commitment, or in the event it cannot so eliminate such Title Objection, to procure from the title insurer, at Heartland’s direction and but at CBCS’s expense, title insurance coverage over such Objection on terms acceptable to CBCS and Heartland. Matters not objected to by Heartland or that are insured in the manner aforesaid, will be deemed to be acceptable to Heartland.

(d)    The expenses incurred by CBCS or CBT pursuant to this Section 6.4, including, without limitation, the cost of any surveys, binders or insurance premiums, shall not be considered expenses or liabilities of CBCS for purposes of computing the Adjusted Tangible Shareholders' Equity, the Transaction Costs, or for any other purposes of computing the Aggregate Merger Consideration, and to the extent deducted from the Adjusted Tangible Assets in accordance with GAAP at the Determination Date shall, for purposes of such calculation, be added back to Adjusted Tangible Assets.

6.5    Shareholder Approval; Registration Statement

(a)    CBCS shall call a meeting of its shareholders (the “Shareholder Meeting”) for the purpose of voting upon this Agreement and the Merger, and shall schedule such meeting

based on consultation with Heartland as soon as practicable after the Registration Statement (as defined in Section 6.5(b)) is declared effective. The Board of Directors of CBCS shall recommend that the shareholders approve this Agreement and the Merger (the “Board Recommendation”), and shall use its best efforts (including, without limitation, soliciting proxies for such approval) to obtain the Required CBCS Shareholder Vote, and (ii) the Board Recommendation may not be withdrawn or modified in a manner adverse to Heartland, and no resolution by the board of directors of CBCS or any committee thereof to withdraw or modify the Board Recommendation in a manner adverse to CBCS may be adopted; provided, however, that notwithstanding the foregoing, prior to the adoption of this Agreement by the Required CBCS Shareholder Vote, the CBCS Board of Directors may withhold, withdraw, qualify or modify the Board Recommendation or approve, adopt, recommend or otherwise declare advisable any Superior Proposal made after the date hereof and not solicited, initiated or encouraged in breach of Section 5.8 of this Agreement, if the CBCS Board of Directors determines in good faith, after consultation with outside counsel, that failure to do so would reasonably be likely to result in a breach of fiduciary duties under applicable law (a “Change of Board Recommendation”). In determining whether to make a Change of Board Recommendation in response to a Superior Proposal or otherwise, the CBCS Board of Directors shall take into account any changes to the terms of this Agreement proposed by Heartland or any other information provided by Heartland in response to such notice.

(b)    For the purposes of (i) holding the Shareholder Meeting and (ii) registering Heartland Common Stock to be issued to shareholders of CBCS in connection with the Merger with the SEC and with applicable state securities authorities, Heartland shall prepare, with the cooperation of CBCS, a registration statement on Form S-4 (such registration statement, together with all and any amendments and supplements thereto, being herein referred to as the “Registration Statement”), which shall include a prospectus/proxy statement satisfying all applicable requirements of the 1933 Act, the Exchange Act and applicable Blue Sky Laws (such prospectus/proxy statement, together with any and all amendments or supplements thereto, being herein referred to as the “Prospectus/Proxy Statement”).

(c)    Heartland shall furnish such information concerning Heartland as is necessary in order to cause the Prospectus/Proxy Statement and the Registration Statement, insofar as they relate to Heartland, to be prepared in accordance with Section 6.5(b). Heartland agrees promptly to notify CBCS if at any time prior to the Shareholder Meeting any information provided by Heartland in the Prospectus/Proxy Statement becomes incorrect or incomplete in any material respect, and to provide the information needed to correct such inaccuracy or omission.

(d)    CBCS shall furnish Heartland with such information concerning CBCS, CBT and the Subsidiaries as is necessary in order to cause the Prospectus/Proxy Statement and the Registration Statement, insofar as it relates to CBCS, CBT and the Subsidiaries, to be prepared in accordance with Section 6.5(b), including, without limitation, the opinion of counsel as to tax matters required to be filed as an exhibit thereto. CBCS agrees promptly to notify Heartland if at any time prior to the Shareholder Meeting any information provided by CBCS in the Prospectus/Proxy Statement becomes incorrect or incomplete in any material respect, and to provide Heartland with the information needed to correct such inaccuracy or omission.

(e)    Heartland shall promptly, and in any event within ten days of receipt from CBCS pursuant to Section 6.5(d) of all portions of such Registration Statement requiring information relating to CBCS, CBT and the other Subsidiaries, file the Registration Statement with the SEC and applicable state securities agencies. Heartland shall use reasonable efforts to cause (a) the Registration Statement to become effective under the 1933 Act and applicable Blue Sky Laws at the earliest practicable date and (b) the shares of Heartland Common Stock issuable to the shareholders of CBCS to be authorized for listing on The NASDAQ Global Select Market or other national securities exchange. CBCS hereby authorizes Heartland to utilize in the Registration Statement the information concerning CBCS, CBT and the Subsidiaries provided to Heartland for the purpose of inclusion in the Prospectus/Proxy Statement. Heartland shall advise CBCS promptly when the Registration Statement has become effective and of any supplements or amendments thereto, and Heartland shall furnish CBCS with copies of all such documents. Prior to the Effective Time or the termination of this Agreement, each party shall consult with the other with respect to any material (other than the Prospectus/Proxy Statement) that might constitute a “prospectus” relating to the Merger within the meaning of the 1933 Act.

(f)    Heartland shall bear the costs of all SEC filing fees with respect to the Registration Statement, the costs of qualifying the shares of Heartland Common Stock under the Blue Sky Laws, to the extent necessary, and the costs of listing the shares of Heartland Common Stock on The NASDAQ Global Select Market or other national securities exchange. Heartland shall bear all printing and mailing costs in connection with the preparation and mailing of the Prospectus/Proxy Statement to CBCS shareholders. Heartland and CBCS shall each bear their own legal and accounting expenses in connection with the preparation of the Prospectus/Proxy Statement and the Registration Statement.

6.6    Establishment of Accruals. If requested by Heartland, on the Business Day immediately prior to the Determination Date, CBT shall, consistent with GAAP, establish such additional accruals and reserves as Heartland indicates are necessary to conform CBT’s accounting and credit loss reserve practices and methods to those of Heartland (as such practices and methods are to be applied to CBT from and after the Effective Time) and reflect Heartland’s plans with respect to the conduct of CBT’s business following the Merger and to provide for the costs and expenses relating to the consummation by CBT of the transactions contemplated by this Agreement (the “Heartland Accruals”), provided, however, that any such Heartland Accruals and reserves shall not affect the determination of the Merger Consideration pursuant to Section 2.3, and accordingly the Merger Consideration will be determined based on Adjusted Tangible Shareholders Equity as of the Determination Date without giving effect to any Heartland Accruals.

6.7    Employee Matters

(a)    General. Subject to the following agreements, after the Effective Time, Heartland shall have the right to continue, amend, merge or terminate any of the Plans in accordance with the terms thereof and subject to any limitation arising under applicable law, including tax qualification requirements. Until Heartland shall take such action, however, such Plans shall continue in force for the benefit of present and former employees of CBCS, CBT or any Subsidiary who have any present or future entitlement to benefits under any of the Plans (“CBCS Employees”).

(b)    Limitation on Enforcement. This Section 6.7 is an agreement solely between CBCS and Heartland. Nothing in this Section 6.7, whether express or implied, confers upon any employee of CBCS, CBT, any Subsidiary or Heartland or any other person, any rights or remedies, including, but not limited to: (i) any right to employment or recall, (ii) any right to continued employment for any specified period or (iii) any right to claim any particular compensation, benefit or aggregate of benefits, of any kind or nature whatsoever, as a result of this Section 6.7. Each CBCS Employee will be eligible to continue to participate in Heartland's health, vacation and other non-equity based employee benefit plans; provided, however, that (a) nothing in this Section 6.7(b) or elsewhere in this Agreement will limit the right of Heartland, or any of its Subsidiaries to amend or terminate any such health, vacation or other employee benefit plan at any time. With respect to employee benefit plans, if any, of Heartland or its Subsidiaries in which CBCS Employees become eligible to participate after the Closing Date (the "Heartland Plans"), Heartland will, or will cause the Surviving Corporation or its Subsidiaries to: (i) with respect to each Heartland Plan that is a medical/prescription, dental or vision plan, (x) waive any exclusions for pre-existing conditions under such Heartland Plan that would result in a lack of coverage for any condition for which the applicable CBCS Employee would have been entitled to coverage under the corresponding Benefit Plan in which such CBCS Employee was an active participant immediately prior to his or her transfer to Heartland Plan; (y) waive any waiting period under such Heartland Plan, to the extent that such period exceeds the corresponding waiting period under the corresponding Benefit Plan in which such CBCS Employee was an active participant immediately prior to his or her transfer to Heartland Plan (after taking into account the service credit provided for herein for purposes of satisfying such waiting period); and (z) provided CBCS’s insurance company provides information related to the amount of such credit that is available to Heartland, provide each CBCS Employee with credit for deductibles paid by such CBCS Employee prior to his or her transfer to Heartland Plan (to the same extent such credit was given under the analogous Benefit Plan prior to such transfer) in satisfying any applicable deductible or out-of-pocket requirements under such Heartland Plan for the plan year that includes such transfer and (ii) recognize service of the CBCS Employees with CBCS or CBT (or their respective predecessors) for purposes of eligibility to participate and vesting credit, and, solely with respect to vacation and severance benefits, benefit accrual in any Heartland Plan in which the CBCS Employees are eligible to participate after the Closing Date, to the extent that such service was recognized for that purpose under the analogous Benefit Plan prior to such transfer; provided, however, that the foregoing will not apply to the extent it would result in duplication of benefits.

(c)    Designated Agreements. It is the intention of CBCS that it will either (i) pay to each of the Designated Executives in lump sum, an amount necessary to extinguish any executory obligations to make payments under the Designated Agreements and record such payments as expenses as of a date prior to the Determination Balance Sheet, (ii) deposit sums in a Rabbi Trust adequate to pay all of the executory payment obligations under the Designated Agreements as they become due, and record such deposit as an expense (and not include sums held in such Trust as assets) as of a date prior to the Determination Balance Sheet, or (iii) accrue for the aggregate payments due and to become due under the Designated Agreements, as discounted to present value as set forth in Confidential Schedule 1 (and only to the extent not previously accrued), as of a date prior to, and reflected in, the Designated Balance Sheet. If, but only if CBCS has not extinguished its obligations and the obligations of each of its Subsidiaries, under the Designated Agreements in accordance with clause (i) or (ii), the aggregate costs with

respect to such Designated Agreements set forth in the attached Confidential Schedule 1 have been properly accrued and accounted for in the Determination Balance Sheet, or subtracted as Severance Costs from Adjusted Tangible Assets as provided herein, and regardless of such accrual, the obligations of Heartland to assume any Retiree Health Benefits under the Desigated Agreements have been extinguished or amended to the satisfaction of Heartland, then, in accordance with the Merger, Heartland shall assume the obligations to the Designated Executives under the Designated Agreements.

6.8    Tax Treatment. None of CBCS, CBT, the other Subsidiaries nor Heartland shall take any action which would disqualify the Merger as a “reorganization” that would be tax-free to the shareholders of CBCS pursuant to Section 368(a)(1)(A) of the Code.

6.9    Updated Schedules. As of a date 15 Business Days prior to the Effective Date and on the Effective Date, CBCS shall modify any Schedule to this Agreement or add any Schedule or Schedules hereto for the purpose of making the representations and warranties to which any such Schedule relates true and correct in all material respects as of such date, whether to correct any misstatement or omission in any Schedule or to reflect any additional information obtained by CBCS subsequent to the date any Schedule was previously delivered by CBCS to Heartland. If any disclosure in any such Schedule supplement or update is of the type that would permit Heartland to terminate this Agreement pursuant to Section 8.1(d)(ii) but Heartland fails to do so within ten (10) Business Days of its receipt of such Schedule supplement or update, then Heartland shall be deemed to have irrevocably waived any right to terminate this Agreement with respect to such matter and to have accepted such supplement or update as if it was part of the Schedule delivered upon execution of this Agreement.

ARTICLE 7

CONDITIONS

7.1    Conditions to Obligations of Each Party. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the fulfillment at or prior to the Effective Time of the following conditions:

(a)    Regulatory Approvals. The Regulatory Approvals shall have been obtained and the applicable waiting periods, if any, under all statutory or regulatory waiting periods shall have lapsed. None of such approvals shall contain any conditions or restrictions that Heartland reasonably believes will materially restrict or limit the business or activities of Heartland, CBCS or the Subsidiaries or have a Material Adverse Effect.

(b)    No Injunction. No injunction or other order entered by a state or federal court of competent jurisdiction shall have been issued and remain in effect which would impair the consummation of the transactions contemplated hereby.

(c)    No Prohibitive Change of Law. There shall have been no law, statute, rule or regulation, domestic or foreign, enacted or promulgated which would materially impair the consummation of the transactions contemplated hereby.

(d)    Governmental Action. There shall not be any action taken, or any statute, rule, regulation, judgment, order or injunction proposed, enacted, entered, enforced,

promulgated, issued or deemed applicable to the transactions contemplated hereby by any federal, state or other court, government or governmental authority or agency, which would reasonably be expected to result, directly or indirectly, in (i) restraining or prohibiting the consummation of the transactions contemplated hereby or obtaining material damages from CBCS, any Subsidiary, Heartland or any of Heartland’s subsidiaries in connection with the transactions contemplated hereby, (ii) prohibiting direct or indirect ownership or operation by Heartland of all or a material portion of the business or assets of CBCS or any Subsidiary or of Heartland or any of its subsidiaries, or to compelling Heartland or any of its subsidiaries or CBCS or any Subsidiary to dispose of or to hold separately all or a material portion of the business or assets of Heartland or any of its subsidiaries or of CBCS or any Subsidiary, as a result of the transactions contemplated hereby, or (iii) requiring direct or indirect divestiture by Heartland of any of its business or assets or of the business or assets of CBCS or any Subsidiary.

(e)    No Termination. No party hereto shall have terminated this Agreement as permitted herein.

(f)    Shareholder Approval. The Merger shall have been approved by the Required CBCS Shareholder Vote.

(g)    Registration Statement. The registration statement on Form S-4 referred to in Section 6.5 shall have been declared and shall remain effective and no stop order suspending the effectiveness of such registration statement shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the SEC. The shares of Heartland Common Stock issuable to the shareholders of CBCS shall have been authorized for listing on The NASDAQ Global Select Market or other national securities exchange, subject to official notice of issuance.

7.2    Additional Conditions to Obligation of CBCS. The obligation of CBCS to consummate the transactions contemplated hereby in accordance with the terms of this Agreement is also subject to the following conditions:

(a)    Representations and Warranties. The representations and warranties set forth in article 3 (i) that are not subject to materiality or Material Adverse Effect qualifications will be true and correct in all material respects at and as of the Closing Date as though then made and as though the Closing Date had been substituted for the date of this Agreement in such representations and warranties, except that any representation or warranty expressly made as of a specified date will only need to have been true on and as of such date, and (ii) the representations and warranties set forth in article 3 that are subject to materiality or Material Adverse Effect qualifications will be true and correct in all respects at and as of the Closing Date as though then made and as though the Closing Date had been substituted for the date of this Agreement in such representations and warranties, except that any representation or warranty expressly made as of a specified date will only need to have been true on and as of such date.

(b)    Agreements. Heartland shall have performed and complied in all material respects with each of its agreements contained in this Agreement.

(c)    Officer’s Certificate. Heartland shall have furnished to CBCS a certificate of the Chief Financial Officer of Heartland, dated as of the Effective Time, in which such officer shall certify to the conditions set forth in Sections 7.2(a) and (b).

(d)    Heartland Secretary’s Certificate. Heartland shall have furnished to CBCS (i) copies of the text of the resolutions by which the corporate action on the part of Heartland necessary to approve this Agreement and the transactions contemplated hereby were taken, and (ii) a certificate dated as of the Effective Time executed on behalf of Heartland by its corporate secretary or one of its assistant corporate secretaries certifying to CBCS that such copies are true, correct and complete copies of such resolutions and that such resolutions were duly adopted and have not been amended or rescinded.

(e)    Change in Control of Heartland. Heartland shall not have (i) been merged or consolidated with or into, or announced an agreement to merge with or into, another corporation in any transaction in which the holders of the voting securities of Heartland would not hold a majority of the voting securities of the surviving corporation, (ii) sold all or substantially all of its assets, or (iii) had one person or group acquire, directly or indirectly, beneficial ownership of more than 50% of the outstanding Heartland Common Stock.

(f)    Legal Opinion. CBCS shall have received an opinion of Reinhart Boerner Van Deuren s.c., or other counsel that is, in the judgment of Heartland, reputable, that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Code.

(g)    Other Materials. CBCS shall have received the materials set forth in Section 2.8(b).

7.3    Additional Conditions to Obligation of Heartland. The obligation of Heartland to consummate the transactions contemplated hereby in accordance with the terms of this Agreement is also subject to the following conditions:

(a)    Representations and Compliance. The representations and warranties set forth in article 4 that are not subject to materiality or Material Adverse Effect qualifications will be true and correct in all material respects at and as of the Closing Date as though then made and as though the Closing Date had been substituted for the date of this Agreement in such representations and warranties, except that any representation or warranty expressly made as of a specified date will only need to have been true on and as of such date, and the representations and warranties set forth in article 4 that are subject to materiality or Material Adverse Effect qualifications will be true and correct in all respects at and as of the Closing Date as though then made and as though the Closing Date had been substituted for the date of this Agreement in such representations and warranties, except that any representation or warranty expressly made as of a specified date will only need to have been true on and as of such date.

(b)    Agreements. CBCS shall have performed and complied in all material respects with each of its agreements contained in this Agreement.

(c)    Officers’ Certificate of CBCS. CBCS shall have furnished to Heartland a certificate of the Chief Executive Officer and Chief Financial Officer of CBCS, dated as of the

Effective Time, in which such officers shall certify to the conditions set forth in Sections 7.3(a) and 7.3(b).

(d)    CBCS Secretary’s Certificate. CBCS shall have furnished to Heartland (i) copies of the text of the resolutions by which the corporate action on the part of CBCS necessary to approve this Agreement and the transactions contemplated hereby were taken, and (ii) a certificate dated as of the Effective Time executed on behalf of CBCS by its corporate secretary or one of its assistant corporate secretaries certifying to Heartland that such copies are true, correct and complete copies of such resolutions and that such resolutions were duly adopted and have not been amended or rescinded.

(e)    Dissenting Shares. The total number of Dissenting Shares shall be no greater than six percent (6.0%) of the number of outstanding shares of CBCS Common Stock.

(f)    Required Consents. Each Required Consent will have been obtained and be in full force and effect and such actions as Heartland’s counsel may reasonably require will have been taken in connection therewith.

(g)    Designated Agreements. The Retiree Health Benefits under the Designated Agreements shall have been fully paid and extinguished, or the obligation of Heartland, as successor to CBCS, to pay any Retiree Health Benefits under the Designated Agreements shall have been eliminated, amended or qualified to Heartland’s satisfaction (and in its absolute discretion).

(h)    Title Matters. Heartland will have received and will have been reasonably satisfied with the title commitments described in Section 6.4 and all timely delivered Title Objections shall have been resolved to its reasonable satisfaction;

(i)    Transaction Costs. Heartland shall have received proof satisfactory to it that CBCS has paid or fully accrued for as of the Determination Date all of the Transaction Costs, or otherwise caused all Transaction Costs to be reflected in the calculation of Aggregate Merger Consideration; and

(j)    Other Materials. Heartland shall have received the materials set forth in Section 2.8(a).

ARTICLE 8

TERMINATION, AMENDMENT AND WAIVER

8.1    Reasons for Termination. This Agreement, by prompt written notice given to the other parties prior to or at the Closing, may be terminated:

(a)    by mutual consent of the boards of directors of Heartland and CBCS;

(b)    by either party in the event a Law or Governmental Order will have been enacted, entered, enforced, promulgated, issued or deemed applicable to the transactions contemplated by this Agreement by any Governmental Entity that prohibits the Closing;

(c)    by CBCS if:

(i)    the Closing has not occurred by March 31, 2015 (the “Termination Date”); provided that CBCS will not be entitled to terminate this Agreement pursuant to this clause (c)(i) if (x) CBCS's failure to comply fully with its obligations under this Agreement has prevented the consummation of the transactions contemplated by this Agreement, (y) CBCS has refused, after satisfaction of the conditions set forth in Section 7.2, to close in accordance with Section 2.8 or (z) the circumstances or events underlying the termination rights set forth in clauses (c)(iii) or (c)(iv) of this Section 8.1 shall have occurred;

(ii)    Heartland will have breached any representation, warranty or agreement of Heartland in this Agreement in any material respect and such breach cannot be or is not cured within thirty (30) days after written notice of such breach is given by CBCS to Heartland;

(iii)    at the CBCS Shareholders’ Meeting, this Agreement shall not have been duly adopted by the Required CBCS Shareholder Vote;

(iv)    (A) CBCS will have delivered to Heartland a written notice of the intent of CBCS to enter into a merger, acquisition or other agreement (including an agreement in principle) to effect a Superior Proposal based on an Acquisition Proposal received by it, (B) five business days have elapsed following delivery to Heartland of such written notice by CBCS, (C) during such five business-day period CBCS has fully cooperated with Heartland, including, without limitation, informing Heartland of the terms and conditions of such Acquisition Proposal and the identity of the Person making such Acquisition Proposal, with the intent of enabling Heartland to agree to a modification of the terms and conditions of this Agreement so that the transactions contemplated hereby may be effected, (D) at the end of such five business-day period the Board of Directors of the CBCS will have continued reasonably to believe that such Acquisition Proposal constitutes a Superior Proposal, (E) CBCS pays to Heartland the termination fee in accordance with Section 8.4, and (F) the Company will have entered into a merger, acquisition or other agreement (including an agreement in principle) to effect a Superior Proposal or the Board of Directors of the Company will have resolved to do so;

(v)    any of the conditions set forth in Section 7.2 will have become impossible to satisfy (other than through a failure of CBCS to comply with its obligations under this Agreement); or

(vi)    if the Average Closing Price is $32.00 or greater.

(d)    by Heartland if:

(i)    the Closing has not occurred by the Termination Date; provided that Heartland will not be entitled to terminate this Agreement pursuant to this clause (d)(i) if (x) Heartland's failure to comply fully with its obligations under

this Agreement has prevented the consummation of the transactions contemplated by this Agreement or (y) Heartland has refused, after satisfaction of the conditions set forth in Section 7.3, to close in accordance with Section 2.8

(ii)    CBCS, CBT or any Subsidiary will have breached any representation, warranty or agreement in this Agreement in any material respect and such breach cannot be or is not cured within thirty (30) days after written notice of such breach is given by Heartland to CBCS;

(iii)    the Board of Directors of CBCS shall make a Change of Board Recommendation;

(iv)    CBCS shall have failed to take a vote of shareholders as a result of an intentional breach of Section 6.5(a), 6.5(a)and at least 20 days shall have passed since the Registration Statement containing the proxy statement/prospectus relating to the shareholder meeting shall have been declared effective and remained available for use in connection with the CBCS Shareholder Meeting (in each case, other than as a result of Heartland’s failure to comply fully with its obligations under this Agreement);

(v)    at the CBCS Shareholders’ Meeting, this Agreement shall not have been duly adopted by the Required CBCS Shareholder Vote; or

(vi)    if the Average Closing Price is $20.00 or less.

8.2    Effect of Termination.Except as provided in Sections 8.3 and 8.4, if this Agreement is terminated pursuant to Section 8.1, this Agreement shall forthwith become void, there shall be no liability under this Agreement on the part of Heartland, CBCS or any of their respective Representatives or Subsidiaries, and all rights and obligations of each party hereto shall cease; provided, however, that, subject to Sections 8.3, and 8.4, nothing herein shall relieve any party from liability for the willful and intentional breach of any of its covenants or agreements set forth in this Agreement.

8.3    Expenses.Except as provided in this Sections 8.3 and 8.4, all Expenses (as defined below) incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses, whether or not the Merger is consummated. Notwithstanding the foregoing, if this Agreement is terminated pursuant to Section 8.1(c)(iii), 8.1(d)(v), or by Heartland pursuant to Section 8.1(d)(ii) because of an intentional and material breach of Section 5.8, then CBCS shall pay to, within five Business Days of presentation from time to time by Heartland of any invoice for the same, all Expenses incurred by Heartland. “Expenses” as used in this Agreement shall consist of all out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the solicitation of shareholder approvals and all other matters related to the consummation of the Merger.

8.4    CBCS Termination Payments.If this Agreement is terminated by CBCS pursuant to 8.1(c)(iv), by Heartland pursuant to Sections 8.1(d)(iii) or 8.1(d)(iv), or by Heartland pursuant to Section 8.1(d)(ii) because of an intentional and material breach of Section 5.8, then CBCS shall pay to Heartland (in addition to any payment that may be due under Section 8.3), a termination fee of $2,000,000. Notwithstanding anything to the contrary in this Agreement, the parties hereby acknowledge that, in the event the termination fee is paid by CBCS pursuant to this Section 8.4, the termination fee shall be Heartland’s sole and exclusive remedy for monetary damages under this Agreement.

8.5    Amendment.This Agreement may not be amended except by an instrument in writing approved by the parties to this Agreement and signed on behalf of each of the parties hereto.

8.6    Waiver.At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto or (b) waive compliance with any of the agreements of any other parties or with any conditions to its own obligations, in each case only to the extent such obligations, agreements and conditions are intended for its benefit.

ARTICLE 9

GENERAL PROVISIONS

9.1    Press Releases and Announcements.Any public announcement, including any announcement to employees, customers, suppliers or others having dealings with CBCS, CBT or any other Subsidiary, or similar publicity with respect to this Agreement or the transactions contemplated by this Agreement, will be issued, if at all, at such time and in such manner as Heartland determines and approves. Heartland will have the right to be present for any in-Person announcement by CBCS. Unless consented to by Heartland or required by Law, CBCS will keep, and will cause each of its Subsidiaries to keep, this Agreement and the transactions contemplated by this Agreement confidential.

9.2    Notices.All notices and other communications hereunder shall be in writing and shall be sufficiently given if made by hand delivery, by fax, by e-mail, by overnight delivery service, or by registered or certified mail (postage prepaid and return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by it by like notice):

if to Heartland:

1398 Central Avenue

P.O. Box 778

Dubuque, Iowa 52004-0778

Telephone: (563) 589-1994

Fax: (563) 589-1951

Attention: David Horstmann, Executive Vice President; and

	Michael Coyle, General Counsel
e-mail:	davidhorstmann@htlf.com
	mcoyle@htlf.com

with a copy to:

Dorsey & Whitney LLP

Pillsbury Center South

220 South Sixth Street

Minneapolis, Wisconsin 55402

Attention: Thomas Martin

Fax: (612) 340-8706

e-mail: martin.tom@dorsey.com

if to CBCS:

Community Banc-Corp. of Sheboygan, Inc.

604 North 8th Street

Sheboygan, Wisconsin 53081

Attention: Anthony L. Jovanovich

Chairman and Chief Executive Officer

e-mail: AJovanovich@communitybankandtrust.com

with a copy to:

Reinhart Boerner Van Deuren s.c.

1000 N. Water Street, Suite 1700

Milwaukee, WI 53202

Attention: James Bedore

Fax: (414) 298-8097

Email: jbedore@reinhartlaw.com

All such notices and other communications shall be deemed to have been duly given as follows: when delivered by hand, if personally delivered; three Business Days after being deposited in the mail, postage prepaid, if delivered by mail; when receipt electronically acknowledged, if faxed or e-mailed; and the next day after being delivered to an overnight delivery service.

