OTHER BORROWINGS

Other borrowings, which Heartland defines as borrowings with an original maturity date of more than one year, outstanding at December 31, 2016 and 2015, are shown in the table below, net of discount and issuance costs amortization, in thousands:



	2016		2015
Advances from the FHLB; weighted average call dates at December 31, 2016 and 2015 were August 2020 and February 2018, respectively; and weighted average interest rates were 3.25% and 1.78%, respectively	$	6,975	$	17,242
Wholesale repurchase agreements; weighted average call dates at December 31, 2016 and 2015 were May 2017 and May 2016, respectively; and weighted average interest rates were 3.76% for both December 31, 2016 and 2015	30,000		30,000
Trust preferred securities	115,232		114,877
Senior notes	16,000		16,000
Note payable to unaffiliated bank	37,667		8,947
Contracts payable for purchase of real estate and other assets	2,339		2,434
Subordinated notes	73,857		73,714
Other borrowings	6,464		—
Total	$	288,534	$	263,214

The Heartland banks are members of the FHLB of Des Moines, Chicago, Dallas, San Francisco and Topeka. The advances from the FHLB are collateralized by the Heartland banks' investments in FHLB stock of $9.9 million and $9.6 million at December 31, 2016 and 2015, respectively. In addition, the FHLB advances are collateralized with pledges of one- to four-family residential mortgages, commercial and agricultural mortgages and securities totaling $2.74 billion at December 31, 2016, and $2.10 billion at December 31, 2015. At December 31, 2016, Heartland had $1.15 billion of remaining FHLB borrowing capacity.

Heartland has entered into various wholesale repurchase agreements, which had balances totaling $30.0 million at both December 31, 2016 and 2015, respectively. A schedule of Heartland's wholesale repurchase agreements outstanding as of December 31, 2016, were as follows, in thousands:

Amount

Interest Rate as
of 12/31/16

Issue

Date

Maturity

Date

Callable

Date

Counterparty:

Citigroup Global Markets

20,000

3.61

⁽¹⁾

04/17/2008

04/17/2018

04/17/2017

Barclays Capital