9.3    Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned by any party to this Agreement without the prior written consent of the other parties to this Agreement, except that Heartland may assign any of its rights under this Agreement to one or more Subsidiaries of Heartland, so long as Heartland remains responsible for the performance of all of its obligations under this Agreement. Subject to the foregoing, this Agreement and all of the provisions of this Agreement will be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns.

9.4    No Third Party Beneficiaries.Nothing expressed or referred to in this Agreement confers any rights or remedies upon any Person that is not a party or permitted assign of a party to this Agreement.

9.5    Schedules.The Schedules correspond to the specific sections contained in Article 4. Nothing in a Schedule is deemed adequate to disclose an exception to a representation or warranty made in this Agreement unless the Schedule identifies in the corresponding schedule the exception with particularity and describes the relevant facts in detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item is not deemed adequate to disclose an exception to a representation or warranty unless the representation or warranty relates solely to the existence of the document or other item itself. In the event of any inconsistency between the statements in this Agreement and statements in a Schedule, the statements in this Agreement will control and the statements in the Schedule will be disregarded.

9.6    Interpretation.The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References to Sections and Articles refer to Sections and Articles of this Agreement unless otherwise stated. Words such as “herein,” “hereinafter,” “hereof,” “hereto,” “hereby” and “hereunder,” and words of like import, unless the context requires otherwise, refer to this Agreement (including the Exhibits and Schedules hereto). As used in this Agreement, the masculine, feminine and neuter genders shall be deemed to include the others if the context requires.

9.7    Severability.If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties shall negotiate in good faith to modify this Agreement and to preserve each party’s anticipated benefits under this Agreement.

9.8    Complete Agreement.This Agreement contains the complete agreement between the parties and supersedes any prior understandings, agreements or representations by or between the parties, written or oral. CBCS acknowledges that Heartland has made no representations, warranties, agreements, undertakings or promises except for those expressly set forth in this Agreement or in agreements referred to herein that survive the execution and delivery of this Agreement.

9.9    Governing Law.THE DOMESTIC LAW, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, OF THE STATE OF DELAWARE WILL GOVERN ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT.

9.10    Specific Performance.Each of the parties acknowledges and agrees that the subject matter of this Agreement, including the business, assets and properties of CBCS, CBT and the other Subsidiaries, is unique, that the other parties would be damaged irreparably in the

event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached, and that the remedies at law would not be adequate to compensate such other parties not in default or in breach. Accordingly, each of the parties agrees that the other parties will be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions of this Agreement in addition to any other remedy to which they may be entitled, at law or in equity (without any requirement that Heartland provide any bond or other security). The parties waive any defense that a remedy at law is adequate and any requirement to post bond or provide similar security in connection with actions instituted for injunctive relief or specific performance of this Agreement.

9.11    Waiver of Jury Trial.EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 9.11.

9.12    Investigation of Representations, Warranties and Covenant.No investigation made by or on behalf of the parties hereto or the results of any such investigation shall constitute a waiver of any representation, warranty or covenant of any other party.

9.13    No Survival of Representations.The representations, warranties and covenants made by CBCS and Heartland in this Agreement or in any instrument delivered pursuant to this Agreement shall terminate on, and shall have no further force or effect after, the first to occur of (a) the Effective Time or (b) the date on which this Agreement is terminated as set forth herein, except for those covenants contained herein or therein which by their terms apply in whole or in part after the Effective Time.

[The remainder of this page is intentionally blank]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first written above by their respective duly elected and authorized officers.

HEARTLAND FINANCIAL USA, INC.

By:	/s/ Lynn B. Fuller
Lynn B. Fuller, Chairman and Chief Executive Officer

COMMUNITY BANC-CORP. OF SHEBOYGAN, INC.

By:	/s/ Anthony L. Jovanovich
Anthony L. Jovanovich, Chairman and Chief Executive Officer

EX-31.1

Exhibit 31.1

I, Lynn B. Fuller, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Heartland Financial USA, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting, and;
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 7, 2014
/s/ Lynn B. Fuller
Lynn B. Fuller
Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Bryan R. McKeag, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Heartland Financial USA, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting, and;
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 7, 2014
/s/ Bryan R. McKeag
Bryan R. McKeag
Executive Vice President
Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Heartland Financial USA, Inc. (the “Company”) on Form 10-Q for the quarter ending September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report), I, Lynn B. Fuller, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Lynn B. Fuller
Lynn B. Fuller
Chief Executive Officer
Date:	November 7, 2014

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Heartland Financial USA, Inc. (the “Company”) on Form 10-Q for the quarter ending September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report), I, Bryan R. McKeag, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Bryan R. McKeag
Bryan R. McKeag
Executive Vice President
Chief Financial Officer
Date:	November 7, 2014

XML

Securities (Held to maturity securities losses) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Schedule of Held-to-maturity Securities [Line Items]
Less than 12 months, Fair Value	$ 1,577	$ 49,345
Less than 12 months, Unrealized Losses	(390)	(3,827)
12 months or longer, Fair Value	39,273	22,339
12 months or longer, Unrealized Losses	(1,458)	(2,234)
Total, Fair Value	40,850	71,684
Total, Unrealized Losses	(1,848)	(6,061)
Mortgage-backed securities
Schedule of Held-to-maturity Securities [Line Items]
Less than 12 months, Fair Value	0	2,170
Less than 12 months, Unrealized Losses	0	(319)
12 months or longer, Fair Value	2,861	834
12 months or longer, Unrealized Losses	(533)	(2)
Total, Fair Value	2,861	3,004
Total, Unrealized Losses	(533)	(321)
Obligations of states and political subdivisions
Schedule of Held-to-maturity Securities [Line Items]
Less than 12 months, Fair Value	1,577	47,175
Less than 12 months, Unrealized Losses	(390)	(3,508)
12 months or longer, Fair Value	36,412	21,505
12 months or longer, Unrealized Losses	(925)	(2,232)
Total, Fair Value	37,989	68,680
Total, Unrealized Losses	$ (1,315)	$ (5,740)

XML

Allowance for Loan and Lease Losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	$ 40,892	$ 37,623	$ 41,685	$ 38,715
Charge-offs	(2,649)	(2,513)	(14,707)	(8,350)
Recoveries	902	1,052	3,085	3,298
Provision	2,553	5,149	11,635	7,648
Ending Balance	41,698	41,311	41,698	41,311
Commercial
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	11,927	9,436	13,099	11,388
Charge-offs	(875)	(163)	(7,940)	(1,422)
Recoveries	145	78	552	983
Provision	158	3,745	5,644	2,147
Ending Balance	11,355	13,096	11,355	13,096
Commercial real estate
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	14,680	13,671	14,152	14,473
Charge-offs	(295)	(630)	(1,379)	(2,561)
Recoveries	539	514	1,833	1,279
Provision	1,221	488	1,539	852
Ending Balance	16,145	14,043	16,145	14,043
Agricultural
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	2,788	3,055	2,992	2,138
Charge-offs	(338)	0	(1,974)	(23)
Recoveries	5	1	9	100
Provision	661	(240)	2,089	601
Ending Balance	3,116	2,816	3,116	2,816
Residential real estate
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	3,815	3,580	3,720	3,543
Charge-offs	(21)	(450)	(225)	(856)
Recoveries	29	76	85	102
Provision	(200)	331	43	748
Ending Balance	3,623	3,537	3,623	3,537
Consumer
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	7,516	7,881	7,722	7,173
Charge-offs	(1,120)	(1,270)	(3,189)	(3,488)
Recoveries	184	383	606	834
Provision	673	825	2,114	3,300
Ending Balance	7,253	7,819	7,253	7,819
Unallocated
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	166	0	0	0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	40	0	206	0
Ending Balance	$ 206	$ 0	$ 206	$ 0

XML

Loans and Leases (Loans and leases not covered by share agreements (credit quality indicator)) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	$ 3,800,424	$ 3,500,109
Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	1,024,712	950,197
Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	1,684,832	1,529,683
Commercial and Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	2,709,544	2,479,880
Agricultural and agricultural real estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	404,423	376,735
Residential real estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	360,309	349,349
Consumer
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	326,148	294,145
Pass
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	3,487,189	3,215,775
Pass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	913,923	871,825
Pass | Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	1,536,940	1,390,820
Pass | Commercial and Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	2,450,863	2,262,645
Pass | Agricultural and agricultural real estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	377,733	335,821
Pass | Residential real estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	341,984	333,161
Pass | Consumer
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	316,609	284,148
Nonpass
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	313,235	284,334
Nonpass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	110,789	78,372
Nonpass | Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	147,892	138,863
Nonpass | Commercial and Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	258,681	217,235
Nonpass | Agricultural and agricultural real estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	26,690	40,914
Nonpass | Residential real estate
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	18,325	16,188
Nonpass | Consumer
Financing Receivable, Recorded Investment [Line Items]
Loans and leases receivable	$ 9,539	$ 9,997

XML

Fair Value (Changes Level 3 assets (fair value, recurring)) (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Interest rate lock commitments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at January 1	$ 1,809,000	$ 9,353,000
Total gains (losses):
Included in earnings	3,393,000	(10,518,000)
Purchases, issuances, sales and settlements:
Issuances	1,798,000	9,821,000
Settlements	(3,709,000)	(6,847,000)
Balance at period end	3,291,000	1,809,000
Gain (loss) on sale of loans held-for-sale	3,300,000	1,800,000
Z-Tranche Securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at January 1	3,298,000	4,089,000
Total gains (losses):
Included in earnings	0	(1,587,000)
Included in other comprehensive income	1,669,000	826,000
Purchases, issuances, sales and settlements:
Purchases	0	0
Sales	(119,000)	(30,000)
Settlements	0	0
Balance at period end	$ 4,848,000	$ 3,298,000

XML

Goodwill, Core Deposit Premium and Other Intangible Assets (Goodwill) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 35,583	$ 35,583

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Loans and Leases (Troubled debt loans with payment defaults) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014 loans	Sep. 30, 2013 loans	Sep. 30, 2014 loans	Sep. 30, 2013 loans
Financing Receivable, Modifications [Line Items]
Number of Loans	1	1	1	4
Recorded Investment	$ 60	$ 13,000	$ 60	$ 17,837
Commercial
Financing Receivable, Modifications [Line Items]
Number of Loans	0	1	0	2
Recorded Investment	0	13,000	0	17,670
Commercial real estate
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	0
Recorded Investment	0	0	0	0
Commercial and Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Number of Loans	0	1	0	2
Recorded Investment	0	13,000	0	17,670
Agricultural and agricultural real estate
Financing Receivable, Modifications [Line Items]
Number of Loans	1	0	1	0
Recorded Investment	60	0	60	0
Residential real estate
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	2
Recorded Investment	0	0	0	167
Consumer
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	0
Recorded Investment	$ 0	$ 0	$ 0	$ 0

XML

Securities (Securities available for sale) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 1,366,069	$ 1,659,456
Gross Unrealized Gains	16,205	11,423
Gross Unrealized Losses	(12,571)	(36,977)
Estimated Fair Value	1,369,703	1,633,902
Debt Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,361,048	1,654,460
Gross Unrealized Gains	16,157	11,391
Gross Unrealized Losses	(12,571)	(36,977)
Estimated Fair Value	1,364,634	1,628,874
U.S. government corporations and agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	13,884	220,157
Gross Unrealized Gains	74	147
Gross Unrealized Losses	(12)	(2,001)
Estimated Fair Value	13,946	218,303
Mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,166,166	1,156,983
Gross Unrealized Gains	10,403	9,538
Gross Unrealized Losses	(11,692)	(22,574)
Estimated Fair Value	1,164,877	1,143,947
Obligations of states and political subdivisions
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	180,998	277,320
Gross Unrealized Gains	5,680	1,706
Gross Unrealized Losses	(867)	(12,402)
Estimated Fair Value	185,811	266,624
Equity securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	5,021	4,996
Gross Unrealized Gains	48	32
Gross Unrealized Losses	0	0
Estimated Fair Value	$ 5,069	$ 5,028

XML

Goodwill, Core Deposit Premium and Other Intangible Assets (Estimated future amortization expense for amortizable intangible assets) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014
Future amortization expense for amortizable intangible assets [Line Items]
Three months ending December 31, 2014	$ 1,911
Year ending December 31, 2015	7,457
Year ending December 31, 2016	6,446
Year ending December 31, 2017	5,458
Year ending December 31, 2018	4,491
Year ending December 31, 2019	3,509
Thereafter	4,127
Core deposit intangibles
Future amortization expense for amortizable intangible assets [Line Items]
Three months ending December 31, 2014	476
Year ending December 31, 2015	1,780
Year ending December 31, 2016	1,575
Year ending December 31, 2017	1,393
Year ending December 31, 2018	1,232
Year ending December 31, 2019	1,056
Thereafter	1,508
Mortgage servicing rights
Future amortization expense for amortizable intangible assets [Line Items]
Three months ending December 31, 2014	1,424
Year ending December 31, 2015	5,635
Year ending December 31, 2016	4,830
Year ending December 31, 2017	4,025
Year ending December 31, 2018	3,220
Year ending December 31, 2019	2,415
Thereafter	2,416
Customer relationship intangible
Future amortization expense for amortizable intangible assets [Line Items]
Three months ending December 31, 2014	11
Year ending December 31, 2015	42
Year ending December 31, 2016	41
Year ending December 31, 2017	40
Year ending December 31, 2018	39
Year ending December 31, 2019	38
Thereafter	$ 203

XML

Fair Value (Estimated fair value financial instruments (incl. carrying amounts)) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financial assets:
Trading securities	$ 0	$ 1,801
Securities available for sale	1,369,703	1,633,902
Held to maturity securities	266,641	237,437
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Cash and cash equivalents	67,836	125,270
Time deposits in other financial institutions	2,605
Trading securities	0	1,801
Securities available for sale	2,536	4,084
Held to maturity securities	0	0
Other investments	0	0
Loans held for sale	0	0
Loans, net	0	0
Derivative assets	0	0
Financial liabilities:
Short term borrowings	0	0
Other borrowings	0	0
Derivative liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Demand Deposits
Financial liabilities:
Deposits	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Savings Deposits
Financial liabilities:
Deposits	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Time Deposits
Financial liabilities:
Deposits	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate lock commitments
Financial assets:
Derivative assets	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Forward commitments
Financial assets:
Derivative assets	0	0
Financial liabilities:
Derivative liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Commercial
Financial assets:
Loans, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Commercial real estate
Financial assets:
Loans, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Agricultural and agricultural real estate
Financial assets:
Loans, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Residential real estate
Financial assets:
Loans, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Consumer
Financial assets:
Loans, net	0	0
Significant Other Observable Inputs (Level 2)
Financial assets:
Cash and cash equivalents	0	0
Time deposits in other financial institutions	0
Trading securities	0	0
Securities available for sale	1,362,319	1,626,520
Held to maturity securities	266,641	237,437
Other investments	20,279	21,608
Loans held for sale	93,054	46,665
Loans, net	3,702,033	3,396,662
Derivative assets	96	0
Financial liabilities:
Short term borrowings	348,305	408,756
Other borrowings	339,338	355,923
Derivative liabilities	3,111	3,697
Significant Other Observable Inputs (Level 2) | Demand Deposits
Financial liabilities:
Deposits	1,274,439	1,238,581
Significant Other Observable Inputs (Level 2) | Savings Deposits
Financial liabilities:
Deposits	2,599,850	2,535,242
Significant Other Observable Inputs (Level 2) | Time Deposits
Financial liabilities:
Deposits	852,430	892,676
Significant Other Observable Inputs (Level 2) | Interest rate lock commitments
Financial assets:
Derivative assets	0	0
Significant Other Observable Inputs (Level 2) | Forward commitments
Financial assets:
Derivative assets	222	1,206
Financial liabilities:
Derivative liabilities	623	133
Significant Other Observable Inputs (Level 2) | Commercial
Financial assets:
Loans, net	1,002,936	923,272
Significant Other Observable Inputs (Level 2) | Commercial real estate
Financial assets:
Loans, net	1,674,984	1,505,024
Significant Other Observable Inputs (Level 2) | Agricultural and agricultural real estate
Financial assets:
Loans, net	387,344	365,024
Significant Other Observable Inputs (Level 2) | Residential real estate
Financial assets:
Loans, net	327,413	331,966
Significant Other Observable Inputs (Level 2) | Consumer
Financial assets:
Loans, net	309,356	271,376
Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	0	0
Time deposits in other financial institutions	0
Trading securities	0	0
Securities available for sale	4,848	3,298
Held to maturity securities	0	0
Other investments	235	235
Loans held for sale	0	0
Loans, net	14,976	33,199
Derivative assets	0	0
Financial liabilities:
Short term borrowings	0	0
Other borrowings	0	0
Derivative liabilities	0	0
Significant Unobservable Inputs (Level 3) | Demand Deposits
Financial liabilities:
Deposits	0	0
Significant Unobservable Inputs (Level 3) | Savings Deposits
Financial liabilities:
Deposits	0	0
Significant Unobservable Inputs (Level 3) | Time Deposits
Financial liabilities:
Deposits	0	0
Significant Unobservable Inputs (Level 3) | Interest rate lock commitments
Financial assets:
Derivative assets	3,291	1,809
Significant Unobservable Inputs (Level 3) | Forward commitments
Financial assets:
Derivative assets	0	0
Financial liabilities:
Derivative liabilities	0	0
Significant Unobservable Inputs (Level 3) | Commercial
Financial assets:
Loans, net	1,545	7,229
Significant Unobservable Inputs (Level 3) | Commercial real estate
Financial assets:
Loans, net	7,058	7,749
Significant Unobservable Inputs (Level 3) | Agricultural and agricultural real estate
Financial assets:
Loans, net	827	13,062
Significant Unobservable Inputs (Level 3) | Residential real estate
Financial assets:
Loans, net	2,503	3,396
Significant Unobservable Inputs (Level 3) | Consumer
Financial assets:
Loans, net	3,043	1,763
Carrying Amount
Financial assets:
Cash and cash equivalents	67,836	125,270
Time deposits in other financial institutions	2,605
Trading securities	0	1,801
Securities available for sale	1,369,703	1,633,902
Held to maturity securities	255,312	237,498
Other investments	20,514	21,843
Loans held for sale	93,054	46,665
Loans, net	3,760,456	3,461,016
Derivative assets	96	0
Financial liabilities:
Short term borrowings	348,305	408,756
Other borrowings	334,513	350,109
Derivative liabilities	3,111	3,697
Carrying Amount | Demand Deposits
Financial liabilities:
Deposits	1,274,439	1,238,581
Carrying Amount | Savings Deposits
Financial liabilities:
Deposits	2,599,850	2,535,242
Carrying Amount | Time Deposits
Financial liabilities:
Deposits	852,430	892,676
Carrying Amount | Interest rate lock commitments
Financial assets:
Derivative assets	3,291	1,809
Carrying Amount | Forward commitments
Financial assets:
Derivative assets	222	1,206
Financial liabilities:
Derivative liabilities	623	133
Carrying Amount | Commercial
Financial assets:
Loans, net	1,012,918	936,305
Carrying Amount | Commercial real estate
Financial assets:
Loans, net	1,668,969	1,516,352
Carrying Amount | Agricultural and agricultural real estate
Financial assets:
Loans, net	401,785	374,203
Carrying Amount | Residential real estate
Financial assets:
Loans, net	357,658	347,266
Carrying Amount | Consumer
Financial assets:
Loans, net	319,126	286,890
Estimated Fair Value
Financial assets:
Cash and cash equivalents	67,836	125,270
Time deposits in other financial institutions	2,605
Trading securities	0	1,801
Securities available for sale	1,369,703	1,633,902
Held to maturity securities	266,641	237,437
Other investments	20,514	21,843
Loans held for sale	93,054	46,665
Loans, net	3,717,009	3,429,861
Derivative assets	96	0
Financial liabilities:
Short term borrowings	348,305	408,756
Other borrowings	339,338	355,923
Derivative liabilities	3,111	3,697
Estimated Fair Value | Demand Deposits
Financial liabilities:
Deposits	1,274,439	1,238,581
Estimated Fair Value | Savings Deposits
Financial liabilities:
Deposits	2,599,850	2,535,242
Estimated Fair Value | Time Deposits
Financial liabilities:
Deposits	852,430	892,676
Estimated Fair Value | Interest rate lock commitments
Financial assets:
Derivative assets	3,291	1,809
Estimated Fair Value | Forward commitments
Financial assets:
Derivative assets	222	1,206
Financial liabilities:
Derivative liabilities	623	133
Estimated Fair Value | Commercial
Financial assets:
Loans, net	1,004,481	930,501
Estimated Fair Value | Commercial real estate
Financial assets:
Loans, net	1,682,042	1,512,773
Estimated Fair Value | Agricultural and agricultural real estate
Financial assets:
Loans, net	388,171	378,086
Estimated Fair Value | Residential real estate
Financial assets:
Loans, net	329,916	335,362
Estimated Fair Value | Consumer
Financial assets:
Loans, net	$ 312,399	$ 273,139

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The table below presents Heartland's assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2014, and December 31, 2013, in thousands, aggregated by the level in the fair value hierarchy within which those measurements fall:

	Total Fair Value		Level 1		Level 2		Level 3
September 30, 2014
Assets
Trading securities	$	—	$	—	$	—	$	—
Securities available for sale
U.S. government corporations and agencies	13,946		2,536		11,410		—
Mortgage-backed securities	1,164,877		—		1,160,029		4,848
Obligations of states and political subdivisions	185,811		—		185,811		—
Equity securities	5,069		—		5,069		—
Derivative financial instruments	96		—		96		—
Interest rate lock commitments	3,291		—		—		3,291
Forward commitments	222		—		222		—
Total assets at fair value	$	1,373,312	$	2,536	$	1,362,637	$	8,139
Liabilities
Derivative financial instruments	$	3,111	$	—	$	3,111	$	—
Forward commitments	623		—		623		—
Total liabilities at fair value	$	3,734	$	—	$	3,734	$	—
December 31, 2013
Assets
Trading securities	$	1,801	$	1,801	$	—	$	—
Securities available for sale
U.S. government corporations and agencies	218,303		4,084		214,219		—
Mortgage-backed securities	1,143,947		—		1,140,649		3,298
Obligations of states and political subdivisions	266,624		—		266,624		—
Equity securities	5,028		—		5,028		—
Interest rate lock commitments	1,809		—		—		1,809
Forward commitments	1,206		—		1,206		—
Total assets at fair value	$	1,638,718	$	5,885	$	1,627,726	$	5,107
Liabilities
Derivative financial instruments	$	3,697	$	—	$	3,697	$	—
Forward commitments	133		—		133		—
Total liabilities at fair value	$	3,830	$	—	$	3,830	$	—

Fair Value Measurements, Nonrecurring

The tables below present Heartland's assets that are measured at fair value on a nonrecurring basis, in thousands:

	Fair Value Measurements at September 30, 2014
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	1,545	$	—	$	—	$	1,545	$	112
Commercial real estate	7,058		—		—		7,058		470
Agricultural and agricultural real estate	827		—		—		827		1,428
Residential real estate	2,503		—		—		2,503		—
Consumer	3,043		—		—		3,043		9
Total collateral dependent impaired loans	$	14,976	$	—	$	—	$	14,976	$	2,019
Other real estate owned	$	20,475	$	—	$	—	$	20,475	$	1,365

	Fair Value Measurements at December 31, 2013
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	7,229	$	—	$	—	$	7,229	$	919
Commercial real estate	7,749		—		—		7,749		1,881
Agricultural and agricultural real estate	13,062		—		—		13,062		—
Residential real estate	3,396		—		—		3,396		—
Consumer	1,763		—		—		1,763		—
Total collateral dependent impaired loans	$	33,199	$	—	$	—	$	33,199	$	2,800
Other real estate owned	$	29,852	$	—	$	—	$	29,852	$	2,799

Fair Value Inputs, Liabilities, Quantitative Information

The following tables present additional quantitative information about assets measured at fair value and for which Heartland has utilized Level 3 inputs to determine fair value, in thousands:

	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value at 9/30/14		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	4,848	Discounted cash flows	Pretax discount rate	6.50 - 8.00%
				Actual defaults	12.71-20.14% (15.52%)
				Actual deferrals	6.25-22.35% (11.32%)
Interest rate lock commitments	3,291		Discounted cash flows	Closing ratio	(1)
Collateral dependent impaired loans:
Commercial	1,545		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Commercial real estate	7,058		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Agricultural and agricultural real estate	827		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Residential real estate	2,503		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Consumer	3,043		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Other real estate owned	20,475		Modified appraised value	Third party appraisal	(2)
				Appraisal discount
(1) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at September 30, 2014 was 84%.
(2) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value at 12/31/13		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	3,298	Discounted cash flows	Pretax discount rate	7.00 - 9.00%
				Actual defaults	12.50-28.20% (20.80%)
				Actual deferrals	6.10-16.00% (11.10%)
Interest rate lock commitments	1,809		Discounted cash flows	Closing ratio	(1)
Collateral dependent impaired loans:
Commercial	7,229		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Commercial real estate	7,749		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Agricultural and agricultural real estate	13,062		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Residential real estate	3,396		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Consumer	1,763		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Other real estate owned	29,852		Modified appraised value	Third party appraisal	(2)
				Appraisal discount
(1) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at December 31, 2013 was 87%.
(2) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The changes in fair value of the Z-TRANCHE, a Level 3 asset, that is measured on a recurring basis is summarized in the following table, in thousands:

	For the Nine Months Ended September 30, 2014			For the Year Ended December 31, 2013
Balance at January 1,	$	3,298		$	4,089
Total gains (losses):
Included in earnings	—			(1,587		)
Included in other comprehensive income	1,669			826
Purchases, issuances, sales and settlements:
Purchases	—			—
Sales	(119		)	(30		)
Settlements	—			—
Balance at period end	$	4,848		$	3,298

The changes in fair value of the interest rate lock commitments, which are Level 3 financial instruments and are measured on a recurring basis, are summarized in the following table, in thousands:

	For the Nine Months Ended September 30, 2014			For the Year Ended December 31, 2013
Balance at January 1,	$	1,809		$	9,353
Total gains (losses) included in earnings	3,393			(10,518		)
Issuances	1,798			9,821
Settlements	(3,709		)	(6,847		)
Balance at period end	$	3,291		$	1,809

Fair Value, by Balance Sheet Grouping

The following analysis, which is inherently limited in depicting fair value, also does not consider any value associated with either existing customer relationships or the ability of Heartland to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

					Fair Value Measurements at September 30, 2014
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	67,836	$	67,836	$	67,836	$	—	$	—
Time deposits in other financial institutions	2,605		2,605		2,605		—		—
Securities:
Trading	—		—		—		—		—
Available for sale	1,369,703		1,369,703		2,536		1,362,319		4,848
Held to maturity	255,312		266,641		—		266,641		—
Other investments	20,514		20,514		—		20,279		235
Loans held for sale	93,054		93,054		—		93,054		—
Loans, net:
Commercial	1,012,918		1,004,481		—		1,002,936		1,545
Commercial real estate	1,668,969		1,682,042		—		1,674,984		7,058
Agricultural and agricultural real estate	401,785		388,171		—		387,344		827
Residential real estate	357,658		329,916		—		327,413		2,503
Consumer	319,126		312,399		—		309,356		3,043
Total Loans, net	3,760,456		3,717,009		—		3,702,033		14,976
Derivative financial instruments	96		96		—		96		—
Interest rate lock commitments	3,291		3,291		—		—		3,291
Forward commitments	222		222		—		222		—
Financial liabilities:
Deposits
Demand deposits	1,274,439		1,274,439		—		1,274,439		—
Savings deposits	2,599,850		2,599,850		—		2,599,850		—
Time deposits	852,430		852,430		—		852,430		—
Short term borrowings	348,305		348,305		—		348,305		—
Other borrowings	334,513		339,338		—		339,338		—
Derivative financial instruments	3,111		3,111		—		3,111		—
Forward commitments	623		623		—		623		—

					Fair Value Measurements at December 31, 2013
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	125,270	$	125,270	$	125,270	$	—	$	—
Securities:
Trading	1,801		1,801		1,801		—		—
Available for sale	1,633,902		1,633,902		4,084		1,626,520		3,298
Held to maturity	237,498		237,437		—		237,437		—
Other investments	21,843		21,843		—		21,608		235
Loans held for sale	46,665		46,665		—		46,665		—
Loans, net:
Commercial	936,305		930,501		—		923,272		7,229
Commercial real estate	1,516,352		1,512,773		—		1,505,024		7,749
Agricultural and agricultural real estate	374,203		378,086		—		365,024		13,062
Residential real estate	347,266		335,362		—		331,966		3,396
Consumer	286,890		273,139		—		271,376		1,763
Total Loans, net	3,461,016		3,429,861		—		3,396,662		33,199
Derivative financial instruments	—		—		—		—		—
Interest rate lock commitments	1,809		1,809		—		—		1,809
Forward commitments	1,206		1,206		—		1,206		—
Financial liabilities:
Deposits
Demand deposits	1,238,581		1,238,581		—		1,238,581		—
Savings deposits	2,535,242		2,535,242		—		2,535,242		—
Time deposits	892,676		892,676		—		892,676		—
Short term borrowings	408,756		408,756		—		408,756		—
Other borrowings	350,109		355,923		—		355,923		—
Derivative financial instruments	3,697		3,697		—		3,697		—
Forward commitments	133		133		—		133		—

XML

Loans and Leases (Loans and leases not covered by share agreements (past due financing receivables)) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 10,734	$ 8,380
60-89 Days Past Due	1,335	2,085
90 Days or More Past Due	0	24
Total Past Due	12,069	10,489
Current	3,758,225	3,447,226
Nonaccrual	30,130	42,394
Total	3,800,424	3,500,109
Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	5,163	697
60-89 Days Past Due	124	741
90 Days or More Past Due	0	0
Total Past Due	5,287	1,438
Current	1,013,124	935,508
Nonaccrual	6,301	13,251
Total	1,024,712	950,197
Commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	941	3,042
60-89 Days Past Due	101	199
90 Days or More Past Due	0	24
Total Past Due	1,042	3,265
Current	1,670,756	1,511,618
Nonaccrual	13,034	14,800
Total	1,684,832	1,529,683
Commercial and Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	6,104	3,739
60-89 Days Past Due	225	940
90 Days or More Past Due	0	24
Total Past Due	6,329	4,703
Current	2,683,880	2,447,126
Nonaccrual	19,335	28,051
Total	2,709,544	2,479,880
Agricultural and agricultural real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	89	818
60-89 Days Past Due	0	0
90 Days or More Past Due	0	0
Total Past Due	89	818
Current	402,319	369,907
Nonaccrual	2,015	6,010
Total	404,423	376,735
Residential real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	1,626	1,199
60-89 Days Past Due	120	56
90 Days or More Past Due	0	0
Total Past Due	1,746	1,255
Current	352,362	342,735
Nonaccrual	6,201	5,359
Total	360,309	349,349
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	2,915	2,624
60-89 Days Past Due	990	1,089
90 Days or More Past Due	0	0
Total Past Due	3,905	3,713
Current	319,664	287,458
Nonaccrual	2,579	2,974
Total	$ 326,148	$ 294,145

XML

Loans and Leases (Loans and leases receivable) (Details) (USD $) In Thousands, unless otherwise specified											9 Months Ended				9 Months Ended				9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 Commercial	Dec. 31, 2013 Commercial	Sep. 30, 2014 Commercial real estate	Dec. 31, 2013 Commercial real estate	Sep. 30, 2014 Agricultural and agricultural real estate	Dec. 31, 2013 Agricultural and agricultural real estate	Sep. 30, 2014 Commercial and Commercial Real Estate	Dec. 31, 2013 Commercial and Commercial Real Estate	Sep. 30, 2014 Commercial and Commercial Real Estate Minimum	Sep. 30, 2014 Commercial and Commercial Real Estate Maximum	Sep. 30, 2014 Residential real estate	Dec. 31, 2013 Residential real estate	Sep. 30, 2014 Residential real estate Minimum	Sep. 30, 2014 Residential real estate Maximum	Sep. 30, 2014 Consumer	Dec. 31, 2013 Consumer	Sep. 30, 2014 Consumer Citizens Finance Co Loans and Finance Receivables	Sep. 30, 2014 Gross Loans and Leases Receivable Held to Maturity	Dec. 31, 2013 Gross Loans and Leases Receivable Held to Maturity
Loans and Leases [Line Items]
Loans and leases receivable held to maturity	$ 3,800,424	$ 3,500,109	$ 1,024,712	$ 950,197	$ 1,684,832	$ 1,529,683	$ 404,423	$ 376,735	$ 2,709,544	$ 2,479,880			$ 360,309	$ 349,349			$ 326,148	$ 294,145		$ 3,800,424	$ 3,500,109
Unearned discount	(98)	(168)
Deferred loan fees	(2,021)	(2,989)
Total net loans and leases receivable held to maturity	3,798,305	3,496,952
Loans covered under loss share agreements	3,850	5,749					573	543	1,188	2,314			1,762	2,280			327	612
Allowance for loan and lease losses	(41,698)	(41,685)
Loans and leases receivable, net	$ 3,760,457	$ 3,461,016
Length of loan agreements											1 year	5 years			10 years	30 years
Concentration risk, percentage																			22.00%

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Securities (Realized gain (loss)) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Investments, Debt and Equity Securities [Abstract]
Proceeds from sales	$ 189,939	$ 127,475	$ 699,830	$ 343,410
Gross security gains	1,101	1,420	4,547	7,703
Gross security losses	$ 276	$ 302	$ 2,087	$ 1,091

XML

Loans and Leases (Carrying amount loans covered by loss share agreements) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired purchased loans	$ 266	$ 1,087
Non impaired purchased loans	3,584	4,662
Total covered loans	3,850	5,749
Commercial and commercial real estate
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired purchased loans	0	549
Non impaired purchased loans	1,188	1,765
Total covered loans	1,188	2,314
Agricultural and agricultural real estate
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired purchased loans	0	0
Non impaired purchased loans	573	543
Total covered loans	573	543
Residential real estate
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired purchased loans	0	0
Non impaired purchased loans	1,762	2,280
Total covered loans	1,762	2,280
Consumer
Loans covered by loss share agreement (carrying amount) [Line Items]
Impaired purchased loans	266	538
Non impaired purchased loans	61	74
Total covered loans	$ 327	$ 612

XML

Fair Value (Fair value measurement recurring) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	$ 0		$ 1,801
Securities available for sale	1,369,703		1,633,902
U.S. government corporations and agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	13,946		218,303
Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	1,164,877		1,143,947
Obligations of states and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	185,811		266,624
Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	5,069		5,028
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0		1,801
Securities available for sale	2,536		4,084
Derivative assets	0		0
Derivative liabilities	0		0
Level 1 | Interest rate lock commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0
Level 1 | Forward commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0
Derivative liabilities	0		0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0		0
Securities available for sale	1,362,319		1,626,520
Derivative assets	96		0
Derivative liabilities	3,111		3,697
Level 2 | Interest rate lock commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0
Level 2 | Forward commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	222		1,206
Derivative liabilities	623		133
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0		0
Securities available for sale	4,848		3,298
Derivative assets	0		0
Derivative liabilities	0		0
Level 3 | Interest rate lock commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	3,291		1,809
Level 3 | Forward commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0
Derivative liabilities	0		0
Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0		1,801
Total assets at fair value	1,373,312		1,638,718
Total liabilities at fair value	3,734		3,830
Recurring Basis | Derivative financial instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	96
Derivative liabilities	3,111		3,697
Recurring Basis | Interest rate lock commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	3,291		1,809
Recurring Basis | Forward commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	222		1,206
Derivative liabilities	623		133
Recurring Basis | U.S. government corporations and agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	13,946		218,303
Recurring Basis | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	1,164,877		1,143,947
Recurring Basis | Obligations of states and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	185,811		266,624
Recurring Basis | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	5,069		5,028
Recurring Basis | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0		1,801
Total assets at fair value	2,536		5,885
Total liabilities at fair value	0		0
Recurring Basis | Level 1 | Derivative financial instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0
Derivative liabilities	0		0
Recurring Basis | Level 1 | Interest rate lock commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0
Recurring Basis | Level 1 | Forward commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0
Derivative liabilities	0		0
Recurring Basis | Level 1 | U.S. government corporations and agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	2,536		4,084
Recurring Basis | Level 1 | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0		0
Recurring Basis | Level 1 | Obligations of states and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0		0
Recurring Basis | Level 1 | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0		0
Recurring Basis | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0		0
Total assets at fair value	1,362,637		1,627,726
Total liabilities at fair value	3,734		3,830
Recurring Basis | Level 2 | Derivative financial instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	96
Derivative liabilities	3,111		3,697
Recurring Basis | Level 2 | Interest rate lock commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0
Recurring Basis | Level 2 | Forward commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	222		1,206
Derivative liabilities	623		133
Recurring Basis | Level 2 | U.S. government corporations and agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	11,410		214,219
Recurring Basis | Level 2 | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	1,160,029		1,140,649
Recurring Basis | Level 2 | Obligations of states and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	185,811		266,624
Recurring Basis | Level 2 | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	5,069		5,028
Recurring Basis | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0		0
Total assets at fair value	8,139		5,107
Total liabilities at fair value	0		0
Recurring Basis | Level 3 | Derivative financial instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0
Derivative liabilities	0		0
Recurring Basis | Level 3 | Interest rate lock commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	3,291	[1]	1,809
Recurring Basis | Level 3 | Forward commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0
Derivative liabilities	0		0
Recurring Basis | Level 3 | U.S. government corporations and agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0		0
Recurring Basis | Level 3 | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	4,848		3,298
Recurring Basis | Level 3 | Obligations of states and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	0		0
Recurring Basis | Level 3 | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 0		$ 0

[1] The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at September 30, 2014 was 84%.

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Derivative Financial Instruments (Estimated cash payments and reclassification to interest expense) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Change in net unrealized losses on cash flow hedges	$ 1.7
Estimated amount to be reclassified from accumulated other comprehensive income to interest expense within the next twelve months	$ (2.3)

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Loans and Leases (Troubled debt in text) (Details)	Sep. 30, 2014 loans
Receivables [Abstract]
Number of loans classified as doubtful or loss	0

XML

Consolidated Statements of Changes in Equity (Unaudited) (Parentheticals) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Cash dividends per share preferred stock (in dollars per share)	$ 7.50	$ 10.89
Cash dividends per share common stock (in dollars per share)	$ 0.30	$ 0.30
Shares of common stock purchased	24,042	59,174
Shares of common stock issued	102,349	182,392

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Derivative Financial Instruments (Executed interest rate swap) (Details) (Derivative financial instruments, USD $) In Millions, unless otherwise specified	Apr. 20, 2011	Mar. 31, 2014 Cash Flow Hedges transaction	Dec. 31, 2009 Cash Flow Hedges transaction	Mar. 31, 2014 Cash Flow Hedges New Contracts transaction
Derivative [Line Items]
Derivative, notional amount	$ 15.0	$ 85.0		$ 16.6
Number of swap transactions		5	3	2

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Loans and Leases (Allowance for credit losses on financing receivables) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	$ 3,405		$ 6,717
Ending Balance Under ASC 450-20	38,293		34,968
Total	41,698	40,892	41,685	41,311	37,623	38,715
Ending Balance Evaluated for Impairment Under ASC 310-10-35	61,584		71,961
Ending Balance Evaluated for Impairment Under ASC 450-20	3,738,840		3,428,148
Total	3,800,424		3,500,109
Commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	451		2,817
Ending Balance Under ASC 450-20	10,904		10,282
Total	11,355	11,927	13,099	13,096	9,436	11,388
Ending Balance Evaluated for Impairment Under ASC 310-10-35	8,278		14,644
Ending Balance Evaluated for Impairment Under ASC 450-20	1,016,434		935,553
Total	1,024,712		950,197
Commercial real estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	1,176		818
Ending Balance Under ASC 450-20	14,969		13,334
Total	16,145	14,680	14,152	14,043	13,671	14,473
Ending Balance Evaluated for Impairment Under ASC 310-10-35	33,280		28,299
Ending Balance Evaluated for Impairment Under ASC 450-20	1,651,552		1,501,384
Total	1,684,832		1,529,683
Agricultural and agricultural real estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	67		756
Ending Balance Under ASC 450-20	3,049		2,236
Total	3,116	2,788	2,992	2,816	3,055	2,138
Ending Balance Evaluated for Impairment Under ASC 310-10-35	5,689		16,667
Ending Balance Evaluated for Impairment Under ASC 450-20	398,734		360,068
Total	404,423		376,735
Residential real estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	424		605
Ending Balance Under ASC 450-20	3,199		3,115
Total	3,623	3,815	3,720	3,537	3,580	3,543
Ending Balance Evaluated for Impairment Under ASC 310-10-35	8,187		7,214
Ending Balance Evaluated for Impairment Under ASC 450-20	352,122		342,135
Total	360,309		349,349
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	1,287		1,721
Ending Balance Under ASC 450-20	5,966		6,001
Total	7,253	7,516	7,722	7,819	7,881	7,173
Ending Balance Evaluated for Impairment Under ASC 310-10-35	6,150		5,137
Ending Balance Evaluated for Impairment Under ASC 450-20	319,998		289,008
Total	326,148		294,145
Unallocated
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance Under ASC 310-10-35	0		0
Ending Balance Under ASC 450-20	206		0
Total	206	166	0	0	0	0
Ending Balance Evaluated for Impairment Under ASC 310-10-35	0		0
Ending Balance Evaluated for Impairment Under ASC 450-20	0		0
Total	$ 0		$ 0

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Basis of Presentation (Summary of RSUs Activity) (Details) (Restricted Stock Units (RSUs), USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Restricted Stock Units (RSUs)
Shares
Outstanding at beginning of period (in shares)	353,070	348,897
Granted (in shares)	133,139	126,685
Vested (in shares)	(74,521)	(43,388)
Forfeited (in shares)	(7,483)	(57,982)
Outstanding at end of period (in shares)	404,205	374,212
Weighted-Average Grant Date Fair Value
Outstanding at beginning of period (in dollars per share)	$ 18.62	$ 15.75
Granted (in dollars per share)	$ 26.65	$ 26.92
Vested (in dollars per share)	$ 16.95	$ 17.00
Forfeited (in dollars per share)	$ 20.22	$ 19.08
Outstanding at end of period (in dollars per share)	$ 21.44	$ 19.02

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Basis of Presentation (Stock-Based Compensation) (Details) (USD $)	0 Months Ended		9 Months Ended
	Mar. 11, 2014	Jan. 22, 2013	Sep. 30, 2014 equal_installments	Sep. 30, 2013
Stock-Based Compensation
Tax benefit (expense) from equity based awards			$ 119,000	$ 68,000
Options granted (in shares)			0	0
Vested options (in shares)			245,186	307,521
Vested options, weighted average exercise price (in dollars per share)			$ 23.67	$ 23.28
Vested options, weighted average remaining contractual life			2 years 3 months 1 day
Intrinsic value for vested options			594,000
Intrinsic value for the total of all options exercised			41,000
Maximum exercise period			10 years
Cash received from options exercised			192,000	1,300,000
Long-Term Incentive Plan 2012
Stock-Based Compensation
Number of shares for issuance under future awards			368,026
Restricted Stock Units (RSUs)
Stock-Based Compensation
Share-based compensation costs			2,700,000	1,500,000
Share-based unrecognized compensation costs			3,600,000
Restricted Stock Units (RSUs) | Long-Term Incentive Plan 2005
Stock-Based Compensation
Equity instruments other than options, granted (in shares)	67,190	72,595	33,304	13,100
Share-based compensation, award vesting periods			5 years
Award vesting, number of equal installments			3
Performance-Based Restricted Stock Units | Long-Term Incentive Plan 2005
Stock-Based Compensation
Equity instruments other than options, granted (in shares)	32,645	40,990
Stock Option
Stock-Based Compensation
Share-based compensation costs			$ 0	$ 10,000
Options granted (in shares)			0	0
Stock Option | Prior to 2009
Stock-Based Compensation
Share-based compensation, award vesting periods			5 years
Typical options expiration period after date of grant			10 years
Stock Option | Prior to 2009 | Period One
Stock-Based Compensation
Share-based compensation, award vesting periods			3 years
Stock Option | Prior to 2009 | Period Two
Stock-Based Compensation
Share-based compensation, award vesting periods			4 years
Stock Option | Prior to 2009 | Period Three
Stock-Based Compensation
Share-based compensation, award vesting periods			5 years

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Goodwill, Core Deposit Premium and Other Intangible Assets (Carrying amount of intangible assets (incl accumulated amortization) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 58,439	$ 54,406
Accumulated Amortization	25,040	21,447
Net Carrying Amount	33,399	32,959
Core deposit intangibles
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	21,069	21,069
Accumulated Amortization	12,049	10,345
Net Carrying Amount	9,020	10,724
Mortgage servicing rights
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	36,193	32,160
Accumulated Amortization	12,228	10,372
Net Carrying Amount	23,965	21,788
Customer relationship intangible
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,177	1,177
Accumulated Amortization	763	730
Net Carrying Amount	$ 414	$ 447

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Loans and Leases (Financing receivables, non accrual status) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Receivables [Abstract]
Nonaccrual loans	$ 25,802	$ 29,313
Nonaccrual troubled debt restructured loans	4,328	13,081
Total nonaccrual loans	30,130	42,394
Accruing loans past due 90 days or more	0	24
Performing troubled debt restructured loans	$ 11,994	$ 19,353

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Basis of Presentation (Summary of Stock Options Activity) (Details) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Shares
Outstanding at beginning of period (in shares)	261,936	377,907
Granted (in shares)	0	0
Exercised (in shares)	(9,750)	(68,586)
Forfeited (in shares)	(7,000)	(1,800)
Outstanding at end of period (in shares)	245,186	307,521
Options exercisable at end of period (in shares)	245,186	307,521
Weighted-Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 23.60	$ 22.62
Granted (in dollars per share)	$ 0.00	$ 0.00
Exercised (in dollars per share)	$ 19.67	$ 19.54
Forfeited (in dollars per share)	$ 26.62	$ 26.68
Outstanding at end of period (in dollars per share)	$ 23.67	$ 23.28
Options exercisable at end of period (in dollars per share)	$ 23.67	$ 23.28

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Basis of Presentation (Subsequent Events) (Details) (USD $)				0 Months Ended			0 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013	Oct. 22, 2014 Community Bank-Corp of Sheboygan, Inc. Subsequent Event	Sep. 30, 2014 Community Bank & Trust	Sep. 30, 2014 Morrill and Janes Bank and Trust Company	Nov. 07, 2014 Morrill and Janes Bank and Trust Company Subsequent Event	Nov. 07, 2014 Morrill and Janes Bank and Trust Company Subsequent Event branch
Subsequent Event [Line Items]
Assets	$ 5,934,809,000	$ 5,923,716,000	$ 4,912,730,000		$ 525,000,000
Loans					410,000,000	9,000,000
Percentage of adjusted tangible book value				155.00%
Purchase price				52,000,000
Number of branches to be sold								1
Deposits	$ 4,726,719,000	$ 4,666,499,000				$ 28,000,000
Anticipated premium as percentage of average deposits							2.00%

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Consolidated Statements of Changes in Equity (Unaudited) (USD $) In Thousands, unless otherwise specified	Total	Preferred Stock [Member]	Common Stock [Member]	Capital Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]
Balance at beginning of period at Dec. 31, 2012	$ 404,539	$ 81,698	$ 16,828	$ 50,359	$ 236,279	$ 16,641	$ 0	$ 2,734
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income	(1,542)				28,854	(30,460)		64
Cash dividends declared:
Preferred	(889)				(889)
Common	(5,072)				(5,072)
Purchase of noncontrolling interest	(2,798)							(2,798)
Purchase of shares of common stock	(1,601)						(1,601)
Issuance of shares of common stock	2,428		125	744			1,559
Commitments to issue common stock	1,538			1,538
Balance at end of period at Sep. 30, 2013	396,603	81,698	16,953	52,641	259,172	(13,819)	(42)	0
Balance at beginning of period at Dec. 31, 2013	439,460	81,698	18,399	91,632	265,067	(17,336)	0	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income	47,249				29,637	17,612
Cash dividends declared:
Preferred	(613)				(613)
Common	(5,536)				(5,536)
Purchase of shares of common stock	(625)						(625)
Issuance of shares of common stock	781		78	78			625
Commitments to issue common stock	2,683			2,683
Balance at end of period at Sep. 30, 2014	$ 483,399	$ 81,698	$ 18,477	$ 94,393	$ 288,555	$ 276	$ 0	$ 0

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Basis of Presentation (Reclassifications) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Loan servicing income, reclassified to gain on sale of loans held-for-sale		$ 3,400,000		$ 10,600,000
Other real estate and loan collection expenses, reclassified to other noninterest income		339,000		2,400,000
Other real estate and loan collection expenses	$ 730,000	$ 1,100,000	$ 2,400,000	$ 4,900,000

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Securities (Other-than-temporary impairments) (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended		9 Months Ended
	Mar. 31, 2012 securities	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 Available-for-sale Securities	Dec. 31, 2013 Available-for-sale Securities	Sep. 30, 2014 Held-to-maturity Securities	Dec. 31, 2013 Held-to-maturity Securities
Investments, Debt and Equity Securities [Abstract]
Recorded as part of gross realized losses: Credit related OTTI		$ 0	$ 0	$ 0	$ 0
Recorded as part of gross realized losses: Intent to sell OTTI		0	0	0	0
Total recorded as part of gross realized losses	981	0	0	0	0
Recorded directly to AOCI for non-credit related impairment: Residential mortgage backed securities		0	0	0	0
Recorded directly to AOCI for non-credit related impairment: Accretion of non-credit related impairment		(24)	(24)	(72)	(72)
Total changes to AOCI for non-credit related impairment		(24)	(24)	(72)	(72)
Total OTTI losses (accretion) recorded on debt securities, net		(24)	(24)	(72)	(72)
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Credit related to OTTI						184	184	797	797
Non-credit related to OTTI								445	517
Number of private label mortgage-backed securities attributable to credit-related losses	3
Other-than-temporary credit-related losses in held to maturity	797
Other-than-temporary credit-related losses in available for sale	$ 184

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Loans and Leases (Carrying amount loans covered by loss share agreements (in text)) (Details) (USD $)	9 Months Ended
	Sep. 30, 2014 Galena State Bank & Trust Co. agreements	Sep. 30, 2014 Galena State Bank & Trust Co. Non-residential real estate Losses	Sep. 30, 2014 Galena State Bank & Trust Co. Non-residential real estate Recoveries	Sep. 30, 2014 Galena State Bank & Trust Co. Residential real estate	Jul. 02, 2009 Elizabeth State Bank	Jul. 02, 2009 Elizabeth State Bank Impaired Purchased Loans	Jul. 02, 2009 Elizabeth State Bank Nonimpaired Purchased Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contractually required payments of loans acquired					$ 42,700,000	$ 13,800,000	$ 28,900,000
Estimated fair value of loans acquired					37,800,000	9,000,000	28,700,000
Number of loss share agreements	2
Shared loss arrangement, maximum covered assets	$ 10,000,000
Loss sharing agreement, term		5 years	8 years	10 years

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Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Net interest income	$ 51,491	$ 39,880	$ 150,902	$ 117,471
Provision for loan and lease losses	2,553	5,149	11,635	7,648
Total noninterest income	20,162	20,379	59,626	69,604
Total noninterest expense	54,211	46,808	160,487	140,220
INCOME BEFORE INCOME TAXES	14,889	8,302	38,406	39,207
Segment Assets	5,934,809	4,912,730	5,934,809	4,912,730	5,923,716
Average Loans	3,812,218	2,937,508	3,692,718	2,906,970
Community and Other Banking
Segment Reporting Information [Line Items]
Net interest income	50,790	39,292	148,930	115,968
Provision for loan and lease losses	2,553	5,149	11,635	7,648
Total noninterest income	11,124	11,971	33,720	35,190
Total noninterest expense	42,784	35,511	127,743	104,199
INCOME BEFORE INCOME TAXES	16,577	10,603	43,272	39,311
Segment Assets	5,817,427	4,825,781	5,817,427	4,825,781
Average Loans	3,736,917	2,867,933	3,629,822	2,820,418
Retail Mortgage Banking
Segment Reporting Information [Line Items]
Net interest income	701	588	1,972	1,503
Provision for loan and lease losses	0	0	0	0
Total noninterest income	9,038	8,408	25,906	34,414
Total noninterest expense	11,427	11,297	32,744	36,021
INCOME BEFORE INCOME TAXES	(1,688)	(2,301)	(4,866)	(104)
Segment Assets	117,382	86,949	117,382	86,949
Average Loans	$ 75,301	$ 69,575	$ 62,896	$ 86,552

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
ASSETS
Cash and due from banks	$ 63,400	$ 118,441
Federal funds sold and other short-term investments	4,436	6,829
Cash and cash equivalents	67,836	125,270
Time deposits in other financial institutions	2,605	3,355
Securities:
Trading, at fair value	0	1,801
Available for sale, at fair value (cost of $1,366,069 at September 30, 2014, and $1,659,456 at December 31, 2013)	1,369,703	1,633,902
Held to maturity, at cost (fair value of $266,641 at September 30, 2014, and $237,437 at December 31, 2013)	255,312	237,498
Other investments, at cost	20,514	21,843
Loans held for sale	93,054	46,665
Loans and leases receivable:
Held to maturity	3,798,305	3,496,952
Loans covered by loss share agreements	3,850	5,749
Allowance for loan and lease losses	(41,698)	(41,685)
Loans and leases receivable, net	3,760,457	3,461,016
Premises, furniture and equipment, net	132,240	135,714
Other real estate, net	20,475	29,852
Goodwill	35,583	35,583
Other intangible assets, net	33,399	32,959
Cash surrender value on life insurance	82,224	81,110
FDIC indemnification asset	83	249
Other assets	61,324	76,899
TOTAL ASSETS	5,934,809	5,923,716
Deposits:
Demand	1,274,439	1,238,581
Savings	2,599,850	2,535,242
Time	852,430	892,676
Total deposits	4,726,719	4,666,499
Short-term borrowings	348,305	408,756
Other borrowings	334,513	350,109
Accrued expenses and other liabilities	41,873	58,892
TOTAL LIABILITIES	5,451,410	5,484,256
STOCKHOLDERS' EQUITY:
Common stock (par value $1 per share; authorized 25,000,000 shares; issued 18,477,463 shares at September 30, 2014 and 18,399,156 shares at December 31, 2013)	18,477	18,399
Capital surplus	94,393	91,632
Retained earnings	288,555	265,067
Accumulated other comprehensive income (loss)	276	(17,336)
Treasury stock at cost (0 shares outstanding at both September 30, 2014 and December 31, 2013)	0	0
TOTAL STOCKHOLDERS' EQUITY	483,399	439,460
TOTAL LIABILITIES AND EQUITY	5,934,809	5,923,716
Preferred Stock [Member]
STOCKHOLDERS' EQUITY:
Preferred stock	0	0
Series A Preferred Stock [Member]
STOCKHOLDERS' EQUITY:
Preferred stock	0	0
Series C Preferred Stock [Member]
STOCKHOLDERS' EQUITY:
Preferred stock	$ 81,698	$ 81,698

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Loans and Leases (Troubled debt restructurings on financing receivables) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014 loans	Sep. 30, 2013 loans	Sep. 30, 2014 loans	Sep. 30, 2013 loans
Financing Receivable, Modifications [Line Items]
Number of Loans	1	1	5	11
Pre- Modification Recorded Investment	$ 60	$ 65	$ 3,753	$ 21,377
Post- Modification Recorded Investment	60	65	3,753	21,377
Commercial
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	3
Pre- Modification Recorded Investment	0	0	0	17,873
Post- Modification Recorded Investment	0	0	0	17,873
Commercial real estate
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	1	0
Pre- Modification Recorded Investment	0	0	298	0
Post- Modification Recorded Investment	0	0	298	0
Commercial and Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	1	3
Pre- Modification Recorded Investment	0	0	298	17,873
Post- Modification Recorded Investment	0	0	298	17,873
Agricultural and agricultural real estate
Financing Receivable, Modifications [Line Items]
Number of Loans	1	0	3	3
Pre- Modification Recorded Investment	60	0	3,417	2,576
Post- Modification Recorded Investment	60	0	3,417	2,576
Residential real estate
Financing Receivable, Modifications [Line Items]
Number of Loans	0	1	1	4
Pre- Modification Recorded Investment	0	65	38	762
Post- Modification Recorded Investment	0	65	38	762
Consumer
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	1
Pre- Modification Recorded Investment	0	0	0	166
Post- Modification Recorded Investment	$ 0	$ 0	$ 0	$ 166

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Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
NET INCOME	$ 11,973	$ 6,810	$ 29,637	$ 28,918
Securities:
Net change in unrealized gain (loss) on securities	(144)	(4,857)	30,538	(44,394)
Reclassification adjustment for net gain realized in net income	(825)	(1,118)	(2,460)	(6,612)
Net change in non-credit related other than temporary impairment	24	24	72	72
Income taxes	372	2,229	(11,110)	19,036
Other comprehensive income (loss) on securities	(573)	(3,722)	17,040	(31,898)
Derivatives used in cash flow hedging relationships:
Net change in unrealized gain (loss) on derivatives	317	(366)	(758)	733
Reclassification adjustment for net loss on derivatives realized in net income	577	523	1,671	1,552
Income taxes	(334)	(54)	(341)	(847)
Other comprehensive income on cash flow hedges	560	103	572	1,438
Other comprehensive income (loss)	(13)	(3,619)	17,612	(30,460)
Comprehensive income (loss)	11,960	3,191	47,249	(1,542)
Less: comprehensive income attributable to noncontrolling interest	0	0	0	(64)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO HEARTLAND	$ 11,960	$ 3,191	$ 47,249	$ (1,606)

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Goodwill, Core Deposit Premium and Other Intangible Assets (Changes in capitalized mortgage servicing rights) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Finite-lived Intangible Assets [Roll Forward]
Balance at beginning of period			$ 21,788	$ 15,653
Originations			5,955	10,595
Amortization			(3,778)	(5,548)
Valuation adjustment	0	0	0	496
Balance at end of period	23,965	21,196	23,965	21,196
Fair value of mortgage servicing rights	$ 33,260	$ 31,179	$ 33,260	$ 31,179	$ 32,000
Mortgage servicing rights, net to servicing portfolio			0.71%	0.73%

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Securities (Securities available for sale (debt maturities) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Amortized Cost
Due in 1 year or less	$ 8,440
Due in 1 to 5 years	19,027
Due in 5 to 10 years	83,717
Due after 10 years	83,698
Total debt securities	194,882
Mortgage-backed securities	1,166,166
Equity securities	5,021
Amortized Cost	1,366,069	1,659,456
Estimated Fair Value
Due in 1 year or less	8,525
Due in 1 to 5 years	19,184
Due in 5 to 10 years	86,936
Due after 10 years	85,112
Total debt securities	199,757
Mortgage-backed securities	1,164,877
Equity securities	5,069
Estimated Fair Value	$ 1,369,703	$ 1,633,902

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Derivative Financial Instruments (Balance sheet category and fair values of derivative instruments (not designated as hedging instruments)) (Details) (Not Designated as Hedging Instrument, USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Other Assets | Interest rate lock commitments
Derivatives, Fair Value [Line Items]
Notional Amount	$ 103,933	$ 63,370
Fair Value	3,291	1,809
Other Assets | Forward Contracts
Derivatives, Fair Value [Line Items]
Notional Amount	114,988	117,637
Fair Value	222	1,206
Other Liabilities | Forward Contracts
Derivatives, Fair Value [Line Items]
Notional Amount	179,044	53,277
Fair Value	$ (623)	$ (133)

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Allowance for Loan and Lease Losses (Tables)

9 Months Ended

Sep. 30, 2014

Allowance for Loan and Lease Losses [Abstract]

Allowance for Credit Losses on Financing Receivables

Changes in the allowance for loan and lease losses for the three and nine months ended September 30, 2014, and September 30, 2013, were as follows, in thousands:

	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at June 30, 2014	$	11,927		$	14,680		$	2,788		$	3,815		$	7,516		$	166	$	40,892
Charge-offs	(875		)	(295		)	(338		)	(21		)	(1,120		)	—		(2,649		)
Recoveries	145			539			5			29			184			—		902
Provision	158			1,221			661			(200		)	673			40		2,553
Balance at September 30, 2014	$	11,355		$	16,145		$	3,116		$	3,623		$	7,253		$	206	$	41,698
	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2013	$	13,099		$	14,152		$	2,992		$	3,720		$	7,722		$	—	$	41,685
Charge-offs	(7,940		)	(1,379		)	(1,974		)	(225		)	(3,189		)	—		(14,707		)
Recoveries	552			1,833			9			85			606			—		3,085
Provision	5,644			1,539			2,089			43			2,114			206		11,635
Balance at September 30, 2014	$	11,355		$	16,145		$	3,116		$	3,623		$	7,253		$	206	$	41,698

	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at June 30, 2013	$	9,436		$	13,671		$	3,055		$	3,580		$	7,881		$	—	$	37,623
Charge-offs	(163		)	(630		)	—			(450		)	(1,270		)	—		(2,513		)
Recoveries	78			514			1			76			383			—		1,052
Provision	3,745			488			(240		)	331			825			—		5,149
Balance at September 30, 2013	$	13,096		$	14,043		$	2,816		$	3,537		$	7,819		$	—	$	41,311
	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2012	$	11,388		$	14,473		$	2,138		$	3,543		$	7,173		$	—	$	38,715
Charge-offs	(1,422		)	(2,561		)	(23		)	(856		)	(3,488		)	—		(8,350		)
Recoveries	983			1,279			100			102			834			—		3,298
Provision	2,147			852			601			748			3,300			—		7,648
Balance at September 30, 2013	$	13,096		$	14,043		$	2,816		$	3,537		$	7,819		$	—	$	41,311

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Securities (Securities held to maturity (debt maturities) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Amortized Cost
Due in 1 year or less	$ 0
Due in 1 to 5 years	13,062
Due in 5 to 10 years	47,769
Due after 10 years	188,676
Total debt securities	249,507
Mortgage-backed securities	5,805
Amortized Cost	255,312	237,498
Estimated Fair Value
Due in 1 year or less	0
Due in 1 to 5 years	13,910
Due in 5 to 10 years	50,227
Due after 10 years	196,969
Total debt securities	261,106
Mortgage-backed securities	5,535
Estimated Fair Value	$ 266,641	$ 237,437

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments designated as cash flow hedges at September 30, 2014, and December 31, 2013, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category	Receive Rate		Weighted Average Pay Rate		Maturity
September 30, 2014
Interest rate swap	$	10,713	$	(295	)	Other Liabilities	2.904	%	5.140	%	04/20/2016
Interest rate swap	25,000		(117		)	Other Liabilities	0.235	%	2.255	%	03/17/2021
Interest rate swap	20,000		(1,120		)	Other Liabilities	0.234	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,579		)	Other Liabilities	0.232	%	3.355	%	01/07/2020
Interest rate swap	10,000		48			Other Assets	0.235	%	1.674	%	03/26/2019
Interest rate swap	10,000		48			Other Assets	0.235	%	1.658	%	03/18/2019
December 31, 2013
Interest rate swap	$	11,719	$	(457	)	Other Liabilities	2.917	%	5.140	%	04/20/2016
Interest rate swap	25,000		(146		)	Other Liabilities	0.244	%	2.580	%	03/17/2014
Interest rate swap	20,000		(1,507		)	Other Liabilities	0.239	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,587		)	Other Liabilities	0.243	%	3.355	%	01/07/2020

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The table below identifies the gains and losses recognized on Heartland's derivative instruments designated as cash flow hedges for the three and nine months ended September 30, 2014, and September 30, 2013, in thousands:

	Effective Portion							Ineffective Portion
	Recognized in OCI			Reclassified from AOCI into Income				Recognized in Income on Derivatives
	Amount of Gain (Loss)			Category	Amount of Gain (Loss)			Category	Amount of Gain (Loss)
Three Months Ended September 30, 2014
Interest rate swap	$	68		Interest Expense	$	(63	)	Other Income	$	—
Interest rate swap	193			Interest Expense	(129		)	Other Income	—
Interest rate swap	208			Interest Expense	(153		)	Other Income	—
Interest rate swap	248			Interest Expense	(158		)	Other Income	—
Interest rate swap	89			Interest Expense	(37		)	Other Income	—
Interest rate swap	88			Interest Expense	(37		)	Other Income	—
Interest rate swap	—			Interest Expense	—			Other Income	—
Nine Months Ended September 30, 2014
Interest rate swap	$	162		Interest Expense	$	(192	)	Other Income	$	—
Interest rate swap	(117		)	Interest Expense	(258		)	Other Income	—
Interest rate swap	387			Interest Expense	(455		)	Other Income	—
Interest rate swap	8			Interest Expense	(473		)	Other Income	—
Interest rate swap	48			Interest Expense	(74		)	Other Income	—
Interest rate swap	48			Interest Expense	(73		)	Other Income	—
Interest rate swap	146			Interest Expense	(146		)	Other Income	—
Three Months Ended September 30, 2013
Interest rate swap	$	27		Interest Expense	$	(69	)	Other Income	$	—
Interest rate swap	138			Interest Expense	(147		)	Other Income	—
Interest rate swap	7			Interest Expense	(151		)	Other Income	—
Interest rate swap	(15		)	Interest Expense	(156		)	Other Income	—
Nine Months Ended September 30, 2013
Interest rate swap	$	203		Interest Expense	$	(210	)	Other Income	$	—
Interest rate swap	419			Interest Expense	(436		)	Other Income	—
Interest rate swap	548			Interest Expense	(446		)	Other Income	—
Interest rate swap	1,115			Interest Expense	(460		)	Other Income	—

Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments not designated as hedging instruments at September 30, 2014, and December 31, 2013, in thousands:

	Balance Sheet Category	Notional Amount		Fair Value
September 30, 2014
Interest rate lock commitments (mortgage)	Other Assets	$	103,933	$	3,291
Forward commitments	Other Assets	114,988		222
Forward commitments	Other Liabilities	179,044		(623		)
December 31, 2013
Interest rate lock commitments (mortgage)	Other Assets	$	63,370	$	1,809
Forward commitments	Other Assets	117,637		1,206
Forward commitments	Other Liabilities	53,277		(133		)

The table below identifies the income statement category of the gains and losses recognized in income on Heartland's derivative instruments not designated as hedging instruments for the three and nine months ended September 30, 2014, and September 30, 2013, in thousands:

	Income Statement Category	Year-to-Date Gain (Loss) Recognized
Three Months Ended September 30, 2014
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	(1,924	)
Forward commitments	Gains on sale of loans held for sale	1,505
Nine Months Ended September 30, 2014
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	3,393
Forward commitments	Gains on sale of loans held for sale	(1,474		)
Three Months Ended September 30, 2013
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	5,219
Forward commitments	Gains on sale of loans held for sale	(11,430		)
Nine Months Ended September 30, 2013
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	(6,047	)
Forward commitments	Gains on sale of loans held for sale	(1,289		)

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Fair Value (Fair value measurement non-recurring) (Details) (Nonrecurring Basis, USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	$ 14,976		$ 33,199
Other real estate owned	20,475		29,852
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Other real estate owned	0		0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Other real estate owned	0		0
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	14,976		33,199
Other real estate owned	20,475	[1]	29,852	[1]
Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	1,545		7,229
Commercial | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Commercial | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Commercial | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	1,545	[1]	7,229	[1]
Commercial real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	7,058		7,749
Commercial real estate | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Commercial real estate | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Commercial real estate | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	7,058	[1]	7,749	[1]
Agricultural and agricultural real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	827		13,062
Agricultural and agricultural real estate | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Agricultural and agricultural real estate | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Agricultural and agricultural real estate | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	827	[1]	13,062	[1]
Residential real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	2,503		3,396
Residential real estate | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Residential real estate | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Residential real estate | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	2,503	[1]	3,396	[1]
Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	3,043		1,763
Consumer | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Consumer | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Consumer | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	3,043	[1]	1,763	[1]
Year-to- Date Losses
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	2,019		2,800
Other real estate owned	1,365		2,799
Year-to- Date Losses | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	112		919
Year-to- Date Losses | Commercial real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	470		1,881
Year-to- Date Losses | Agricultural and agricultural real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	1,428		0
Year-to- Date Losses | Residential real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	0		0
Year-to- Date Losses | Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	$ 9		$ 0

[1] Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 29,637	$ 28,918
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	13,041	12,599
Provision for loan and lease losses	11,635	7,648
Net amortization of premium on securities	18,993	22,417
Securities gains, net	(2,460)	(6,612)
(Increase) decrease in trading account securities	1,801	(839)
Stock based compensation	2,683	1,538
Write downs and losses on repossessed assets	1,365	2,440
Loans originated for sale	(694,622)	(1,203,402)
Proceeds on sales of loans held for sale	665,837	1,262,488
Net gains on sales of loans held for sale	(17,604)	(24,247)
(Increase) decrease in accrued interest receivable	(603)	94
(Increase) decrease in prepaid expenses	(857)	8,645
Decrease in accrued interest payable	(1,176)	(843)
Capitalization of mortgage servicing rights	(5,955)	(10,595)
Valuation adjustment on mortgage servicing rights	0	(496)
Other, net	7,396	(3,825)
NET CASH PROVIDED BY OPERATING ACTIVITIES	29,111	95,928
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of time deposits in other financial institutions	0	(3,605)
Proceeds from the sale of securities available for sale	699,830	343,410
Proceeds from the sale of other investments	10,178	3,760
Proceeds from the maturity of and principal paydowns on securities available for sale	104,089	191,683
Proceeds from the maturity of and principal paydowns on securities held to maturity	2,217	1,982
Proceeds from the maturity of and principal paydowns on other securities	750	0
Purchase of securities available for sale	(543,407)	(541,265)
Purchase of securities held to maturity	(20,944)	0
Purchase of other investments	(8,849)	(4,566)
Net increase in loans and leases	(317,604)	(97,741)
Purchase of bank owned life insurance policies	0	(2,835)
Capital expenditures	(5,738)	(8,442)
Proceeds from the sale of equipment	175	0
Proceeds on sale of OREO and other repossessed assets	14,578	14,304
NET CASH USED BY INVESTING ACTIVITIES	(64,725)	(103,315)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits and savings accounts	100,466	138,415
Net decrease in time deposit accounts	(40,246)	(59,077)
Net decrease in short-term borrowings	(60,451)	(578)
Proceeds from other borrowings	5,000	160
Repayments of other borrowings	(20,596)	(66,647)
Purchase of noncontrolling interest	0	(2,798)
Purchase of treasury stock	(625)	(1,601)
Proceeds from issuance of common stock	662	2,360
Excess tax benefits on exercised stock options	119	68
Dividends paid	(6,149)	(5,961)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES	(21,820)	4,341
Net decrease in cash and cash equivalents	(57,434)	(3,046)
Cash and cash equivalents at beginning of year	125,270	168,054
CASH AND CASH EQUIVALENTS AT END OF PERIOD	67,836	165,008
Supplemental disclosures:
Cash paid for income/franchise taxes	2,632	4,819
Cash paid for interest	26,925	27,263
Loans transferred to OREO	6,528	13,318
Purchases of securities available for sale, accrued, not paid	$ 2,089	$ 7,540

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Consolidated Balance Sheet (Unaudited) (Parentheticals) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Cost of available for sale securities	$ 1,366,069,000	$ 1,659,456,000
Estimated Fair Value	266,641,000	237,437,000
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	18,477,463	18,399,156
Treasury stock shares	0	0
Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 1	$ 1
Preferred stock, shares authorized	20,604	20,604
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Series A Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 1	$ 1
Preferred stock, shares authorized	16,000	16,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Series C Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 1	$ 1
Preferred stock, shares authorized	81,698	81,698
Preferred stock, shares issued	81,698	81,698
Preferred stock, shares outstanding	81,698	81,698
Preferred stock, liquidation value	$ 81,700,000	$ 81,700,000

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Segment Reporting

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Segment Reporting

SEGMENT REPORTING

Heartland has identified two operating segments for purposes of financial reporting: community and other banking and retail mortgage banking. These segments were determined based on the products and services provided or the type of customers served and are consistent with the information used by Heartland's key decision makers to make operating decisions and to assess Heartland's performance. The following tables present financial information from Heartland's operating segments for the three and nine month periods ended September 30, 2014, and 2013, in thousands.

	Three Months Ended September 30,
	2014							2013
	Community and Other Banking		Retail Mortgage Banking			Total		Community and Other Banking		Retail Mortgage Banking			Total
Net interest income	$	50,790	$	701		$	51,491	$	39,292	$	588		$	39,880
Provision for loan losses	2,553		—			2,553		5,149		—			5,149
Total noninterest income	11,124		9,038			20,162		11,971		8,408			20,379
Total noninterest expense	42,784		11,427			54,211		35,511		11,297			46,808
Income (loss) before taxes	$	16,577	$	(1,688	)	$	14,889	$	10,603	$	(2,301	)	$	8,302
Average Loans, for the period	$	3,736,917	$	75,301		$	3,812,218	$	2,867,933	$	69,575		$	2,937,508
Segment Assets, at period end	$	5,817,427	$	117,382		$	5,934,809	$	4,825,781	$	86,949		$	4,912,730
	Nine Months Ended September 30,
	2014							2013
	Community and Other Banking		Retail Mortgage Banking			Total		Community and Other Banking		Retail Mortgage Banking			Total
Net interest income	$	148,930	$	1,972		$	150,902	$	115,968	$	1,503		$	117,471
Provision for loan losses	11,635		—			11,635		7,648		—			7,648
Total noninterest income	33,720		25,906			59,626		35,190		34,414			69,604
Total noninterest expense	127,743		32,744			160,487		104,199		36,021			140,220
Income (loss) before taxes	$	43,272	$	(4,866	)	$	38,406	$	39,311	$	(104	)	$	39,207
Average Loans, for the period	$	3,629,822	$	62,896		$	3,692,718	$	2,820,418	$	86,552		$	2,906,970
Segment Assets, at period end	$	5,817,427	$	117,382		$	5,934,809	$	4,825,781	$	86,949		$	4,912,730

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 05, 2014
Document Information [Line Items]
Entity Registrant Name	HEARTLAND FINANCIAL USA INC
Entity Central Index Key	0000920112
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		18,479,869

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Earnings Per Share

Earnings Per Share

Basic earnings per share is determined using net income available to common stockholders and weighted average common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average common shares and assumed incremental common shares issued.

Effect of New Financial Accounting Standards

Effect of New Financial Accounting Standards

In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,"to eliminate the diversity in practice and to increase the comparability of financial statements among companies. The guidance requires that a reporting entity generally must show an unrecognized tax benefit, or a portion of an unrecognized tax benefit, for a net operating loss carryforward, similar tax loss or a tax credit carryforward as a reduction of a deferred tax asset. However, the entity should present the unrecognized tax benefit as a liability and not as a reduction of a deferred tax asset if the carryforward or tax loss is not available on the financial statement date to settle any additional income tax liability that would result from the disallowance of the tax position under the applicable tax law, or the applicable tax law does not require the company to use, and the company does not intend to use, the carryforward or tax loss to settle additional income taxes resulting from the disallowance of the tax position. The guidance does not require any new recurring disclosures because it does not affect the recognition or measurement of uncertain tax positions. Heartland adopted this standard on January 1, 2014, and the adoption did not have a material impact on the results of operations, financial position, and liquidity.

In January 2014, the FASB issued ASU 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects." The amendments in ASU 2014-01 to Topic 323, "Equity Investments and Joint Ventures," provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments are effective for fiscal years, and interim periods within those years, beginning after December 31, 2014, and should be applied retrospectively to all periods presented. Early adoption is permitted. Heartland is in the process of evaluating the impact that adoption of this guidance will have on the results of operations, financial position, and liquidity.

In January 2014, the FASB issued ASU 2014-04, "Receivables-Troubled Debt Restructurings by Creditors: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure." The amendments in ASU 2014-04 clarify that an in-substance foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (i) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (ii) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in lieu of foreclosure or similar legal agreement. ASU 2014-04 also requires disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in loans collateralized by residential real estate property that are in the process of foreclosure. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption permitted. Once adopted, an entity can elect either (i) a modified retrospective transition method or (ii) a prospective transition method. The modified retrospective transition method is applied by means of a cumulative-effect adjustment to residential mortgage loans and foreclosed residential real estate properties existing as of the beginning of the period for which the amendments of ASU 2014-04 are effective, with real estate reclassified to loans measured at the carrying value of the real estate at the date of adoption and loans reclassified to real estate measured at the lower of net carrying value of the loan or the fair value of the real estate less costs to sell at the date of adoption. The prospective transition method is applied by means of applying the amendments of ASU 2014-04 to all instances of receiving physical possession of residential real estate properties that occur after the date of adoption. Heartland does not expect the adoption of this standard to have a material impact on the results of operations, financial position, and liquidity.

In August 2014, the FASB issued ASU 2014-14, "Receivables-Troubled Debt Restructurings by Creditors: Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure." The amendment clarifies how creditors are to classify certain government-guaranteed mortgage loans upon foreclosure. The amendment requires that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government guarantee that is not separate from the loan before foreclosure, and (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under the claim, and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured on the amount of the loan balance (principal and interest) expected to be recovered for the guarantor. This amendment is effective for annual reporting periods, and interim reporting periods within those years, beginning after December 15, 2014, with early adoption permitted. Heartland does not expect the adoption of this standard to have a material impact on the results of operations, financial position, and liquidity.

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Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
INTEREST INCOME:
Interest and fees on loans and leases	$ 49,311	$ 40,154	$ 143,796	$ 119,707
Interest on securities:
Taxable	7,547	4,803	22,755	14,174
Nontaxable	3,249	3,443	10,079	10,001
Interest on federal funds sold	1	0	1	0
Interest on interest bearing deposits in other financial institutions	6	3	20	9
TOTAL INTEREST INCOME	60,114	48,403	176,651	143,891
INTEREST EXPENSE:
Interest on deposits	4,655	4,769	14,010	14,911
Interest on short-term borrowings	227	131	655	387
Interest on other borrowings (includes $577 and $523 of interest expense related to derivatives reclassified from accumulated other comprehensive income (loss) for the three months ended September 30, 2014 and 2013, respectively, and $1,671 and $1,552 of interest expense related to derivatives reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2014 and 2013, respectively)	3,741	3,623	11,084	11,122
TOTAL INTEREST EXPENSE	8,623	8,523	25,749	26,420
NET INTEREST INCOME	51,491	39,880	150,902	117,471
Provision for loan and lease losses	2,553	5,149	11,635	7,648
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES	48,938	34,731	139,267	109,823
NONINTEREST INCOME:
Service charges and fees	4,857	4,487	15,007	12,775
Loan servicing income	1,319	598	4,223	865
Trust fees	3,194	2,918	9,747	8,764
Brokerage and insurance commissions	1,044	1,277	3,325	3,315
Securities gains, net (includes $825 and $1,118 of net security gains reclassified from accumulated other comprehensive income (loss) for the three months ended September 30, 2014 and 2013, respectively, and $2,460 and $6,612 of net security gains reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2014 and 2013, respectively.)	825	1,118	2,460	6,612
Gain (loss) on trading account securities	0	263	(38)	839
Gains on sale of loans held for sale	8,384	8,637	23,559	34,842
Loss on sales/valuations of other real estate and repossessed assets, net	(444)	(339)	(1,365)	(2,440)
Valuation adjustment on mortgage servicing rights	0	0	0	496
Income on bank owned life insurance	371	409	1,073	1,129
Other noninterest income	612	1,011	1,635	2,407
TOTAL NONINTEREST INCOME	20,162	20,379	59,626	69,604
NONINTEREST EXPENSES:
Salaries and employee benefits	33,546	28,847	98,428	88,103
Occupancy	3,807	3,387	11,841	9,796
Furniture and equipment	2,033	1,917	6,008	6,033
Professional fees	4,429	4,486	13,169	12,262
FDIC insurance assessments	888	745	2,848	2,508
Advertising	1,383	1,360	4,082	3,836
Intangible assets amortization	521	196	1,736	594
Other real estate and loan collection expenses	215	730	1,785	2,446
Other noninterest expenses	7,389	5,140	20,590	14,642
TOTAL NONINTEREST EXPENSES	54,211	46,808	160,487	140,220
INCOME BEFORE INCOME TAXES	14,889	8,302	38,406	39,207
Income taxes (includes $93 and $222 of income tax expense reclassified from accumulated other comprehensive income (loss) for the three months ended September 30, 2014 and 2013, respectively, and $296 and $1,887 of income tax expense reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2014 and 2013, respectively)	2,916	1,492	8,769	10,289
NET INCOME	11,973	6,810	29,637	28,918
Net income available to noncontrolling interest, net of tax	0	0	0	(64)
NET INCOME ATTRIBUTABLE TO HEARTLAND	11,973	6,810	29,637	28,854
Preferred dividends and discount	(205)	(276)	(613)	(889)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$ 11,768	$ 6,534	$ 29,024	$ 27,965
EARNINGS PER COMMON SHARE - BASIC (in dollars per share)	$ 0.64	$ 0.39	$ 1.57	$ 1.65
EARNINGS PER COMMON SHARE - DILUTED (in dollars per share)	$ 0.63	$ 0.38	$ 1.55	$ 1.63
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share)	$ 0.10	$ 0.10	$ 0.30	$ 0.30

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Loans and Leases

9 Months Ended

Sep. 30, 2014

Receivables [Abstract]

Loans and Leases

LOANS AND LEASES

Loans and leases as of September 30, 2014, and December 31, 2013, were as follows, in thousands:

	September 30, 2014			December 31, 2013
Loans and leases receivable held to maturity:
Commercial	$	1,024,712		$	950,197
Commercial real estate	1,684,832			1,529,683
Agricultural and agricultural real estate	404,423			376,735
Residential real estate	360,309			349,349
Consumer	326,148			294,145
Gross loans and leases receivable held to maturity	3,800,424			3,500,109
Unearned discount	(98		)	(168		)
Deferred loan fees	(2,021		)	(2,989		)
Total net loans and leases receivable held to maturity	3,798,305			3,496,952
Loans covered under loss share agreements:
Commercial and commercial real estate	1,188			2,314
Agricultural and agricultural real estate	573			543
Residential real estate	1,762			2,280
Consumer	327			612
Total loans covered under loss share agreements	3,850			5,749
Allowance for loan and lease losses	(41,698		)	(41,685		)
Loans and leases receivable, net	$	3,760,457		$	3,461,016

Heartland has certain lending policies and procedures in place that are designed to provide for an acceptable level of credit risk. The board of directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the board with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem loans. Diversification in the loan portfolio is also a means of managing risk associated with fluctuations in economic conditions.

The commercial and commercial real estate loan portfolio includes a wide range of business loans, including lines of credit for working capital and operational purposes and term loans for the acquisition of equipment and real estate. Although most loans are made on a secured basis, loans may be made on an unsecured basis where warranted by the overall financial condition of the borrower. Terms of commercial business loans generally range from one to five years. Commercial loans and leases are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The collateral that Heartland requires for most of these loans and leases is based upon the discounted market value of the collateral. The primary repayment risks of commercial loans and leases are that the cash flow of the borrowers may be unpredictable, and the collateral securing these loans may fluctuate in value. Heartland seeks to minimize these risks in a variety of ways. The underwriting analysis includes credit verification, analysis of global cash flows, appraisals and a review of the financial condition of the borrower. Personal guarantees are frequently required as a tertiary form of repayment. In addition, when underwriting loans for commercial real estate, careful consideration is given to the property's operating history, future operating projections, current and projected occupancy, location and physical condition. Heartland also utilizes government guaranteed lending through the U.S. Small Business Administration and the USDA Rural Development Business and Industry Program to assist customers with longer-term funding and to reduce risk.

Agricultural loans, many of which are secured by crops, machinery and real estate, are provided to finance capital improvements and farm operations as well as acquisitions of livestock and machinery. Agricultural loans present unique credit risks relating to adverse weather conditions, loss of livestock due to disease or other factors, declines in market prices for agricultural products and the impact of government regulations. The ultimate repayment of agricultural loans is dependent upon the profitable operation or management of the agricultural entity. In underwriting agricultural loans, lending personnel work closely with their customers to review budgets and cash flow projections for the ensuing crop year. These budgets and cash flow projections are monitored closely during the year and reviewed with the customers at least annually. Lending personnel also work closely with governmental agencies, including the Farm Service Agency, to help agricultural customers obtain credit enhancement products such as loan guarantees or interest assistance.

Heartland originates first-lien, adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a single family residential property. These loans are principally collateralized by owner-occupied properties and are amortized over 10 to 30 years. Heartland typically sells longer-term, low-rate, residential mortgage loans in the secondary market with servicing rights retained. This practice allows Heartland to better manage interest rate risk and liquidity risk. The Heartland bank subsidiaries participate in lending programs sponsored by U.S. government agencies such as Veterans Administration and Federal Home Administration when justified by market conditions.

Consumer lending includes motor vehicle, home improvement, home equity and small personal credit lines. Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than one-to-four-family residential mortgage loans. Consumer loan collections are dependent on the borrower's continuing financial stability, and are therefore more likely to be affected by adverse personal circumstances. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate. Heartland's consumer finance subsidiaries, Citizens Finance Co. and Citizens Finance of Illinois Co., typically lend to borrowers with past credit problems or limited credit histories, which comprise approximately 22% of Heartland's total consumer loan portfolio.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Heartland’s policy is to discontinue the accrual of interest income on any loan or lease when, in the opinion of management, there is a reasonable doubt as to the timely collection of the interest and principal, normally when a loan or lease is 90 days past due. When interest accruals are deemed uncollectible, interest credited to income in the current year is reversed and interest accrued in prior years is charged to the allowance for loan and lease losses. Nonaccrual loans and leases are returned to an accrual status when, in the opinion of management, the financial position of the borrower indicates that there is no longer any reasonable doubt as to the timely payment of interest and principal.

Under Heartland’s credit practices, a loan is impaired when, based on current information and events, it is probable that Heartland will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loan impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except where more practical, at the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent.

The following table shows the balance in the allowance for loan and lease losses at September 30, 2014, and December 31, 2013, 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 2014.

	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
September 30, 2014
Commercial	$	451	$	10,904	$	11,355	$	8,278	$	1,016,434	$	1,024,712
Commercial real estate	1,176		14,969		16,145		33,280		1,651,552		1,684,832
Agricultural and agricultural real estate	67		3,049		3,116		5,689		398,734		404,423
Residential real estate	424		3,199		3,623		8,187		352,122		360,309
Consumer	1,287		5,966		7,253		6,150		319,998		326,148
Unallocated	—		206		206		—		—		—
Total	$	3,405	$	38,293	$	41,698	$	61,584	$	3,738,840	$	3,800,424
December 31, 2013
Commercial	$	2,817	$	10,282	$	13,099	$	14,644	$	935,553	$	950,197
Commercial real estate	818		13,334		14,152		28,299		1,501,384		1,529,683
Agricultural and agricultural real estate	756		2,236		2,992		16,667		360,068		376,735
Residential real estate	605		3,115		3,720		7,214		342,135		349,349
Consumer	1,721		6,001		7,722		5,137		289,008		294,145
Unallocated	—		—		—		—		—		—
Total	$	6,717	$	34,968	$	41,685	$	71,961	$	3,428,148	$	3,500,109

The following table presents nonaccrual loans, accruing loans past due 90 days or more and troubled debt restructured loans not covered under loss share agreements at September 30, 2014, and December 31, 2013, in thousands. There were no nonaccrual leases, accruing leases past due 90 days or more or restructured leases at September 30, 2014, and December 31, 2013.

	September 30, 2014		December 31, 2013
Nonaccrual loans	$	25,802	$	29,313
Nonaccrual troubled debt restructured loans	4,328		13,081
Total nonaccrual loans	$	30,130	$	42,394
Accruing loans past due 90 days or more	$	—	$	24
Performing troubled debt restructured loans	$	11,994	$	19,353

The following tables provide information on troubled debt restructured loans that were modified during the three and nine months ended September 30, 2014, and September 30, 2013, dollars in thousands:

	Three Months Ended September 30,
	2014					2013
	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	1	60		60		—	—		—
Residential real estate	—	—		—		1	65		65
Consumer	—	—		—		—	—		—
Total	1	$	60	$	60	1	$	65	$	65

	Nine Months Ended September 30,
	2014					2013
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial	—	$	—	$	—	3	$	17,873	$	17,873
Commercial real estate	1	298		298		—	—		—
Total commercial and commercial real estate	1	298		298		3	17,873		17,873
Agricultural and agricultural real estate	3	3,417		3,417		3	2,576		2,576
Residential real estate	1	38		38		4	762		762
Consumer	—	—		—		1	166		166
Total	5	$	3,753	$	3,753	11	$	21,377	$	21,377

The pre-modification and post-modification recorded investment represents amounts as of the date of loan modification. Since the modifications on these loans have been only interest rate concessions and term extensions, not principal reductions, the pre-modification and post-modification recorded investment amounts are the same. At September 30, 2014, there were no commitments to extend credit to any of the borrowers with an existing troubled debt restructuring.

The following tables provide information on troubled debt restructured loans for which there was a payment default during the three months and nine months ended September 30, 2014, and September 30, 2013, in thousands, that had been modified during the twelve month period prior to the default:

	With Payment Defaults During the Following Periods
	Three Months Ended September 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	—	$	—	1	$	13,000
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	—	—		1	13,000
Agricultural and agricultural real estate	1	60		—	—
Residential real estate	—	—		—	—
Consumer	—	—		—	—
Total	1	$	60	1	$	13,000

	With Payment Defaults During the Following Periods
	Nine Months Ended September 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	—	$	—	2	$	17,670
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	—	—		2	17,670
Agricultural and agricultural real estate	1	60		—	—
Residential real estate	—	—		2	167
Consumer	—	—		—	—
Total	1	$	60	4	$	17,837

Heartland's internal rating system is a series of grades reflecting management's risk assessment, based on its analysis of the borrower's financial condition. The "pass" category consists of all loans that are not in the "nonpass" category, categorized into a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the pass category is monitored for early identification of credit deterioration. The "nonpass" category consists of special mention, substandard, doubtful and loss loans. The "special mention" rating is attached to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten its capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. These credits are closely monitored for improvement or deterioration. The "substandard" rating is assigned to loans that are inadequately protected by the current sound net worth and paying capacity of the borrower and may be further at risk due to deterioration in the value of collateral pledged. Well-defined weaknesses jeopardize liquidation of the debt. These loans are still considered collectible, however, a distinct possibility exists that Heartland will sustain some loss if deficiencies are not corrected. Substandard loans may exhibit some or all of the following weaknesses: deteriorating trends, lack of earnings, inadequate debt service capacity, excessive debt and/or lack of liquidity. The "doubtful" rating is assigned to loans where identified weaknesses make collection or liquidation in full, on the basis of existing facts, conditions and values, highly questionable and improbable. These borrowers are usually in default, lack liquidity and capital, as well as, resources necessary to remain an operating entity. Specific pending events, such as capital injections, liquidations or perfection of liens on additional collateral, may strengthen the credit, thus deferring classification of the loan as loss until exact status can be determined. The "loss" rating is assigned to loans considered uncollectible. As of September 30, 2014, Heartland had no loans classified as doubtful or loss. Loans are placed on "nonaccrual" when management does not expect to collect payments of principal and interest in full or when principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection.

The following table presents loans and leases not covered by loss share agreements by credit quality indicator at September 30, 2014, and December 31, 2013, in thousands:

	Pass		Nonpass		Total
September 30, 2014
Commercial	$	913,923	$	110,789	$	1,024,712
Commercial real estate	1,536,940		147,892		1,684,832
Total commercial and commercial real estate	2,450,863		258,681		2,709,544
Agricultural and agricultural real estate	377,733		26,690		404,423
Residential real estate	341,984		18,325		360,309
Consumer	316,609		9,539		326,148
Total gross loans and leases receivable held to maturity	$	3,487,189	$	313,235	$	3,800,424
December 31, 2013
Commercial	$	871,825	$	78,372	$	950,197
Commercial real estate	1,390,820		138,863		1,529,683
Total commercial and commercial real estate	2,262,645		217,235		2,479,880
Agricultural and agricultural real estate	335,821		40,914		376,735
Residential real estate	333,161		16,188		349,349
Consumer	284,148		9,997		294,145
Total gross loans and leases receivable held to maturity	$	3,215,775	$	284,334	$	3,500,109

The nonpass category in the table above is comprised of approximately 69% special mention and 31% substandard as of September 30, 2014. The percent of nonpass loans on nonaccrual status as of September 30, 2014, was 9%. As of December 31, 2013, the nonpass category in the table above was comprised of approximately 59% special mention, 38% substandard, and 3% doubtful. The percent of nonpass loans on nonaccrual status as of December 31, 2013, was 15%. Loans delinquent 30 to 89 days as a percent of total loans were 0.32% at September 30, 2014, compared to 0.30% at December 31, 2013. Changes in credit risk are monitored on a continuous basis and changes in risk ratings are made when identified. All impaired loans are reviewed at least annually.

The following table sets forth information regarding Heartland's accruing and nonaccrual loans and leases not covered by loss share agreements at September 30, 2014, and December 31, 2013, 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
September 30, 2014
Commercial	$	5,163	$	124	$	—	$	5,287	$	1,013,124	$	6,301	$	1,024,712
Commercial real estate	941		101		—		1,042		1,670,756		13,034		1,684,832
Total commercial and commercial real estate	6,104		225		—		6,329		2,683,880		19,335		2,709,544
Agricultural and agricultural real estate	89		—		—		89		402,319		2,015		404,423
Residential real estate	1,626		120		—		1,746		352,362		6,201		360,309
Consumer	2,915		990		—		3,905		319,664		2,579		326,148
Total gross loans and leases receivable held to maturity	$	10,734	$	1,335	$	—	$	12,069	$	3,758,225	$	30,130	$	3,800,424
December 31, 2013
Commercial	$	697	$	741	$	—	$	1,438	$	935,508	$	13,251	$	950,197
Commercial real estate	3,042		199		24		3,265		1,511,618		14,800		1,529,683
Total commercial and commercial real estate	3,739		940		24		4,703		2,447,126		28,051		2,479,880
Agricultural and agricultural real estate	818		—		—		818		369,907		6,010		376,735
Residential real estate	1,199		56		—		1,255		342,735		5,359		349,349
Consumer	2,624		1,089		—		3,713		287,458		2,974		294,145
Total gross loans and leases receivable held to maturity	$	8,380	$	2,085	$	24	$	10,489	$	3,447,226	$	42,394	$	3,500,109

The majority of Heartland's impaired loans are those that are nonaccrual or have had their terms restructured in a troubled debt restructuring. The following tables present, for impaired loans not covered by loss share agreements and by category of loan, the unpaid contractual balance at September 30, 2014, and December 31, 2013; the outstanding loan balance recorded on the consolidated balance sheets at September 30, 2014, and December 31, 2013; any related allowance recorded for those loans as of September 30, 2014, and December 31, 2013; the average outstanding loan balance recorded on the consolidated balance sheets during the three months and nine months ended September 30, 2014, and year ended December 31, 2013; and the interest income recognized on the impaired loans during the three months and nine months ended September 30, 2014, and year ended December 31, 2013, 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, 2014
Impaired loans with a related allowance:
Commercial	$	4,751	$	4,675	$	451	$	6,960	$	—	$	7,022	$	10
Commercial real estate	4,092		3,832		1,176		11,645		7		6,294		40
Total commercial and commercial real estate	8,843		8,507		1,627		18,605		7		13,316		50
Agricultural and agricultural real estate	3,368		3,368		67		4,021		12		4,176		67
Residential real estate	2,024		1,939		424		6,308		8		3,604		17
Consumer	4,339		4,330		1,287		5,489		21		4,710		81
Total loans held to maturity	$	18,574	$	18,144	$	3,405	$	34,423	$	48	$	25,806	$	215
Impaired loans without a related allowance:
Commercial	$	4,222	$	3,603	$	—	$	2,620	$	20	$	3,519	$	60
Commercial real estate	33,626		29,448		—		23,937		595		23,325		883
Total commercial and commercial real estate	37,848		33,051		—		26,557		615		26,844		943
Agricultural and agricultural real estate	3,749		2,321		—		2,100		3		3,731		10
Residential real estate	6,616		6,248		—		6,449		—		6,055		64
Consumer	1,820		1,820		—		1,627		17		1,722		34
Total loans held to maturity	$	50,033	$	43,440	$	—	$	36,733	$	635	$	38,352	$	1,051
Total impaired loans held to maturity:
Commercial	$	8,973	$	8,278	$	451	$	9,580	$	20	$	10,541	$	70
Commercial real estate	37,718		33,280		1,176		35,582		602		29,619		923
Total commercial and commercial real estate	46,691		41,558		1,627		45,162		622		40,160		993
Agricultural and agricultural real estate	7,117		5,689		67		6,121		15		7,907		77
Residential real estate	8,640		8,187		424		12,757		8		9,659		81
Consumer	6,159		6,150		1,287		7,116		38		6,432		115
Total impaired loans held to maturity	$	68,607	$	61,584	$	3,405	$	71,156	$	683	$	64,158	$	1,266

	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
December 31, 2013
Impaired loans with a related allowance:
Commercial	$	7,901	$	7,901	$	2,817	$	5,343	$	38
Commercial real estate	9,164		8,909		818		7,686		282
Total commercial and commercial real estate	17,065		16,810		3,635		13,029		320
Agricultural and agricultural real estate	13,818		13,818		756		7,537		354
Residential real estate	2,460		2,460		605		3,179		13
Consumer	3,485		3,485		1,721		3,490		100
Total loans held to maturity	$	36,828	$	36,573	$	6,717	$	27,235	$	787
Impaired loans without a related allowance:
Commercial	$	7,724	$	6,743	$	—	$	9,394	$	89
Commercial real estate	24,830		19,390		—		25,676		538
Total commercial and commercial real estate	32,554		26,133		—		35,070		627
Agricultural and agricultural real estate	2,849		2,849		—		9,985		189
Residential real estate	5,345		4,754		—		4,198		80
Consumer	1,652		1,652		—		1,515		37
Total loans held to maturity	$	42,400	$	35,388	$	—	$	50,768	$	933
Total impaired loans held to maturity:
Commercial	$	15,625	$	14,644	$	2,817	$	14,737	$	127
Commercial real estate	33,994		28,299		818		33,362		820
Total commercial and commercial real estate	49,619		42,943		3,635		48,099		947
Agricultural and agricultural real estate	16,667		16,667		756		17,522		543
Residential real estate	7,805		7,214		605		7,377		93
Consumer	5,137		5,137		1,721		5,005		137
Total impaired loans held to maturity	$	79,228	$	71,961	$	6,717	$	78,003	$	1,720

On July 2, 2009, Heartland acquired all deposits of The Elizabeth State Bank in Elizabeth, Illinois through its subsidiary Galena State Bank & Trust Co. based in Galena, Illinois, in a whole bank loss sharing transaction facilitated by the FDIC. As of July 2, 2009, The Elizabeth State Bank had loans of $42.7 million. The estimated fair value of the loans acquired was $37.8 million.

The acquired loans and other real estate owned are covered by two loss share agreements between the FDIC and Galena State Bank & Trust Co., which affords Galena State Bank & Trust Co. significant loss protection. Under the loss share agreements, the FDIC covers 80% of the covered loan and other real estate owned losses (referred to as covered assets) up to $10 million and 95% of losses in excess of that amount. The term for loss sharing on non-residential real estate losses is five years with respect to losses and eight years with respect to recoveries, while the term for loss sharing on residential real estate loans is ten years with respect to losses and recoveries. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC at the date of the transaction. New loans made after the acquisition are not covered by the loss share agreements.

The Elizabeth State Bank acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” Purchased loans acquired in a business combination, which include loans purchased in The Elizabeth State Bank acquisition, are recorded at estimated fair value on their purchase date, but the purchaser cannot carry over the related allowance for loan and lease losses. Purchased loans are accounted for under ASC 310-30, “Loans and Debt Securities with Deteriorated Credit Quality,” when the loans have evidence of credit deterioration since origination and it is probable at the date of the acquisition that Heartland will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration at the purchase date included statistics such as past due and nonaccrual status. Generally, acquired loans that meet Heartland’s definition for nonaccrual status fall within the scope of ASC 310-30. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference which is included in the carrying value of the loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in cash flows result in a reversal of the provision for loan and lease losses to the extent of prior charges, or a reclassification of the difference from nonaccretable to accretable with a positive impact on future interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

The carrying amount of the loans covered by these loss share agreements at September 30, 2014, and December 31, 2013, consisted of purchased impaired and nonimpaired loans as summarized in the following table, in thousands:

	September 30, 2014						December 31, 2013
	Impaired Purchased Loans		Non  Impaired Purchased Loans		Total Covered Loans		Impaired Purchased Loans		Non Impaired Purchased Loans		Total Covered Loans
Commercial and commercial real estate	$	—	$	1,188	$	1,188	$	549	$	1,765	$	2,314
Agricultural and agricultural real estate	—		573		573		—		543		543
Residential real estate	—		1,762		1,762		—		2,280		2,280
Consumer loans	266		61		327		538		74		612
Total Covered Loans	$	266	$	3,584	$	3,850	$	1,087	$	4,662	$	5,749

On the acquisition date, the preliminary estimate of the contractually required payments receivable for all loans with evidence of credit deterioration since origination acquired in the acquisition was $13.8 million and the estimated fair value of the loans was $9.0 million. At September 30, 2014, and December 31, 2013, a majority of these loans were valued based upon the liquidation value of the underlying collateral, because the expected cash flows are primarily based on the liquidation of underlying collateral and the timing and amount of the cash flows could not be reasonably estimated. There was no allowance for loan and lease losses related to these ASC 310-30 loans at September 30, 2014, and December 31, 2013.

On the acquisition date, the preliminary estimate of the contractually required payments receivable for all nonimpaired loans acquired in the acquisition was $28.9 million and the estimated fair value of the loans was $28.7 million.

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Securities

9 Months Ended

Sep. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Securities

SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of September 30, 2014, and December 31, 2013, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2014
U.S. government corporations and agencies	$	13,884	$	74	$	(12	)	$	13,946
Mortgage-backed securities	1,166,166		10,403		(11,692		)	1,164,877
Obligations of states and political subdivisions	180,998		5,680		(867		)	185,811
Total debt securities	1,361,048		16,157		(12,571		)	1,364,634
Equity securities	5,021		48		—			5,069
Total	$	1,366,069	$	16,205	$	(12,571	)	$	1,369,703
December 31, 2013
U.S. government corporations and agencies	$	220,157	$	147	$	(2,001	)	$	218,303
Mortgage-backed securities	1,156,983		9,538		(22,574		)	1,143,947
Obligations of states and political subdivisions	277,320		1,706		(12,402		)	266,624
Total debt securities	1,654,460		11,391		(36,977		)	1,628,874
Equity securities	4,996		32		—			5,028
Total	$	1,659,456	$	11,423	$	(36,977	)	$	1,633,902

At both September 30, 2014, and December 31, 2013, the amortized cost of the available for sale securities is net of $184,000 of credit related other-than-temporary impairment ("OTTI").

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of September 30, 2014, and December 31, 2013, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2014
Mortgage-backed securities	$	5,805	$	263	$	(533	)	$	5,535
Obligations of states and political subdivisions	249,507		12,914		(1,315		)	261,106
Total	$	255,312	$	13,177	$	(1,848	)	$	266,641
December 31, 2013
Mortgage-backed securities	$	5,973	$	199	$	(321	)	$	5,851
Obligations of states and political subdivisions	231,525		5,801		(5,740		)	231,586
Total	$	237,498	$	6,000	$	(6,061	)	$	237,437

At September 30, 2014, the amortized cost of the held to maturity securities is net of $797,000 of credit related OTTI and $445,000 of non-credit related OTTI. At December 31, 2013, the amortized cost of the held to maturity securities was net of $797,000 of credit related OTTI and $517,000 of non-credit related OTTI.

Approximately 97% of Heartland's mortgage-backed securities are issuances of government-sponsored enterprises.

The amortized cost and estimated fair value of debt securities available for sale at September 30, 2014, 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.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	8,440	$	8,525
Due in 1 to 5 years	19,027		19,184
Due in 5 to 10 years	83,717		86,936
Due after 10 years	83,698		85,112
Total debt securities	194,882		199,757
Mortgage-backed securities	1,166,166		1,164,877
Equity securities	5,021		5,069
Total investment securities	$	1,366,069	$	1,369,703

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 2014, 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.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	—	$	—
Due in 1 to 5 years	13,062		13,910
Due in 5 to 10 years	47,769		50,227
Due after 10 years	188,676		196,969
Total debt securities	249,507		261,106
Mortgage-backed securities	5,805		5,535
Total investment securities	$	255,312	$	266,641

Gross gains and losses realized related to the sales of securities available for sale for the three and nine months ended September 30, 2014, and 2013, are summarized as follows, in thousands:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Proceeds from sales	$	189,939	$	127,475	$	699,830	$	343,410
Gross security gains	1,101		1,420		4,547		7,703
Gross security losses	276		302		2,087		1,091

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 September 30, 2014, and December 31, 2013. 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 or more months. The reference point for determining how long an investment was in an unrealized loss position was September 30, 2013, andDecember 31, 2012, respectively. Securities for which Heartland has taken credit-related 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.

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
September 30, 2014
U.S. government corporations and agencies	$	—	$	—		$	978	$	(12	)	$	978	$	(12	)
Mortgage-backed securities	514,918		(5,627		)	296,255		(6,065		)	811,173		(11,692		)
Obligations of states and political subdivisions	886		(6		)	42,344		(861		)	43,230		(867		)
Total temporarily impaired securities	$	515,804	$	(5,633	)	$	339,577	$	(6,938	)	$	855,381	$	(12,571	)
December 31, 2013
U.S. government corporations and agencies	$	196,345	$	(2,001	)	$	—	$	—		$	196,345	$	(2,001	)
Mortgage-backed securities	640,684		(17,064		)	118,229		(5,510		)	758,913		(22,574		)
Obligations of states and political subdivisions	196,987		(11,452		)	10,714		(950		)	207,701		(12,402		)
Total temporarily impaired securities	$	1,034,016	$	(30,517	)	$	128,943	$	(6,460	)	$	1,162,959	$	(36,977	)

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
September 30, 2014
Mortgage-backed securities	$	—	$	—		$	2,861	$	(533	)	$	2,861	$	(533	)
Obligations of states and political subdivisions	1,577		(390		)	36,412		(925		)	37,989		(1,315		)
Total temporarily impaired securities	$	1,577	$	(390	)	$	39,273	$	(1,458	)	$	40,850	$	(1,848	)
December 31, 2013
Mortgage-backed securities	$	2,170	$	(319	)	$	834	$	(2	)	$	3,004	$	(321	)
Obligations of states and political subdivisions	47,175		(3,508		)	21,505		(2,232		)	68,680		(5,740		)
Total temporarily impaired securities	$	49,345	$	(3,827	)	$	22,339	$	(2,234	)	$	71,684	$	(6,061	)

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. During 2012, Heartland experienced deterioration in the credit support on three private label mortgage-backed securities which resulted in a credit-related OTTI loss. The underlying collateral on these securities experienced an increased level of defaults and a slowing of voluntary prepayments causing the present value of the forward expected cash flows, using prepayment and default vectors, to be below the amortized cost basis of the securities. Based on Heartland's evaluation, a $981,000 OTTI on three private label mortgage-backed securities attributable to credit-related losses was recorded in March 2012. The other-than-temporary credit-related losses were $797,000 in the held to maturity category and $184,000 in the available for sale category.

The remaining unrealized losses on Heartland's mortgage-backed securities are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities and 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.

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 credit quality and financial 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 available for sale securities with OTTI write-downs for the periods ended September 30, 2014, or December 31, 2013.

The following table shows the detail of OTTI write-downs on debt securities included in earnings and the related changes in other accumulated comprehensive income ("AOCI") for the same securities, in thousands:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Recorded as part of gross realized losses:
Credit related OTTI	$	—		$	—		$	—		$	—
Intent to sell OTTI	—			—			—			—
Total recorded as part of gross realized losses	—			—			—			—
Recorded directly to AOCI for non-credit related impairment:
Residential mortgage backed securities	—			—			—			—
Accretion of non-credit related impairment	(24		)	(24		)	(72		)	(72		)
Total changes to AOCI for non-credit related impairment	(24		)	(24		)	(72		)	(72		)
Total OTTI losses (accretion) recorded on debt securities, net	$	(24	)	$	(24	)	$	(72	)	$	(72	)

Heartland has not experienced any OTTI writedowns since the initial impairment charge in 2012.

Included in other securities at September 30, 2014 and December 31, 2013, were shares of stock in each Federal Home Loan Bank (the "FHLB") of Des Moines, Chicago, Dallas, San Francisco, Seattle, and Topeka at an amortized cost of $14.3 million and $15.6 million, respectively.

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Goodwill, Core Deposit Premium and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Acquired Finite-Lived Intangible Assets by Major Class

The gross carrying amount of other intangible assets and the associated accumulated amortization at September 30, 2014, and December 31, 2013, are presented in the table below, in thousands:

	September 30, 2014						December 31, 2013
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	21,069	$	12,049	$	9,020	$	21,069	$	10,345	$	10,724
Mortgage servicing rights	36,193		12,228		23,965		32,160		10,372		21,788
Customer relationship intangible	1,177		763		414		1,177		730		447
Total	$	58,439	$	25,040	$	33,399	$	54,406	$	21,447	$	32,959

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The following table shows the estimated future amortization expense for amortizable intangible assets, in thousands:

	Core Deposit Intangibles		Mortgage Servicing Rights		Customer Relationship Intangible		Total
Three months ending December 31, 2014	$	476	$	1,424	$	11	$	1,911
Year ending December 31,
2015	1,780		5,635		42		7,457
2016	1,575		4,830		41		6,446
2017	1,393		4,025		40		5,458
2018	1,232		3,220		39		4,491
2019	1,056		2,415		38		3,509
Thereafter	1,508		2,416		203		4,127

Schedule of Servicing Assets at Fair Value

The following table summarizes, in thousands, the changes in capitalized mortgage servicing rights for the nine months ended September 30, 2014 and 2013:

	2014			2013
Balance at January 1	$	21,788		$	15,653
Originations	5,955			10,595
Amortization	(3,778		)	(5,548		)
Valuation adjustment	—			496
Balance at September 30	$	23,965		$	21,196
Fair value of mortgage servicing rights	$	33,260		$	31,179
Mortgage servicing rights, net to servicing portfolio	0.71		%	0.73		%

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Basis of Presentation (Tables)

9 Months Ended

Sep. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

Amounts used in the determination of basic and diluted earnings per share for the three month and nine months ended September 30, 2014 and 2013, are shown in the table below:

	Three Months Ended September 30,
(Dollars and number of shares in thousands, except per share data)	2014			2013
Net income attributable to Heartland	$	11,973		$	6,810
Preferred dividends and discount	(205		)	(276		)
Net income available to common stockholders	$	11,768		$	6,534
Weighted average common shares outstanding for basic earnings per share	18,469			16,936
Assumed incremental common shares issued for common stock equivalents	284			285
Weighted average common shares for diluted earnings per share	18,753			17,221
Earnings per common share — basic	$	0.64		$	0.39
Earnings per common share — diluted	$	0.63		$	0.38
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	94			105

	Nine Months Ended September 30,
(Dollars and number of shares in thousands, except per share data)	2014			2013
Net income attributable to Heartland	$	29,637		$	28,854
Preferred dividends and discount	(613		)	(889		)
Net income available to common stockholders	$	29,024		$	27,965
Weighted average common shares outstanding for basic earnings per share	18,456			16,904
Assumed incremental common shares issued for common stock equivalents	287			279
Weighted average common shares for diluted earnings per share	18,743			17,183
Earnings per common share — basic	$	1.57		$	1.65
Earnings per common share — diluted	$	1.55		$	1.63
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	94			105

Summary of RSUs

A summary of the status of the RSUs as of September 30, 2014 and 2013, and changes during the nine months ended September 30, 2014 and 2013, follows:

	2014				2013
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Outstanding at January 1	353,070		$	18.62	348,897		$	15.75
Granted	133,139		26.65		126,685		26.92
Vested	(74,521	)	16.95		(43,388	)	17.00
Forfeited	(7,483	)	20.22		(57,982	)	19.08
Outstanding at September 30	404,205		$	21.44	374,212		$	19.02

Schedule of Status of Stock Options

A summary of the status of the stock options as of September 30, 2014 and 2013, and changes during the nine months ended September 30, 2014 and 2013, follows:

	2014				2013
	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at January 1	261,936		$	23.60	377,907		$	22.62
Granted	—		—		—		—
Exercised	(9,750	)	19.67		(68,586	)	19.54
Forfeited	(7,000	)	26.62		(1,800	)	26.68
Outstanding at September 30	245,186		$	23.67	307,521		$	23.28
Options exercisable at September 30	245,186		$	23.67	307,521		$	23.28

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

DERIVATIVE FINANCIAL INSTRUMENTS

Heartland uses derivative financial instruments as part of its interest rate risk management strategy. As part of the strategy, Heartland considers the use of interest rate swaps, caps, floors and collars and certain interest rate lock commitments and forward sales of securities related to mortgage banking activities. Heartland's current strategy includes the use of interest rate swaps, interest rate lock commitments, and forward sales of mortgage securities. Heartland's objectives are to add stability to its net interest margin and to manage its exposure to movements in interest rates. The contract or notional amount of a derivative is used to determine, along with the other terms of the derivative, the amounts to be exchanged between the counterparties. Heartland is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. Heartland minimizes this risk by entering into derivative contracts with large, stable financial institutions. Heartland has not experienced any losses from nonperformance by these counterparties. Heartland monitors counterparty risk in accordance with the provisions of ASC 815. In addition, interest rate-related derivative instruments generally contain language outlining collateral pledging requirements for each counterparty. Collateral must be posted when the market value exceeds certain threshold limits which are determined by credit ratings of each counterparty. Heartland was required to pledge $3.8 million and $5.4 million of cash as collateral at September 30, 2014, and December 31, 2013, respectively. Heartland's counterparties were required to pledge $0 and $540,000 at September 30, 2014, and December 31, 2013, respectively.

Heartland's derivative and hedging instruments are recorded at fair value on the consolidated balance sheets. See Note 7, “Fair Value,” for additional fair value information and disclosures.

Cash Flow Hedges

Heartland has variable rate funding which creates exposure to variability in interest payments due to changes in interest rates. To manage the interest rate risk related to the variability of interest payments, Heartland has entered into various interest rate swap agreements. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are received or made on Heartland's variable-rate liabilities. For the nine months ended September 30, 2014, the change in net unrealized losses on cash flow hedges reflects changes in the fair value of the swaps and reclassification from accumulated other comprehensive income (loss) to interest expense totaling $1.7 million. For the next twelve months, Heartland estimates that cash payments and reclassification from accumulated other comprehensive income (loss) to interest expense will total $2.3 million.

Heartland executed an interest rate swap transaction on April 5, 2011, with an effective date of April 20, 2011, and an expiration date of April 20, 2016, to effectively convert $15.0 million of its newly issued variable rate amortizing debt to fixed rate debt. For accounting purposes, this swap transaction is designated as a cash flow hedge of the changes in cash flows attributable to changes in one-month LIBOR, the benchmark interest rate being hedged, associated with the interest payments made on an amount of Heartland's debt principal equal to the then-outstanding swap notional amount. At inception, Heartland asserted that the underlying principal balance would remain outstanding throughout the hedge transaction making it probable that sufficient LIBOR-based interest payments would exist through the maturity date of the swap.

Heartland entered into three forward-starting interest rate swap transactions during 2009 to effectively convert Heartland Financial Statutory Trust IV, V and VII, which are variable interest rate subordinated debentures, to fixed interest rate debt. During the first quarter of 2014, the interest rate swap transaction on Heartland Financial Statutory Trust IV expired. Prior to the expiration of the swap, Heartland entered into a new forward-starting interest rate swap to replace the expiring swap. In addition, Heartland added two new forward starting interest rate swap transactions to effectively convert Morrill Statutory Trust I and Morrill Statutory Trust II, which total $16.6 million, from variable interest rate subordinated debentures to fixed interest rate debt. For accounting purposes, these five swap transactions are designated as cash flow hedges of the changes in cash flows attributable to changes in LIBOR, the benchmark interest rate being hedged, associated with the interest payments made on $85.0 million of Heartland's subordinated debentures that reset quarterly on a specified reset date. At inception, Heartland asserted that the underlying principal balance would remain outstanding throughout the hedge transaction making it probable that sufficient LIBOR-based interest payments would exist through the maturity date of the swaps.

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments designated as cash flow hedges at September 30, 2014, and December 31, 2013, in thousands:

	Notional Amount		Fair Value			Balance Sheet Category	Receive Rate		Weighted Average Pay Rate		Maturity
September 30, 2014
Interest rate swap	$	10,713	$	(295	)	Other Liabilities	2.904	%	5.140	%	04/20/2016
Interest rate swap	25,000		(117		)	Other Liabilities	0.235	%	2.255	%	03/17/2021
Interest rate swap	20,000		(1,120		)	Other Liabilities	0.234	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,579		)	Other Liabilities	0.232	%	3.355	%	01/07/2020
Interest rate swap	10,000		48			Other Assets	0.235	%	1.674	%	03/26/2019
Interest rate swap	10,000		48			Other Assets	0.235	%	1.658	%	03/18/2019
December 31, 2013
Interest rate swap	$	11,719	$	(457	)	Other Liabilities	2.917	%	5.140	%	04/20/2016
Interest rate swap	25,000		(146		)	Other Liabilities	0.244	%	2.580	%	03/17/2014
Interest rate swap	20,000		(1,507		)	Other Liabilities	0.239	%	3.220	%	03/01/2017
Interest rate swap	20,000		(1,587		)	Other Liabilities	0.243	%	3.355	%	01/07/2020

The table below identifies the gains and losses recognized on Heartland's derivative instruments designated as cash flow hedges for the three and nine months ended September 30, 2014, and September 30, 2013, in thousands:

	Effective Portion							Ineffective Portion
	Recognized in OCI			Reclassified from AOCI into Income				Recognized in Income on Derivatives
	Amount of Gain (Loss)			Category	Amount of Gain (Loss)			Category	Amount of Gain (Loss)
Three Months Ended September 30, 2014
Interest rate swap	$	68		Interest Expense	$	(63	)	Other Income	$	—
Interest rate swap	193			Interest Expense	(129		)	Other Income	—
Interest rate swap	208			Interest Expense	(153		)	Other Income	—
Interest rate swap	248			Interest Expense	(158		)	Other Income	—
Interest rate swap	89			Interest Expense	(37		)	Other Income	—
Interest rate swap	88			Interest Expense	(37		)	Other Income	—
Interest rate swap	—			Interest Expense	—			Other Income	—
Nine Months Ended September 30, 2014
Interest rate swap	$	162		Interest Expense	$	(192	)	Other Income	$	—
Interest rate swap	(117		)	Interest Expense	(258		)	Other Income	—
Interest rate swap	387			Interest Expense	(455		)	Other Income	—
Interest rate swap	8			Interest Expense	(473		)	Other Income	—
Interest rate swap	48			Interest Expense	(74		)	Other Income	—
Interest rate swap	48			Interest Expense	(73		)	Other Income	—
Interest rate swap	146			Interest Expense	(146		)	Other Income	—
Three Months Ended September 30, 2013
Interest rate swap	$	27		Interest Expense	$	(69	)	Other Income	$	—
Interest rate swap	138			Interest Expense	(147		)	Other Income	—
Interest rate swap	7			Interest Expense	(151		)	Other Income	—
Interest rate swap	(15		)	Interest Expense	(156		)	Other Income	—
Nine Months Ended September 30, 2013
Interest rate swap	$	203		Interest Expense	$	(210	)	Other Income	$	—
Interest rate swap	419			Interest Expense	(436		)	Other Income	—
Interest rate swap	548			Interest Expense	(446		)	Other Income	—
Interest rate swap	1,115			Interest Expense	(460		)	Other Income	—

Mortgage Derivatives

Heartland also has entered into interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans and mortgage backed securities that are considered derivative instruments. The fair value of these commitments is recorded on the consolidated balance sheets with the changes in fair value recorded in the consolidated statements of income as a component of gains on sale of loans held for sale. These derivative contracts are designated as free standing derivative contracts and are not designated against specific assets and liabilities on the consolidated balance sheets or forecasted transactions and therefore do not qualify for hedge accounting treatment.

The table below identifies the balance sheet category and fair values of Heartland's derivative instruments not designated as hedging instruments at September 30, 2014, and December 31, 2013, in thousands:

	Balance Sheet Category	Notional Amount		Fair Value
September 30, 2014
Interest rate lock commitments (mortgage)	Other Assets	$	103,933	$	3,291
Forward commitments	Other Assets	114,988		222
Forward commitments	Other Liabilities	179,044		(623		)
December 31, 2013
Interest rate lock commitments (mortgage)	Other Assets	$	63,370	$	1,809
Forward commitments	Other Assets	117,637		1,206
Forward commitments	Other Liabilities	53,277		(133		)

The table below identifies the income statement category of the gains and losses recognized in income on Heartland's derivative instruments not designated as hedging instruments for the three and nine months ended September 30, 2014, and September 30, 2013, in thousands:

	Income Statement Category	Year-to-Date Gain (Loss) Recognized
Three Months Ended September 30, 2014
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	(1,924	)
Forward commitments	Gains on sale of loans held for sale	1,505
Nine Months Ended September 30, 2014
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	3,393
Forward commitments	Gains on sale of loans held for sale	(1,474		)
Three Months Ended September 30, 2013
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	5,219
Forward commitments	Gains on sale of loans held for sale	(11,430		)
Nine Months Ended September 30, 2013
Interest rate lock commitments (mortgage)	Gains on sale of loans held for sale	$	(6,047	)
Forward commitments	Gains on sale of loans held for sale	(1,289		)

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Derivative Financial Instruments (Cash collateral on derivative financial instruments) (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Derivative [Line Items]
Cash pledged as collateral	$ 3,800,000	$ 5,400,000
Counterparties
Derivative [Line Items]
Cash pledged as collateral	$ 0	$ 540,000

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Allowance for Loan and Lease Losses

9 Months Ended

Sep. 30, 2014

Allowance for Loan and Lease Losses [Abstract]

Allowance for Loan and Lease Losses

ALLOWANCE FOR LOAN AND LEASE LOSSES

Changes in the allowance for loan and lease losses for the three and nine months ended September 30, 2014, and September 30, 2013, were as follows, in thousands:

	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at June 30, 2014	$	11,927		$	14,680		$	2,788		$	3,815		$	7,516		$	166	$	40,892
Charge-offs	(875		)	(295		)	(338		)	(21		)	(1,120		)	—		(2,649		)
Recoveries	145			539			5			29			184			—		902
Provision	158			1,221			661			(200		)	673			40		2,553
Balance at September 30, 2014	$	11,355		$	16,145		$	3,116		$	3,623		$	7,253		$	206	$	41,698
	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2013	$	13,099		$	14,152		$	2,992		$	3,720		$	7,722		$	—	$	41,685
Charge-offs	(7,940		)	(1,379		)	(1,974		)	(225		)	(3,189		)	—		(14,707		)
Recoveries	552			1,833			9			85			606			—		3,085
Provision	5,644			1,539			2,089			43			2,114			206		11,635
Balance at September 30, 2014	$	11,355		$	16,145		$	3,116		$	3,623		$	7,253		$	206	$	41,698

	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at June 30, 2013	$	9,436		$	13,671		$	3,055		$	3,580		$	7,881		$	—	$	37,623
Charge-offs	(163		)	(630		)	—			(450		)	(1,270		)	—		(2,513		)
Recoveries	78			514			1			76			383			—		1,052
Provision	3,745			488			(240		)	331			825			—		5,149
Balance at September 30, 2013	$	13,096		$	14,043		$	2,816		$	3,537		$	7,819		$	—	$	41,311
	Commercial			Commercial Real Estate			Agricultural			Residential Real Estate			Consumer			Unallocated		Total
Balance at December 31, 2012	$	11,388		$	14,473		$	2,138		$	3,543		$	7,173		$	—	$	38,715
Charge-offs	(1,422		)	(2,561		)	(23		)	(856		)	(3,488		)	—		(8,350		)
Recoveries	983			1,279			100			102			834			—		3,298
Provision	2,147			852			601			748			3,300			—		7,648
Balance at September 30, 2013	$	13,096		$	14,043		$	2,816		$	3,537		$	7,819		$	—	$	41,311

Management allocates the allowance for loan and lease losses by pools of risk within each loan portfolio. The allocation of the allowance for loan and lease losses by loan portfolio is made for analytical purposes and is not necessarily indicative of the trend of future loan and lease losses in any particular category. The total allowance for loan and lease losses is available to absorb losses from any segment of the loan portfolio.

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Goodwill, Core Deposit Premium and Other Intangible Assets

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Core Deposit Premium and Other Intangible Assets

GOODWILL, CORE DEPOSIT PREMIUM AND OTHER INTANGIBLE ASSETS

Heartland had goodwill of $35.6 million at both September 30, 2014, and December 31, 2013. Heartland conducts its annual internal assessment of the goodwill both collectively and at its subsidiaries as of September 30.

Other intangible assets consist of core deposit intangibles, mortgage servicing rights and customer relationship intangible. The gross carrying amount of other intangible assets and the associated accumulated amortization at September 30, 2014, and December 31, 2013, are presented in the table below, in thousands:

	September 30, 2014						December 31, 2013
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	21,069	$	12,049	$	9,020	$	21,069	$	10,345	$	10,724
Mortgage servicing rights	36,193		12,228		23,965		32,160		10,372		21,788
Customer relationship intangible	1,177		763		414		1,177		730		447
Total	$	58,439	$	25,040	$	33,399	$	54,406	$	21,447	$	32,959

The following table shows the estimated future amortization expense for amortizable intangible assets, in thousands:

	Core Deposit Intangibles		Mortgage Servicing Rights		Customer Relationship Intangible		Total
Three months ending December 31, 2014	$	476	$	1,424	$	11	$	1,911
Year ending December 31,
2015	1,780		5,635		42		7,457
2016	1,575		4,830		41		6,446
2017	1,393		4,025		40		5,458
2018	1,232		3,220		39		4,491
2019	1,056		2,415		38		3,509
Thereafter	1,508		2,416		203		4,127

Projections of amortization expense for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of September 30, 2014. Heartland's actual experience may be significantly different depending upon changes in mortgage interest rates and market conditions. Mortgage loans serviced for others were $3.36 billion and $3.05 billion as of September 30, 2014, and December 31, 2013, respectively. The fair value of Heartland's mortgage servicing rights was estimated at $33.3 million at September 30, 2014, and $32.0 million at December 31, 2013.

Heartland's mortgage servicing rights portfolio is comprised of loans serviced for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Government National Mortgage Association. The servicing rights portfolio is separated into 15- and 30-year tranches. At both September 30, 2014, and December 31, 2013, no valuation allowance was required for any of the tranches.

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 are considered in the calculation. The average constant prepayment rate was11.00%and9.65%for the September 30, 2014, and December 31, 2013, valuations, respectively. The discount rate was9.68%and10.15%for the September 30, 2014 and December 31, 2013, valuations, respectively. The average capitalization rate for the first nine months of 2014 ranged from0.75%to1.39%compared to0.79%and1.39%for 2013. Fees collected for the servicing of mortgage loans for others were $6.4 million and $4.9 million for the nine months ended September 30, 2014, and September 30, 2013, respectively.

The following table summarizes, in thousands, the changes in capitalized mortgage servicing rights for the nine months ended September 30, 2014 and 2013:

	2014			2013
Balance at January 1	$	21,788		$	15,653
Originations	5,955			10,595
Amortization	(3,778		)	(5,548		)
Valuation adjustment	—			496
Balance at September 30	$	23,965		$	21,196
Fair value of mortgage servicing rights	$	33,260		$	31,179
Mortgage servicing rights, net to servicing portfolio	0.71		%	0.73		%

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Fair Value

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value

FAIR VALUE

Heartland utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, trading securities and derivatives are recorded in the consolidated balance sheets at fair value on a recurring basis. Additionally, from time to time, Heartland may be required to record at fair value other assets on a nonrecurring basis such as loans held for sale, loans held to maturity and certain other assets including, but not limited to, mortgage servicing rights and other real estate owned. These nonrecurring fair value adjustments typically involve application of lower of cost or fair value accounting or write-downs of individual assets.

Fair Value Hierarchy

Under ASC 820, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 — Valuation is based upon quoted prices for identical instruments in active markets.

Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, or similar instruments in markets that are not active, and model-based valuation techniques for all significant assumptions are observable in the market.

Level 3 — Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring or non-recurring basis.

Assets

Securities Available for Sale and Held to Maturity

Securities available for sale are recorded at fair value on a recurring basis. Securities held to maturity are generally recorded at cost and are recorded at fair value only to the extent a decline in fair value is determined to be other-than-temporary. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury securities. Level 2 securities include U.S. government and agency securities, mortgage-backed securities and private collateralized mortgage obligations, municipal bonds and corporate debt securities. Level 3 securities consist primarily of Z-TRANCHE mortgage-backed securities. On a quarterly basis, a secondary independent pricing service is used for a sample of securities to validate the pricing from Heartland's primary pricing service.

Trading Assets

Trading assets are recorded at fair value and consist of securities held for trading purposes. The valuation method for trading securities is the same as the methodology used for securities classified as available for sale.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or fair value on an aggregate basis. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, Heartland classifies loans held for sale subjected to nonrecurring fair value adjustments as Level 2.

Loans Held to Maturity

Heartland does not record loans held to maturity at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310. The fair value of impaired loans is measured using one of the following impairment methods: 1) the present value of expected future cash flows discounted at the loan's effective interest rate or 2) the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent. In accordance with ASC 820, impaired loans measured at fair value are classified as nonrecurring Level 3 in the fair value hierarchy.

Mortgage Servicing Rights

Mortgage servicing rights assets represent the value associated with servicing residential real estate loans that have been sold to outside investors with servicing retained. Heartland uses the amortization method (i.e., the lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, to determine the carrying value of its mortgage servicing rights. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates, prepayment speeds and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. Mortgage servicing rights are subject to impairment testing. The carrying values of these rights are reviewed quarterly for impairment based upon the calculation of fair value as performed by an outside third party. For purposes of measuring impairment, the rights are stratified into certain risk characteristics including note type and note term. If the valuation model reflects a fair value less than the carrying value, mortgage servicing rights are adjusted to fair value through a valuation allowance. Heartland classifies mortgage servicing rights as nonrecurring with Level 3 measurement inputs.

Derivative Financial Instruments

Heartland's current interest rate risk strategy includes interest rate swaps. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. To comply with the provisions of ASC 820, Heartland incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, Heartland has considered the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although Heartland has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2014, and December 31, 2013, Heartland has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, Heartland has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Interest rate lock commitments

Heartland uses an internal valuation model that relies on internally developed inputs to estimate the fair value of its interest rate lock commitments which is based on unobservable inputs that reflect management's assumptions and specific information about each borrower. Interest rate lock commitments are classified in Level 3 of the fair value hierarchy.

Forward commitments

The fair value of forward commitments are estimated using an internal valuation model, which includes current trade pricing for similar financial instruments in active markets that Heartland has the ability to access and are classified in Level 2 of the fair value hierarchy.

Other Real Estate Owned

Other real estate owned ("OREO") represents property acquired through foreclosures and settlements of loans. Property acquired is carried at the fair value of the property at the time of acquisition (representing the property's cost basis), plus any acquisition costs, or the estimated fair value of the property, less disposal costs. Heartland considers third party appraisals, as well as independent fair value assessments from realtors or persons involved in selling OREO, in determining the fair value of particular properties. Accordingly, the valuation of OREO is subject to significant external and internal judgment. Heartland periodically reviews OREO to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. OREO is classified as nonrecurring Level 3.

The table below presents Heartland's assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2014, and December 31, 2013, in thousands, aggregated by the level in the fair value hierarchy within which those measurements fall:

	Total Fair Value		Level 1		Level 2		Level 3
September 30, 2014
Assets
Trading securities	$	—	$	—	$	—	$	—
Securities available for sale
U.S. government corporations and agencies	13,946		2,536		11,410		—
Mortgage-backed securities	1,164,877		—		1,160,029		4,848
Obligations of states and political subdivisions	185,811		—		185,811		—
Equity securities	5,069		—		5,069		—
Derivative financial instruments	96		—		96		—
Interest rate lock commitments	3,291		—		—		3,291
Forward commitments	222		—		222		—
Total assets at fair value	$	1,373,312	$	2,536	$	1,362,637	$	8,139
Liabilities
Derivative financial instruments	$	3,111	$	—	$	3,111	$	—
Forward commitments	623		—		623		—
Total liabilities at fair value	$	3,734	$	—	$	3,734	$	—
December 31, 2013
Assets
Trading securities	$	1,801	$	1,801	$	—	$	—
Securities available for sale
U.S. government corporations and agencies	218,303		4,084		214,219		—
Mortgage-backed securities	1,143,947		—		1,140,649		3,298
Obligations of states and political subdivisions	266,624		—		266,624		—
Equity securities	5,028		—		5,028		—
Interest rate lock commitments	1,809		—		—		1,809
Forward commitments	1,206		—		1,206		—
Total assets at fair value	$	1,638,718	$	5,885	$	1,627,726	$	5,107
Liabilities
Derivative financial instruments	$	3,697	$	—	$	3,697	$	—
Forward commitments	133		—		133		—
Total liabilities at fair value	$	3,830	$	—	$	3,830	$	—

As of March 31, 2014, Heartland revised the classification of interest rate lock commitments from previous filings. In previous filings, interest rate lock commitments were classified as Level 2 under ASC 820. The resulting change in presentation does not have a material impact on the financial statements and did not affect the method by which Heartland estimates fair value, nor the resulting fair values.

The tables below present Heartland's assets that are measured at fair value on a nonrecurring basis, in thousands:

	Fair Value Measurements at September 30, 2014
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	1,545	$	—	$	—	$	1,545	$	112
Commercial real estate	7,058		—		—		7,058		470
Agricultural and agricultural real estate	827		—		—		827		1,428
Residential real estate	2,503		—		—		2,503		—
Consumer	3,043		—		—		3,043		9
Total collateral dependent impaired loans	$	14,976	$	—	$	—	$	14,976	$	2,019
Other real estate owned	$	20,475	$	—	$	—	$	20,475	$	1,365

	Fair Value Measurements at December 31, 2013
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Year-to- Date Losses
Collateral dependent impaired loans:
Commercial	$	7,229	$	—	$	—	$	7,229	$	919
Commercial real estate	7,749		—		—		7,749		1,881
Agricultural and agricultural real estate	13,062		—		—		13,062		—
Residential real estate	3,396		—		—		3,396		—
Consumer	1,763		—		—		1,763		—
Total collateral dependent impaired loans	$	33,199	$	—	$	—	$	33,199	$	2,800
Other real estate owned	$	29,852	$	—	$	—	$	29,852	$	2,799

The following tables present additional quantitative information about assets measured at fair value and for which Heartland has utilized Level 3 inputs to determine fair value, in thousands:

	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value at 9/30/14		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	4,848	Discounted cash flows	Pretax discount rate	6.50 - 8.00%
				Actual defaults	12.71-20.14% (15.52%)
				Actual deferrals	6.25-22.35% (11.32%)
Interest rate lock commitments	3,291		Discounted cash flows	Closing ratio	(1)
Collateral dependent impaired loans:
Commercial	1,545		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Commercial real estate	7,058		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Agricultural and agricultural real estate	827		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Residential real estate	2,503		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Consumer	3,043		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Other real estate owned	20,475		Modified appraised value	Third party appraisal	(2)
				Appraisal discount
(1) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at September 30, 2014 was 84%.
(2) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value at 12/31/13		Valuation Technique	Unobservable Input	Range (Weighted Average)
Z-TRANCHE Securities	$	3,298	Discounted cash flows	Pretax discount rate	7.00 - 9.00%
				Actual defaults	12.50-28.20% (20.80%)
				Actual deferrals	6.10-16.00% (11.10%)
Interest rate lock commitments	1,809		Discounted cash flows	Closing ratio	(1)
Collateral dependent impaired loans:
Commercial	7,229		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Commercial real estate	7,749		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Agricultural and agricultural real estate	13,062		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Residential real estate	3,396		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Consumer	1,763		Modified appraised value	Third party appraisal	(2)
				Appraisal discount	(2)
Other real estate owned	29,852		Modified appraised value	Third party appraisal	(2)
				Appraisal discount
(1) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at December 31, 2013 was 87%.
(2) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

The changes in fair value of the Z-TRANCHE, a Level 3 asset, that is measured on a recurring basis is summarized in the following table, in thousands:

	For the Nine Months Ended September 30, 2014			For the Year Ended December 31, 2013
Balance at January 1,	$	3,298		$	4,089
Total gains (losses):
Included in earnings	—			(1,587		)
Included in other comprehensive income	1,669			826
Purchases, issuances, sales and settlements:
Purchases	—			—
Sales	(119		)	(30		)
Settlements	—			—
Balance at period end	$	4,848		$	3,298

The changes in fair value of the interest rate lock commitments, which are Level 3 financial instruments and are measured on a recurring basis, are summarized in the following table, in thousands:

	For the Nine Months Ended September 30, 2014			For the Year Ended December 31, 2013
Balance at January 1,	$	1,809		$	9,353
Total gains (losses) included in earnings	3,393			(10,518		)
Issuances	1,798			9,821
Settlements	(3,709		)	(6,847		)
Balance at period end	$	3,291		$	1,809

Gains included in gains (losses) on sales of loans held for sale attributable to interest rate lock commitments held at September 30, 2014, and December 31, 2013, were $3.3 million and $1.8 million, respectively.

The tables below summarize the estimated fair value of Heartland's financial instruments as defined by ASC 825 as of September 30, 2014, and December 31, 2013, in thousands. The carrying amounts in the following tables are recorded in the consolidated balance sheets under the indicated captions. In accordance with ASC 825, the assets and liabilities that are not financial instruments are not included in the disclosure, such as the value of the mortgage servicing rights, premises, furniture and equipment, goodwill and other intangibles and other liabilities.

Heartland does not believe that the estimated information presented herein is representative of the earnings power or value of Heartland. The following analysis, which is inherently limited in depicting fair value, also does not consider any value associated with either existing customer relationships or the ability of Heartland to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

					Fair Value Measurements at September 30, 2014
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	67,836	$	67,836	$	67,836	$	—	$	—
Time deposits in other financial institutions	2,605		2,605		2,605		—		—
Securities:
Trading	—		—		—		—		—
Available for sale	1,369,703		1,369,703		2,536		1,362,319		4,848
Held to maturity	255,312		266,641		—		266,641		—
Other investments	20,514		20,514		—		20,279		235
Loans held for sale	93,054		93,054		—		93,054		—
Loans, net:
Commercial	1,012,918		1,004,481		—		1,002,936		1,545
Commercial real estate	1,668,969		1,682,042		—		1,674,984		7,058
Agricultural and agricultural real estate	401,785		388,171		—		387,344		827
Residential real estate	357,658		329,916		—		327,413		2,503
Consumer	319,126		312,399		—		309,356		3,043
Total Loans, net	3,760,456		3,717,009		—		3,702,033		14,976
Derivative financial instruments	96		96		—		96		—
Interest rate lock commitments	3,291		3,291		—		—		3,291
Forward commitments	222		222		—		222		—
Financial liabilities:
Deposits
Demand deposits	1,274,439		1,274,439		—		1,274,439		—
Savings deposits	2,599,850		2,599,850		—		2,599,850		—
Time deposits	852,430		852,430		—		852,430		—
Short term borrowings	348,305		348,305		—		348,305		—
Other borrowings	334,513		339,338		—		339,338		—
Derivative financial instruments	3,111		3,111		—		3,111		—
Forward commitments	623		623		—		623		—

					Fair Value Measurements at December 31, 2013
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	125,270	$	125,270	$	125,270	$	—	$	—
Securities:
Trading	1,801		1,801		1,801		—		—
Available for sale	1,633,902		1,633,902		4,084		1,626,520		3,298
Held to maturity	237,498		237,437		—		237,437		—
Other investments	21,843		21,843		—		21,608		235
Loans held for sale	46,665		46,665		—		46,665		—
Loans, net:
Commercial	936,305		930,501		—		923,272		7,229
Commercial real estate	1,516,352		1,512,773		—		1,505,024		7,749
Agricultural and agricultural real estate	374,203		378,086		—		365,024		13,062
Residential real estate	347,266		335,362		—		331,966		3,396
Consumer	286,890		273,139		—		271,376		1,763
Total Loans, net	3,461,016		3,429,861		—		3,396,662		33,199
Derivative financial instruments	—		—		—		—		—
Interest rate lock commitments	1,809		1,809		—		—		1,809
Forward commitments	1,206		1,206		—		1,206		—
Financial liabilities:
Deposits
Demand deposits	1,238,581		1,238,581		—		1,238,581		—
Savings deposits	2,535,242		2,535,242		—		2,535,242		—
Time deposits	892,676		892,676		—		892,676		—
Short term borrowings	408,756		408,756		—		408,756		—
Other borrowings	350,109		355,923		—		355,923		—
Derivative financial instruments	3,697		3,697		—		3,697		—
Forward commitments	133		133		—		133		—

Cash and Cash Equivalents — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Time Deposits in Other Financial Institutions — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Securities —For securities either held to maturity, available for sale or trading, fair value equals quoted market price if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. For Level 3 securities, Heartland utilizes independent pricing provided by third party vendors or brokers.

Other Investments — Fair value measurement of other investments, which consists primarily of FHLB stock, are based on their redeemable value, which is at cost due to the restrictions placed on their transferability. The market for these securities is restricted to the issuer of the stock and subject to impairment evaluation.

Loans and Leases—The fair value of loans is estimated using an entrance price concept by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of impaired loans is measured using the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the underlying collateral. The fair value of loans held for sale is estimated using quoted market prices.

Interest Rate Lock Commitments — The fair value of interest rate lock commitments is estimated using an internal valuation model, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated closing ratio based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment group.

Forward Commitments — The fair value of these instruments is estimated using an internal valuation model, which includes current trade pricing for similar financial instruments.

Derivative Financial Instruments — The fair value of all derivatives is estimated based on the amount that Heartland would pay or would be paid to terminate the contract or agreement, using current rates and, when appropriate, the current creditworthiness of the counter-party.

Deposits — The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. If the fair value of the fixed maturity certificates of deposit is calculated at less than the carrying amount, the carrying value of these deposits is reported as the fair value.

Short-term and Other Borrowings—Rates currently available to Heartland for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Commitments to Extend Credit, Unused Lines of Credit and Standby Letters of Credit — Based upon management's analysis of the off balance sheet financial instruments, there are no significant unrealized gains or losses associated with these financial instruments based upon review of the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.

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Derivative Financial Instruments (Gains (losses) recognized on derivatives (cash flow hedges)) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Interest Expense | Interest Rate Swap 1
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	$ 68	$ 27	$ 162	$ 203
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(63)	(69)	(192)	(210)
Interest Expense | Interest Rate Swap 7
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	193		(117)
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(129)		(258)
Interest Expense | Interest Rate Swap 3
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	208	7	387	548
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(153)	(151)	(455)	(446)
Interest Expense | Interest Rate Swap 4
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	248	(15)	8	1,115
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(158)	(156)	(473)	(460)
Interest Expense | Interest Rate Swap 5
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	89		48
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(37)		(74)
Interest Expense | Interest Rate Swap 6
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	88		48
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	(37)		(73)
Interest Expense | Interest Rate Swap 2
Trading Activity, Gains and Losses, Net [Line Items]
Effective Portion, Recognized in OCI, Amount of Gain (Loss)	0	138	146	419
Effective Portion, Reclassified from AOCI into Income, Amount of Gain (Loss)	0	(147)	(146)	(436)
Other Income | Interest Rate Swap 1
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0	0	0
Other Income | Interest Rate Swap 7
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0		0
Other Income | Interest Rate Swap 3
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0	0	0
Other Income | Interest Rate Swap 4
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0	0	0	0
Other Income | Interest Rate Swap 5
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0		0
Other Income | Interest Rate Swap 6
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	0		0
Other Income | Interest Rate Swap 2
Trading Activity, Gains and Losses, Net [Line Items]
Ineffective Portion, Recognized in Income on Derivatives, Amount of Gain (Loss)	$ 0	$ 0	$ 0	$ 0

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Derivative Financial Instruments (Derivative instruments gains and losses recognized (not designated as hedging instruments)) (Details) (Gain on Sale of Loans Held for Sale, USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Interest rate lock commitments
Trading Activity, Gains and Losses, Net [Line Items]
Year-to-Date Gain(Loss) Recognized	$ (1,924)	$ 5,219	$ 3,393	$ (6,047)
Forward commitments
Trading Activity, Gains and Losses, Net [Line Items]
Year-to-Date Gain(Loss) Recognized	$ 1,505	$ (11,430)	$ (1,474)	$ (1,289)

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Derivative Financial Instruments (Balance sheet category and fair values of derivative instruments (cash flow hedges)) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Other Liabilities | Interest Rate Swap 1
Derivatives, Fair Value [Line Items]
Notional Amount	$ 10,713	$ 11,719
Fair Value	(295)	(457)
Receive Rate	2.904%	2.917%
Weighted Average Pay Rate	5.14%	5.14%
Other Liabilities | Interest Rate Swap 7
Derivatives, Fair Value [Line Items]
Notional Amount	25,000
Fair Value	(117)
Receive Rate	0.235%
Weighted Average Pay Rate	2.255%
Other Liabilities | Interest Rate Swap 3
Derivatives, Fair Value [Line Items]
Notional Amount	20,000	20,000
Fair Value	(1,120)	(1,507)
Receive Rate	0.234%	0.239%
Weighted Average Pay Rate	3.22%	3.22%
Other Liabilities | Interest Rate Swap 4
Derivatives, Fair Value [Line Items]
Notional Amount	20,000	20,000
Fair Value	(1,579)	(1,587)
Receive Rate	0.232%	0.243%
Weighted Average Pay Rate	3.355%	3.355%
Other Liabilities | Interest Rate Swap 2
Derivatives, Fair Value [Line Items]
Notional Amount		25,000
Fair Value		(146)
Receive Rate		0.244%
Weighted Average Pay Rate		2.58%
Other Assets | Interest Rate Swap 5
Derivatives, Fair Value [Line Items]
Notional Amount	10,000
Fair Value	48
Receive Rate	0.235%
Weighted Average Pay Rate	1.674%
Other Assets | Interest Rate Swap 6
Derivatives, Fair Value [Line Items]
Notional Amount	10,000
Fair Value	$ 48
Receive Rate	0.235%
Weighted Average Pay Rate	1.658%

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Securities (Held to maturity securities) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 255,312	$ 237,498
Gross Unrealized Gains	13,177	6,000
Gross Unrealized Losses	(1,848)	(6,061)
Estimated Fair Value	266,641	237,437
Mortgage-backed securities
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	5,805	5,973
Gross Unrealized Gains	263	199
Gross Unrealized Losses	(533)	(321)
Estimated Fair Value	5,535	5,851
Obligations of states and political subdivisions
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	249,507	231,525
Gross Unrealized Gains	12,914	5,801
Gross Unrealized Losses	(1,315)	(5,740)
Estimated Fair Value	$ 261,106	$ 231,586

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Loans and Leases (Impaired loans not covered by loss share agreements) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Sep. 30, 2014	Dec. 31, 2013
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	$ 18,574	$ 18,574	$ 36,828
Impaired loans without a related allowance, Unpaid Contractual Balance	50,033	50,033	42,400
Total impaired loans held to maturity, Unpaid Contractual Balance	68,607	68,607	79,228
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	18,144	18,144	36,573
Impaired loans without a related allowance, Loan Balance	43,440	43,440	35,388
Total impaired loans held to maturity, Loan Balance	61,584	61,584	71,961
Impaired loans, Related Allowance Recorded	3,405	3,405	6,717
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	34,423	25,806	27,235
Impaired loans without a related allowance, Avg. Loan Balance	36,733	38,352	50,768
Total impaired loans held to maturity, Avg. Loan Balance	71,156	64,158	78,003
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	48	215	787
Impaired loans without a related allowance, Interest Income Recognized	635	1,051	933
Total impaired loans held to maturity, Interest Income Recognized	683	1,266	1,720
Commercial
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	4,751	4,751	7,901
Impaired loans without a related allowance, Unpaid Contractual Balance	4,222	4,222	7,724
Total impaired loans held to maturity, Unpaid Contractual Balance	8,973	8,973	15,625
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	4,675	4,675	7,901
Impaired loans without a related allowance, Loan Balance	3,603	3,603	6,743
Total impaired loans held to maturity, Loan Balance	8,278	8,278	14,644
Impaired loans, Related Allowance Recorded	451	451	2,817
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	6,960	7,022	5,343
Impaired loans without a related allowance, Avg. Loan Balance	2,620	3,519	9,394
Total impaired loans held to maturity, Avg. Loan Balance	9,580	10,541	14,737
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	0	10	38
Impaired loans without a related allowance, Interest Income Recognized	20	60	89
Total impaired loans held to maturity, Interest Income Recognized	20	70	127
Commercial real estate
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	4,092	4,092	9,164
Impaired loans without a related allowance, Unpaid Contractual Balance	33,626	33,626	24,830
Total impaired loans held to maturity, Unpaid Contractual Balance	37,718	37,718	33,994
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	3,832	3,832	8,909
Impaired loans without a related allowance, Loan Balance	29,448	29,448	19,390
Total impaired loans held to maturity, Loan Balance	33,280	33,280	28,299
Impaired loans, Related Allowance Recorded	1,176	1,176	818
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	11,645	6,294	7,686
Impaired loans without a related allowance, Avg. Loan Balance	23,937	23,325	25,676
Total impaired loans held to maturity, Avg. Loan Balance	35,582	29,619	33,362
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	7	40	282
Impaired loans without a related allowance, Interest Income Recognized	595	883	538
Total impaired loans held to maturity, Interest Income Recognized	602	923	820
Commercial and Commercial Real Estate
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	8,843	8,843	17,065
Impaired loans without a related allowance, Unpaid Contractual Balance	37,848	37,848	32,554
Total impaired loans held to maturity, Unpaid Contractual Balance	46,691	46,691	49,619
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	8,507	8,507	16,810
Impaired loans without a related allowance, Loan Balance	33,051	33,051	26,133
Total impaired loans held to maturity, Loan Balance	41,558	41,558	42,943
Impaired loans, Related Allowance Recorded	1,627	1,627	3,635
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	18,605	13,316	13,029
Impaired loans without a related allowance, Avg. Loan Balance	26,557	26,844	35,070
Total impaired loans held to maturity, Avg. Loan Balance	45,162	40,160	48,099
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	7	50	320
Impaired loans without a related allowance, Interest Income Recognized	615	943	627
Total impaired loans held to maturity, Interest Income Recognized	622	993	947
Agricultural and agricultural real estate
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	3,368	3,368	13,818
Impaired loans without a related allowance, Unpaid Contractual Balance	3,749	3,749	2,849
Total impaired loans held to maturity, Unpaid Contractual Balance	7,117	7,117	16,667
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	3,368	3,368	13,818
Impaired loans without a related allowance, Loan Balance	2,321	2,321	2,849
Total impaired loans held to maturity, Loan Balance	5,689	5,689	16,667
Impaired loans, Related Allowance Recorded	67	67	756
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	4,021	4,176	7,537
Impaired loans without a related allowance, Avg. Loan Balance	2,100	3,731	9,985
Total impaired loans held to maturity, Avg. Loan Balance	6,121	7,907	17,522
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	12	67	354
Impaired loans without a related allowance, Interest Income Recognized	3	10	189
Total impaired loans held to maturity, Interest Income Recognized	15	77	543
Residential real estate
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	2,024	2,024	2,460
Impaired loans without a related allowance, Unpaid Contractual Balance	6,616	6,616	5,345
Total impaired loans held to maturity, Unpaid Contractual Balance	8,640	8,640	7,805
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	1,939	1,939	2,460
Impaired loans without a related allowance, Loan Balance	6,248	6,248	4,754
Total impaired loans held to maturity, Loan Balance	8,187	8,187	7,214
Impaired loans, Related Allowance Recorded	424	424	605
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	6,308	3,604	3,179
Impaired loans without a related allowance, Avg. Loan Balance	6,449	6,055	4,198
Total impaired loans held to maturity, Avg. Loan Balance	12,757	9,659	7,377
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	8	17	13
Impaired loans without a related allowance, Interest Income Recognized	0	64	80
Total impaired loans held to maturity, Interest Income Recognized	8	81	93
Consumer
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans with a related allowance, Unpaid Contractual Balance	4,339	4,339	3,485
Impaired loans without a related allowance, Unpaid Contractual Balance	1,820	1,820	1,652
Total impaired loans held to maturity, Unpaid Contractual Balance	6,159	6,159	5,137
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans with a related allowance, Loan Balance	4,330	4,330	3,485
Impaired loans without a related allowance, Loan Balance	1,820	1,820	1,652
Total impaired loans held to maturity, Loan Balance	6,150	6,150	5,137
Impaired loans, Related Allowance Recorded	1,287	1,287	1,721
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans with a related allowance, Avg. Loan Balance	5,489	4,710	3,490
Impaired loans without a related allowance, Avg. Loan Balance	1,627	1,722	1,515
Total impaired loans held to maturity, Avg. Loan Balance	7,116	6,432	5,005
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired loans with a related allowance, Interest Income Recognized	21	81	100
Impaired loans without a related allowance, Interest Income Recognized	17	34	37
Total impaired loans held to maturity, Interest Income Recognized	$ 38	$ 115	$ 137

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Loans and Leases (Tables)

9 Months Ended

Sep. 30, 2014

Receivables [Abstract]

Loans and Leases

Loans and leases as of September 30, 2014, and December 31, 2013, were as follows, in thousands:

	September 30, 2014			December 31, 2013
Loans and leases receivable held to maturity:
Commercial	$	1,024,712		$	950,197
Commercial real estate	1,684,832			1,529,683
Agricultural and agricultural real estate	404,423			376,735
Residential real estate	360,309			349,349
Consumer	326,148			294,145
Gross loans and leases receivable held to maturity	3,800,424			3,500,109
Unearned discount	(98		)	(168		)
Deferred loan fees	(2,021		)	(2,989		)
Total net loans and leases receivable held to maturity	3,798,305			3,496,952
Loans covered under loss share agreements:
Commercial and commercial real estate	1,188			2,314
Agricultural and agricultural real estate	573			543
Residential real estate	1,762			2,280
Consumer	327			612
Total loans covered under loss share agreements	3,850			5,749
Allowance for loan and lease losses	(41,698		)	(41,685		)
Loans and leases receivable, net	$	3,760,457		$	3,461,016

Allowance for Loan and Lease Losses, Based on Impairment Methodology

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 2014.

	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
September 30, 2014
Commercial	$	451	$	10,904	$	11,355	$	8,278	$	1,016,434	$	1,024,712
Commercial real estate	1,176		14,969		16,145		33,280		1,651,552		1,684,832
Agricultural and agricultural real estate	67		3,049		3,116		5,689		398,734		404,423
Residential real estate	424		3,199		3,623		8,187		352,122		360,309
Consumer	1,287		5,966		7,253		6,150		319,998		326,148
Unallocated	—		206		206		—		—		—
Total	$	3,405	$	38,293	$	41,698	$	61,584	$	3,738,840	$	3,800,424
December 31, 2013
Commercial	$	2,817	$	10,282	$	13,099	$	14,644	$	935,553	$	950,197
Commercial real estate	818		13,334		14,152		28,299		1,501,384		1,529,683
Agricultural and agricultural real estate	756		2,236		2,992		16,667		360,068		376,735
Residential real estate	605		3,115		3,720		7,214		342,135		349,349
Consumer	1,721		6,001		7,722		5,137		289,008		294,145
Unallocated	—		—		—		—		—		—
Total	$	6,717	$	34,968	$	41,685	$	71,961	$	3,428,148	$	3,500,109

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 not covered under loss share agreements at September 30, 2014, and December 31, 2013, in thousands. There were no nonaccrual leases, accruing leases past due 90 days or more or restructured leases at September 30, 2014, and December 31, 2013.

	September 30, 2014		December 31, 2013
Nonaccrual loans	$	25,802	$	29,313
Nonaccrual troubled debt restructured loans	4,328		13,081
Total nonaccrual loans	$	30,130	$	42,394
Accruing loans past due 90 days or more	$	—	$	24
Performing troubled debt restructured loans	$	11,994	$	19,353

Troubled Debt Restructurings on Financing Receivables

The following tables provide information on troubled debt restructured loans that were modified during the three and nine months ended September 30, 2014, and September 30, 2013, dollars in thousands:

	Three Months Ended September 30,
	2014					2013
	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	1	60		60		—	—		—
Residential real estate	—	—		—		1	65		65
Consumer	—	—		—		—	—		—
Total	1	$	60	$	60	1	$	65	$	65

	Nine Months Ended September 30,
	2014					2013
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial	—	$	—	$	—	3	$	17,873	$	17,873
Commercial real estate	1	298		298		—	—		—
Total commercial and commercial real estate	1	298		298		3	17,873		17,873
Agricultural and agricultural real estate	3	3,417		3,417		3	2,576		2,576
Residential real estate	1	38		38		4	762		762
Consumer	—	—		—		1	166		166
Total	5	$	3,753	$	3,753	11	$	21,377	$	21,377

Troubled Debt Restructured Loans with Payment Default

The following tables provide information on troubled debt restructured loans for which there was a payment default during the three months and nine months ended September 30, 2014, and September 30, 2013, in thousands, that had been modified during the twelve month period prior to the default:

	With Payment Defaults During the Following Periods
	Three Months Ended September 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	—	$	—	1	$	13,000
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	—	—		1	13,000
Agricultural and agricultural real estate	1	60		—	—
Residential real estate	—	—		—	—
Consumer	—	—		—	—
Total	1	$	60	1	$	13,000

	With Payment Defaults During the Following Periods
	Nine Months Ended September 30,
	2014			2013
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	—	$	—	2	$	17,670
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	—	—		2	17,670
Agricultural and agricultural real estate	1	60		—	—
Residential real estate	—	—		2	167
Consumer	—	—		—	—
Total	1	$	60	4	$	17,837

Financing Receivable Credit Quality Indicators

The following table presents loans and leases not covered by loss share agreements by credit quality indicator at September 30, 2014, and December 31, 2013, in thousands:

	Pass		Nonpass		Total
September 30, 2014
Commercial	$	913,923	$	110,789	$	1,024,712
Commercial real estate	1,536,940		147,892		1,684,832
Total commercial and commercial real estate	2,450,863		258,681		2,709,544
Agricultural and agricultural real estate	377,733		26,690		404,423
Residential real estate	341,984		18,325		360,309
Consumer	316,609		9,539		326,148
Total gross loans and leases receivable held to maturity	$	3,487,189	$	313,235	$	3,800,424
December 31, 2013
Commercial	$	871,825	$	78,372	$	950,197
Commercial real estate	1,390,820		138,863		1,529,683
Total commercial and commercial real estate	2,262,645		217,235		2,479,880
Agricultural and agricultural real estate	335,821		40,914		376,735
Residential real estate	333,161		16,188		349,349
Consumer	284,148		9,997		294,145
Total gross loans and leases receivable held to maturity	$	3,215,775	$	284,334	$	3,500,109

Past Due Financing Receivables

The following table sets forth information regarding Heartland's accruing and nonaccrual loans and leases not covered by loss share agreements at September 30, 2014, and December 31, 2013, 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
September 30, 2014
Commercial	$	5,163	$	124	$	—	$	5,287	$	1,013,124	$	6,301	$	1,024,712
Commercial real estate	941		101		—		1,042		1,670,756		13,034		1,684,832
Total commercial and commercial real estate	6,104		225		—		6,329		2,683,880		19,335		2,709,544
Agricultural and agricultural real estate	89		—		—		89		402,319		2,015		404,423
Residential real estate	1,626		120		—		1,746		352,362		6,201		360,309
Consumer	2,915		990		—		3,905		319,664		2,579		326,148
Total gross loans and leases receivable held to maturity	$	10,734	$	1,335	$	—	$	12,069	$	3,758,225	$	30,130	$	3,800,424
December 31, 2013
Commercial	$	697	$	741	$	—	$	1,438	$	935,508	$	13,251	$	950,197
Commercial real estate	3,042		199		24		3,265		1,511,618		14,800		1,529,683
Total commercial and commercial real estate	3,739		940		24		4,703		2,447,126		28,051		2,479,880
Agricultural and agricultural real estate	818		—		—		818		369,907		6,010		376,735
Residential real estate	1,199		56		—		1,255		342,735		5,359		349,349
Consumer	2,624		1,089		—		3,713		287,458		2,974		294,145
Total gross loans and leases receivable held to maturity	$	8,380	$	2,085	$	24	$	10,489	$	3,447,226	$	42,394	$	3,500,109

Allowance for Credit Losses on Financing Receivables

The following tables present, for impaired loans not covered by loss share agreements and by category of loan, the unpaid contractual balance at September 30, 2014, and December 31, 2013; the outstanding loan balance recorded on the consolidated balance sheets at September 30, 2014, and December 31, 2013; any related allowance recorded for those loans as of September 30, 2014, and December 31, 2013; the average outstanding loan balance recorded on the consolidated balance sheets during the three months and nine months ended September 30, 2014, and year ended December 31, 2013; and the interest income recognized on the impaired loans during the three months and nine months ended September 30, 2014, and year ended December 31, 2013, 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, 2014
Impaired loans with a related allowance:
Commercial	$	4,751	$	4,675	$	451	$	6,960	$	—	$	7,022	$	10
Commercial real estate	4,092		3,832		1,176		11,645		7		6,294		40
Total commercial and commercial real estate	8,843		8,507		1,627		18,605		7		13,316		50
Agricultural and agricultural real estate	3,368		3,368		67		4,021		12		4,176		67
Residential real estate	2,024		1,939		424		6,308		8		3,604		17
Consumer	4,339		4,330		1,287		5,489		21		4,710		81
Total loans held to maturity	$	18,574	$	18,144	$	3,405	$	34,423	$	48	$	25,806	$	215
Impaired loans without a related allowance:
Commercial	$	4,222	$	3,603	$	—	$	2,620	$	20	$	3,519	$	60
Commercial real estate	33,626		29,448		—		23,937		595		23,325		883
Total commercial and commercial real estate	37,848		33,051		—		26,557		615		26,844		943
Agricultural and agricultural real estate	3,749		2,321		—		2,100		3		3,731		10
Residential real estate	6,616		6,248		—		6,449		—		6,055		64
Consumer	1,820		1,820		—		1,627		17		1,722		34
Total loans held to maturity	$	50,033	$	43,440	$	—	$	36,733	$	635	$	38,352	$	1,051
Total impaired loans held to maturity:
Commercial	$	8,973	$	8,278	$	451	$	9,580	$	20	$	10,541	$	70
Commercial real estate	37,718		33,280		1,176		35,582		602		29,619		923
Total commercial and commercial real estate	46,691		41,558		1,627		45,162		622		40,160		993
Agricultural and agricultural real estate	7,117		5,689		67		6,121		15		7,907		77
Residential real estate	8,640		8,187		424		12,757		8		9,659		81
Consumer	6,159		6,150		1,287		7,116		38		6,432		115
Total impaired loans held to maturity	$	68,607	$	61,584	$	3,405	$	71,156	$	683	$	64,158	$	1,266

	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
December 31, 2013
Impaired loans with a related allowance:
Commercial	$	7,901	$	7,901	$	2,817	$	5,343	$	38
Commercial real estate	9,164		8,909		818		7,686		282
Total commercial and commercial real estate	17,065		16,810		3,635		13,029		320
Agricultural and agricultural real estate	13,818		13,818		756		7,537		354
Residential real estate	2,460		2,460		605		3,179		13
Consumer	3,485		3,485		1,721		3,490		100
Total loans held to maturity	$	36,828	$	36,573	$	6,717	$	27,235	$	787
Impaired loans without a related allowance:
Commercial	$	7,724	$	6,743	$	—	$	9,394	$	89
Commercial real estate	24,830		19,390		—		25,676		538
Total commercial and commercial real estate	32,554		26,133		—		35,070		627
Agricultural and agricultural real estate	2,849		2,849		—		9,985		189
Residential real estate	5,345		4,754		—		4,198		80
Consumer	1,652		1,652		—		1,515		37
Total loans held to maturity	$	42,400	$	35,388	$	—	$	50,768	$	933
Total impaired loans held to maturity:
Commercial	$	15,625	$	14,644	$	2,817	$	14,737	$	127
Commercial real estate	33,994		28,299		818		33,362		820
Total commercial and commercial real estate	49,619		42,943		3,635		48,099		947
Agricultural and agricultural real estate	16,667		16,667		756		17,522		543
Residential real estate	7,805		7,214		605		7,377		93
Consumer	5,137		5,137		1,721		5,005		137
Total impaired loans held to maturity	$	79,228	$	71,961	$	6,717	$	78,003	$	1,720

Impaired Financing Receivables

The carrying amount of the loans covered by these loss share agreements at September 30, 2014, and December 31, 2013, consisted of purchased impaired and nonimpaired loans as summarized in the following table, in thousands:

	September 30, 2014						December 31, 2013
	Impaired Purchased Loans		Non  Impaired Purchased Loans		Total Covered Loans		Impaired Purchased Loans		Non Impaired Purchased Loans		Total Covered Loans
Commercial and commercial real estate	$	—	$	1,188	$	1,188	$	549	$	1,765	$	2,314
Agricultural and agricultural real estate	—		573		573		—		543		543
Residential real estate	—		1,762		1,762		—		2,280		2,280
Consumer loans	266		61		327		538		74		612
Total Covered Loans	$	266	$	3,584	$	3,850	$	1,087	$	4,662	$	5,749

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Schedule of Segment Reporting

The following tables present financial information from Heartland's operating segments for the three and nine month periods ended September 30, 2014, and 2013, in thousands.

	Three Months Ended September 30,
	2014							2013
	Community and Other Banking		Retail Mortgage Banking			Total		Community and Other Banking		Retail Mortgage Banking			Total
Net interest income	$	50,790	$	701		$	51,491	$	39,292	$	588		$	39,880
Provision for loan losses	2,553		—			2,553		5,149		—			5,149
Total noninterest income	11,124		9,038			20,162		11,971		8,408			20,379
Total noninterest expense	42,784		11,427			54,211		35,511		11,297			46,808
Income (loss) before taxes	$	16,577	$	(1,688	)	$	14,889	$	10,603	$	(2,301	)	$	8,302
Average Loans, for the period	$	3,736,917	$	75,301		$	3,812,218	$	2,867,933	$	69,575		$	2,937,508
Segment Assets, at period end	$	5,817,427	$	117,382		$	5,934,809	$	4,825,781	$	86,949		$	4,912,730
	Nine Months Ended September 30,
	2014							2013
	Community and Other Banking		Retail Mortgage Banking			Total		Community and Other Banking		Retail Mortgage Banking			Total
Net interest income	$	148,930	$	1,972		$	150,902	$	115,968	$	1,503		$	117,471
Provision for loan losses	11,635		—			11,635		7,648		—			7,648
Total noninterest income	33,720		25,906			59,626		35,190		34,414			69,604
Total noninterest expense	127,743		32,744			160,487		104,199		36,021			140,220
Income (loss) before taxes	$	43,272	$	(4,866	)	$	38,406	$	39,311	$	(104	)	$	39,207
Average Loans, for the period	$	3,629,822	$	62,896		$	3,692,718	$	2,820,418	$	86,552		$	2,906,970
Segment Assets, at period end	$	5,817,427	$	117,382		$	5,934,809	$	4,825,781	$	86,949		$	4,912,730

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Loans and Leases (Loans and leases not covered by share agreements (in text)) (Details)	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Loans delinquent 30 to 89 days, percentage	0.32%	0.30%
Nonpass
Financing Receivable, Recorded Investment [Line Items]
Percent of nonaccrual loans	9.00%	15.00%
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Percent of loans	69.00%	59.00%
Substandard
Financing Receivable, Recorded Investment [Line Items]
Percent of loans	31.00%	38.00%
Doubtful
Financing Receivable, Recorded Investment [Line Items]
Percent of loans		3.00%

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Securities (Other securities) (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Investments, Debt and Equity Securities [Abstract]
FHLB	$ 14.3	$ 15.6
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment [Line Items]
Percentage of mortgage-backed securities issued by government-sponsored enterprises	97.00%

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Consolidated Statements of Income (Unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Interest on other borrowings	$ 3,741	$ 3,623	$ 11,084	$ 11,122
Securities gains, net	825	1,118	2,460	6,612
Income taxes	2,916	1,492	8,769	10,289
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Gain (Loss) from Derivatives [Member]
Interest on other borrowings	577	523	1,671	1,552
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Unrealized Investment Gain (Loss) [Member]
Securities gains, net	825	1,118	2,460	6,612
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Other Comprehensive Income (Loss) [Member]
Income taxes	$ 93	$ 222	$ 296	$ 1,887

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Basis of Presentation

9 Months Ended

Sep. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

BASIS OF PRESENTATION

The interim unaudited consolidated financial statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended December 31, 2013, included in the Form 10-K of Heartland Financial USA, Inc. ("Heartland") filed with the Securities and Exchange Commission ("SEC") on March 14, 2014. Accordingly, footnote disclosures which would substantially duplicate the disclosure contained in the audited consolidated financial statements have been omitted.

The financial information of Heartland included herein has been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments), that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the interim period ended September 30, 2014, are not necessarily indicative of the results expected for the year ending December 31, 2014.

Earnings Per Share

Basic earnings per share is determined using net income available to common stockholders and weighted average common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average common shares and assumed incremental common shares issued. Amounts used in the determination of basic and diluted earnings per share for the three month and nine months ended September 30, 2014 and 2013, are shown in the table below:

	Three Months Ended September 30,
(Dollars and number of shares in thousands, except per share data)	2014			2013
Net income attributable to Heartland	$	11,973		$	6,810
Preferred dividends and discount	(205		)	(276		)
Net income available to common stockholders	$	11,768		$	6,534
Weighted average common shares outstanding for basic earnings per share	18,469			16,936
Assumed incremental common shares issued for common stock equivalents	284			285
Weighted average common shares for diluted earnings per share	18,753			17,221
Earnings per common share — basic	$	0.64		$	0.39
Earnings per common share — diluted	$	0.63		$	0.38
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	94			105

	Nine Months Ended September 30,
(Dollars and number of shares in thousands, except per share data)	2014			2013
Net income attributable to Heartland	$	29,637		$	28,854
Preferred dividends and discount	(613		)	(889		)
Net income available to common stockholders	$	29,024		$	27,965
Weighted average common shares outstanding for basic earnings per share	18,456			16,904
Assumed incremental common shares issued for common stock equivalents	287			279
Weighted average common shares for diluted earnings per share	18,743			17,183
Earnings per common share — basic	$	1.57		$	1.65
Earnings per common share — diluted	$	1.55		$	1.63
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	94			105

Stock-Based Compensation

Heartland may grant, through its Nominating and Compensation Committee (the "Compensation Committee"), non-qualified and incentive stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and cash incentive awards, under its 2012 Long-Term Incentive Plan (the "Plan"). The Plan, which was approved by stockholders in May 2012 and replaced Heartland's 2005 Long-Term Incentive Plan with respect to grants after such approval, reserved 368,026 shares of common stock at September 30, 2014, for issuance under future awards that may be granted under the Plan to employees and directors of, and service providers to, Heartland or its subsidiaries.

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, "Compensation-Stock Compensation" requires the measurement of the cost of employee services received in exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the award is based upon its fair value estimated on the date of grant and recognized in the consolidated statements of income over the vesting period of the award. The fair market value of restricted stock and restricted stock units is based on the fair value of the underlying shares of common stock on the date of grant. The fair value of stock options is estimated on the date of grant using the Black-Scholes model.

The amount of tax benefit related to the exercise, vesting, and forfeiture of equity-based awards reflected in additional paid-in-capital, not taxes payable, was $119,000 and $68,000 during the nine months ended September 30, 2014, and 2013, respectively.

Restricted Stock Units

The Plan permits the Compensation Committee to grant restricted stock units ("RSUs"). On March 11, 2014, the Compensation Committee granted time-based RSUs with respect to 67,190 shares of common stock and on January 22, 2013, granted time-based RSUs with respect to 72,595 shares of common stock, to selected officers. The time-based RSUs, which represent the right, without payment, to receive shares of Heartland common stock at a specified date in the future based on specific vesting conditions, vest over five years in three equal installments on the third, fourth and fifth anniversaries of the grant date, will be settled in common stock upon vesting, and will not be entitled to dividends until vested. The time-based RSUs granted in 2014 vest upon a "qualified retirement" (as defined in the RSU agreement) while the RSUs granted in 2013 allow the Compensation Committee to exercise its discretion to provide for vesting upon retirement. In both cases, the retiree is required to sign a non-solicitation and non-compete agreement as a condition to vesting.

In addition to the time-based RSUs referenced in the preceding paragraph, the Compensation Committee granted performance-based RSUs with respect to 32,645 shares of common stock on March 11, 2014, and performance-based RSUs with respect to 40,990 shares of common stock on January 22, 2013, to Heartland executives and subsidiary presidents. These performance-based RSUs vest based first on performance measures tied to Heartland's earnings and loans on December 31, 2014, for the 2014 RSUs, and earnings and assets on December 31, 2013, for the 2013 RSUs, and then on time-based vesting conditions. For the grants awarded in 2014, the portion of the RSUs earned based on performance vest on December 31, 2016, if the executive remains employed on that date, and for the grants awarded in 2013, the portion of the RSUs earned based on performance vest on December 31, 2015, subject to employment on that date.

The Compensation Committee also grants RSUs under the Plan to directors as part of their compensation, to new management level employees at commencement of employment, and to other employees and service providers as incentives. During the nine months ended September 30, 2014, and 2013, 33,304 and 13,100 RSUs, respectively, were granted to directors and new employees.

A summary of the status of the RSUs as of September 30, 2014 and 2013, and changes during the nine months ended September 30, 2014 and 2013, follows:

	2014				2013
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Outstanding at January 1	353,070		$	18.62	348,897		$	15.75
Granted	133,139		26.65		126,685		26.92
Vested	(74,521	)	16.95		(43,388	)	17.00
Forfeited	(7,483	)	20.22		(57,982	)	19.08
Outstanding at September 30	404,205		$	21.44	374,212		$	19.02

Total compensation costs recorded for RSUs were $2.7 million and $1.5 million for the nine months ended September 30, 2014, and 2013, respectively. As of September 30, 2014, there were $3.6 million of total unrecognized compensation costs related to the 2005 and 2012 Long-Term Incentive Plans for RSUs which are expected to be recognized through 2019.

Options

Although the Plan provides authority to the Compensation Committee to grant stock options, no options were granted during the first nine months of 2014 and 2013. Prior to 2009, options were typically granted annually with an expiration date ten years after the date of grant. Vesting was generally over a five-year service period with portions of a grant becoming exercisable at three years, four years, and five years after the date of grant. A summary of the status of the stock options as of September 30, 2014 and 2013, and changes during the nine months ended September 30, 2014 and 2013, follows:

	2014				2013
	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at January 1	261,936		$	23.60	377,907		$	22.62
Granted	—		—		—		—
Exercised	(9,750	)	19.67		(68,586	)	19.54
Forfeited	(7,000	)	26.62		(1,800	)	26.68
Outstanding at September 30	245,186		$	23.67	307,521		$	23.28
Options exercisable at September 30	245,186		$	23.67	307,521		$	23.28

AtSeptember 30, 2014, the vested options totaled 245,186 shares with a weighted average exercise price of $23.67 per share and a weighted average remaining contractual life of 2.25 years. The intrinsic value (the difference between the market price and the aggregate exercise price) for the vested options as of September 30, 2014, was $594,000. The intrinsic value for the total of all options exercised during the nine months ended September 30, 2014, was $41,000.

The exercise price of stock options granted is established by the Compensation Committee, but the exercise price for the stock options may not be less than the fair market value of the shares on the date that the option is granted or, if greater, the par value of a share of stock. Each option granted is exercisable in full at any time or from time to time, subject to vesting provisions, as determined by the Compensation Committee and as provided in the option agreement, but such time may not exceed ten years from the grant date. Cash received from options exercised was $192,000 for the nine months ended September 30, 2014, and $1.3 million for the nine months ended September 30, 2013.

Total compensation costs recorded for options were $0 and $10,000 for the nine months ended September 30, 2014, and 2013, respectively. There are no unrecorded compensation costs related to options at September 30, 2014.

Subsequent Events

On October 22, 2014, Heartland entered into a merger agreement with Community Banc-Corp of Sheboygan, Inc., parent company of Community Bank & Trust in Sheboygan, Wisconsin. As of September 30, 2014, Community Bank & Trust had assets of approximately $525.0 million, including loans of $410.0 million. Under the merger agreement, and subject to shareholder and regulatory approval, Community Banc-Corp of Sheboygan, Inc. will merge into Heartland, and the shareholders of Community Banc-Corp of Sheboygan, Inc. will receive Heartland common stock. The aggregate purchase price will be based upon 155% of adjusted tangible book value, as defined in the merger agreement, of Community Banc-Corp of Sheboygan, Inc. prior to closing. Heartland estimates the purchase price at approximately $52.0 million. The merger agreement also provides that Community Bank & Trust will simultaneously merge into Heartland’s Wisconsin Bank & Trust subsidiary. The transaction, expected to close in the first quarter of 2015, is intended to be a tax-free reorganization with respect to the stock consideration received by the stockholders of Community Banc-Corp of Sheboygan, Inc.

Heartland has entered into an agreement to sell one branch of its Morrill & Janes Bank and Trust Company subsidiary. The branch sale is expected to close on November 7, 2014. The branch had loans of approximately $9.0 million and deposits of $28.0 million at September 30, 2014. The anticipated premium on the branch sale is 2% of average deposits.

Effect of New Financial Accounting Standards

In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,"to eliminate the diversity in practice and to increase the comparability of financial statements among companies. The guidance requires that a reporting entity generally must show an unrecognized tax benefit, or a portion of an unrecognized tax benefit, for a net operating loss carryforward, similar tax loss or a tax credit carryforward as a reduction of a deferred tax asset. However, the entity should present the unrecognized tax benefit as a liability and not as a reduction of a deferred tax asset if the carryforward or tax loss is not available on the financial statement date to settle any additional income tax liability that would result from the disallowance of the tax position under the applicable tax law, or the applicable tax law does not require the company to use, and the company does not intend to use, the carryforward or tax loss to settle additional income taxes resulting from the disallowance of the tax position. The guidance does not require any new recurring disclosures because it does not affect the recognition or measurement of uncertain tax positions. Heartland adopted this standard on January 1, 2014, and the adoption did not have a material impact on the results of operations, financial position, and liquidity.

In January 2014, the FASB issued ASU 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects." The amendments in ASU 2014-01 to Topic 323, "Equity Investments and Joint Ventures," provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments are effective for fiscal years, and interim periods within those years, beginning after December 31, 2014, and should be applied retrospectively to all periods presented. Early adoption is permitted. Heartland is in the process of evaluating the impact that adoption of this guidance will have on the results of operations, financial position, and liquidity.

In January 2014, the FASB issued ASU 2014-04, "Receivables-Troubled Debt Restructurings by Creditors: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure." The amendments in ASU 2014-04 clarify that an in-substance foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (i) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (ii) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in lieu of foreclosure or similar legal agreement. ASU 2014-04 also requires disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in loans collateralized by residential real estate property that are in the process of foreclosure. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption permitted. Once adopted, an entity can elect either (i) a modified retrospective transition method or (ii) a prospective transition method. The modified retrospective transition method is applied by means of a cumulative-effect adjustment to residential mortgage loans and foreclosed residential real estate properties existing as of the beginning of the period for which the amendments of ASU 2014-04 are effective, with real estate reclassified to loans measured at the carrying value of the real estate at the date of adoption and loans reclassified to real estate measured at the lower of net carrying value of the loan or the fair value of the real estate less costs to sell at the date of adoption. The prospective transition method is applied by means of applying the amendments of ASU 2014-04 to all instances of receiving physical possession of residential real estate properties that occur after the date of adoption. Heartland does not expect the adoption of this standard to have a material impact on the results of operations, financial position, and liquidity.

In August 2014, the FASB issued ASU 2014-14, "Receivables-Troubled Debt Restructurings by Creditors: Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure." The amendment clarifies how creditors are to classify certain government-guaranteed mortgage loans upon foreclosure. The amendment requires that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government guarantee that is not separate from the loan before foreclosure, and (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under the claim, and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured on the amount of the loan balance (principal and interest) expected to be recovered for the guarantor. This amendment is effective for annual reporting periods, and interim reporting periods within those years, beginning after December 15, 2014, with early adoption permitted. Heartland does not expect the adoption of this standard to have a material impact on the results of operations, financial position, and liquidity.

Reclassifications

In the first quarter of 2014, Heartland revised the classification of mortgage servicing rights income from loan servicing income to gain on sale of loans held for sale. The reclassification is presented in both the current and prior reporting periods. For the three and nine months ended September 30, 2013, $3.4 million and $10.6 million, respectively, were reclassified from loan servicing income to gain on sale of loans held for sale.

During the first quarter of 2014, Heartland revised the classification of loss on sales/valuations of other real estate and repossessed assets, net, from other real estate and loan collection expenses to a specific noninterest income classification. This reclassification is presented in both the current and prior reporting periods. For the three and nine months ended September 30, 2013, losses of $339,000 and $2.4 million were reclassified from other real estate and loan collection expenses to loss on sales/valuations of other real estate and repossessed assets, net. This reclassification results in other real estate and loan collection expenses for the three and nine months ended September 30, 2013, decreasing from $1.1 million and $4.9 million as previously reported to $730,000 and $2.4 million, respectively.

These reclassifications do not have a material impact on Heartland's financial statements and do not affect the financial results. Heartland believes these reclassifications are more consistent with industry reporting practices.

XML

Goodwill, Core Deposit Premium and Other Intangible Assets (Mortgage loans servicing) (Details) (USD $)	9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Valuation servicing rights in tranches [Line Items]
Mortgage loans serviced for others	$ 3,360,000,000		$ 3,050,000,000
Servicing asset at amortized value	33,260,000	31,179,000	32,000,000
Mortgage Servicing Rights 15-year Tranche [Member]
Valuation servicing rights in tranches [Line Items]
Servicing asset, agreement term	15 years
Mortgage Servicing Rights 30-year Tranche [Member]
Valuation servicing rights in tranches [Line Items]
Servicing asset, agreement term	30 years
Mortgage Servicing Rights [Member]
Valuation servicing rights in tranches [Line Items]
Prepayment rate	11.00%		9.65%
Discount rate	9.68%		10.15%
Fees collected for servicing of mortgage loans	$ 6,400,000	$ 4,900,000
Mortgage Servicing Rights [Member] | Minimum
Valuation servicing rights in tranches [Line Items]
Average cap rate	0.75%		0.79%
Mortgage Servicing Rights [Member] | Maximum
Valuation servicing rights in tranches [Line Items]
Average cap rate	1.39%		1.39%

XML

Fair Value (Quantitative Information about Level 3 fair value measurements) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2014		Dec. 31, 2013
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Securities available for sale	$ 1,369,703		$ 1,633,902
Recurring Basis | Interest rate lock commitments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Derivative assets	3,291		1,809
Nonrecurring Basis
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	14,976		33,199
Other real estate owned	20,475		29,852
Nonrecurring Basis | Commercial
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	1,545		7,229
Nonrecurring Basis | Commercial real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	7,058		7,749
Nonrecurring Basis | Agricultural and agricultural real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	827		13,062
Nonrecurring Basis | Residential real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	2,503		3,396
Nonrecurring Basis | Consumer
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	3,043		1,763
Level 3
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Securities available for sale	4,848		3,298
Derivative assets	0		0
Level 3 | Interest rate lock commitments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Derivative assets	3,291		1,809
Level 3 | Recurring Basis | Interest rate lock commitments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Derivative assets	3,291	[1]	1,809
Closing ratio	84.00%		87.00%
Level 3 | Recurring Basis | Z-Tranche Securities
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Securities available for sale	4,848		3,298
Level 3 | Recurring Basis | Z-Tranche Securities | Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Pretax discount rate	6.50%		7.00%
Actual defaults	12.71%		12.50%
Actual deferrals	6.25%		6.10%
Level 3 | Recurring Basis | Z-Tranche Securities | Maximum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Pretax discount rate	8.00%		9.00%
Actual defaults	20.14%		28.20%
Actual deferrals	22.35%		16.00%
Level 3 | Recurring Basis | Z-Tranche Securities | Weighted Average
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Actual defaults	15.52%		20.80%
Actual deferrals	11.32%		11.10%
Level 3 | Recurring Basis | Z-Tranche Securities | Interest rate lock commitments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Derivative assets			1,809	[2]
Level 3 | Nonrecurring Basis
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	14,976		33,199
Other real estate owned	20,475	[3]	29,852	[3]
Level 3 | Nonrecurring Basis | Commercial
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	1,545	[3]	7,229	[3]
Level 3 | Nonrecurring Basis | Commercial real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	7,058	[3]	7,749	[3]
Level 3 | Nonrecurring Basis | Agricultural and agricultural real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	827	[3]	13,062	[3]
Level 3 | Nonrecurring Basis | Residential real estate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	2,503	[3]	3,396	[3]
Level 3 | Nonrecurring Basis | Consumer
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral dependent impaired loans	$ 3,043	[3]	$ 1,763	[3]

[1] The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at September 30, 2014 was 84%.

[2] The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at December 31, 2013 was 87%.

[3] Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful.

XML

Basis of Presentation (Earnings per Share) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share
Net income attributable to Heartland	$ 11,973	$ 6,810	$ 29,637	$ 28,854
Preferred dividends and discount	(205)	(276)	(613)	(889)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$ 11,768	$ 6,534	$ 29,024	$ 27,965
Weighted average common shares outstanding for basic earnings per share	18,469	16,936	18,456	16,904
Assumed incremental common shares issued for common stock equivalents	284	285	287	279
Weighted average common shares for diluted earnings per share	18,753	17,221	18,743	17,183
Earnings per common share — basic (in dollars per share)	$ 0.64	$ 0.39	$ 1.57	$ 1.65
Earnings per common share — diluted (in dollars per share)	$ 0.63	$ 0.38	$ 1.55	$ 1.63
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	94	105	94	105

XML

Securities (Available for sale securities losses) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	$ 515,804	$ 1,034,016
Less than 12 months, Unrealized Losses	(5,633)	(30,517)
12 months or longer, Fair Value	339,577	128,943
12 months or longer, Unrealized Losses	(6,938)	(6,460)
Total, Fair Value	855,381	1,162,959
Total, Unrealized Losses	(12,571)	(36,977)
U.S. government corporations and agencies
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	0	196,345
Less than 12 months, Unrealized Losses	0	(2,001)
12 months or longer, Fair Value	978	0
12 months or longer, Unrealized Losses	(12)	0
Total, Fair Value	978	196,345
Total, Unrealized Losses	(12)	(2,001)
Mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	514,918	640,684
Less than 12 months, Unrealized Losses	(5,627)	(17,064)
12 months or longer, Fair Value	296,255	118,229
12 months or longer, Unrealized Losses	(6,065)	(5,510)
Total, Fair Value	811,173	758,913
Total, Unrealized Losses	(11,692)	(22,574)
Obligations of states and political subdivisions
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	886	196,987
Less than 12 months, Unrealized Losses	(6)	(11,452)
12 months or longer, Fair Value	42,344	10,714
12 months or longer, Unrealized Losses	(861)	(950)
Total, Fair Value	43,230	207,701
Total, Unrealized Losses	$ (867)	$ (12,402)

XML

Securities (Tables)

9 Months Ended

Sep. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Available-for-sale Securities

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of September 30, 2014, and December 31, 2013, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2014
U.S. government corporations and agencies	$	13,884	$	74	$	(12	)	$	13,946
Mortgage-backed securities	1,166,166		10,403		(11,692		)	1,164,877
Obligations of states and political subdivisions	180,998		5,680		(867		)	185,811
Total debt securities	1,361,048		16,157		(12,571		)	1,364,634
Equity securities	5,021		48		—			5,069
Total	$	1,366,069	$	16,205	$	(12,571	)	$	1,369,703
December 31, 2013
U.S. government corporations and agencies	$	220,157	$	147	$	(2,001	)	$	218,303
Mortgage-backed securities	1,156,983		9,538		(22,574		)	1,143,947
Obligations of states and political subdivisions	277,320		1,706		(12,402		)	266,624
Total debt securities	1,654,460		11,391		(36,977		)	1,628,874
Equity securities	4,996		32		—			5,028
Total	$	1,659,456	$	11,423	$	(36,977	)	$	1,633,902

Held-to-maturity Securities

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of September 30, 2014, and December 31, 2013, are summarized in the table below, in thousands:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2014
Mortgage-backed securities	$	5,805	$	263	$	(533	)	$	5,535
Obligations of states and political subdivisions	249,507		12,914		(1,315		)	261,106
Total	$	255,312	$	13,177	$	(1,848	)	$	266,641
December 31, 2013
Mortgage-backed securities	$	5,973	$	199	$	(321	)	$	5,851
Obligations of states and political subdivisions	231,525		5,801		(5,740		)	231,586
Total	$	237,498	$	6,000	$	(6,061	)	$	237,437

Investments Classified by Contractual Maturity Date

The amortized cost and estimated fair value of debt securities available for sale at September 30, 2014, 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.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	8,440	$	8,525
Due in 1 to 5 years	19,027		19,184
Due in 5 to 10 years	83,717		86,936
Due after 10 years	83,698		85,112
Total debt securities	194,882		199,757
Mortgage-backed securities	1,166,166		1,164,877
Equity securities	5,021		5,069
Total investment securities	$	1,366,069	$	1,369,703

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 2014, 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.

	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	—	$	—
Due in 1 to 5 years	13,062		13,910
Due in 5 to 10 years	47,769		50,227
Due after 10 years	188,676		196,969
Total debt securities	249,507		261,106
Mortgage-backed securities	5,805		5,535
Total investment securities	$	255,312	$	266,641

Schedule of Realized Gain (Loss)

Gross gains and losses realized related to the sales of securities available for sale for the three and nine months ended September 30, 2014, and 2013, are summarized as follows, in thousands:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Proceeds from sales	$	189,939	$	127,475	$	699,830	$	343,410
Gross security gains	1,101		1,420		4,547		7,703
Gross security losses	276		302		2,087		1,091

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value

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 September 30, 2014, and December 31, 2013. 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 or more months. The reference point for determining how long an investment was in an unrealized loss position was September 30, 2013, andDecember 31, 2012, respectively. Securities for which Heartland has taken credit-related 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.

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
September 30, 2014
U.S. government corporations and agencies	$	—	$	—		$	978	$	(12	)	$	978	$	(12	)
Mortgage-backed securities	514,918		(5,627		)	296,255		(6,065		)	811,173		(11,692		)
Obligations of states and political subdivisions	886		(6		)	42,344		(861		)	43,230		(867		)
Total temporarily impaired securities	$	515,804	$	(5,633	)	$	339,577	$	(6,938	)	$	855,381	$	(12,571	)
December 31, 2013
U.S. government corporations and agencies	$	196,345	$	(2,001	)	$	—	$	—		$	196,345	$	(2,001	)
Mortgage-backed securities	640,684		(17,064		)	118,229		(5,510		)	758,913		(22,574		)
Obligations of states and political subdivisions	196,987		(11,452		)	10,714		(950		)	207,701		(12,402		)
Total temporarily impaired securities	$	1,034,016	$	(30,517	)	$	128,943	$	(6,460	)	$	1,162,959	$	(36,977	)

Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value

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
September 30, 2014
Mortgage-backed securities	$	—	$	—		$	2,861	$	(533	)	$	2,861	$	(533	)
Obligations of states and political subdivisions	1,577		(390		)	36,412		(925		)	37,989		(1,315		)
Total temporarily impaired securities	$	1,577	$	(390	)	$	39,273	$	(1,458	)	$	40,850	$	(1,848	)
December 31, 2013
Mortgage-backed securities	$	2,170	$	(319	)	$	834	$	(2	)	$	3,004	$	(321	)
Obligations of states and political subdivisions	47,175		(3,508		)	21,505		(2,232		)	68,680		(5,740		)
Total temporarily impaired securities	$	49,345	$	(3,827	)	$	22,339	$	(2,234	)	$	71,684	$	(6,061	)

Other than Temporary Impairment, Credit Losses Recognized in Earnings

The following table shows the detail of OTTI write-downs on debt securities included in earnings and the related changes in other accumulated comprehensive income ("AOCI") for the same securities, in thousands:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Recorded as part of gross realized losses:
Credit related OTTI	$	—		$	—		$	—		$	—
Intent to sell OTTI	—			—			—			—
Total recorded as part of gross realized losses	—			—			—			—
Recorded directly to AOCI for non-credit related impairment:
Residential mortgage backed securities	—			—			—			—
Accretion of non-credit related impairment	(24		)	(24		)	(72		)	(72		)
Total changes to AOCI for non-credit related impairment	(24		)	(24		)	(72		)	(72		)
Total OTTI losses (accretion) recorded on debt securities, net	$	(24	)	$	(24	)	$	(72	)	$	(72	)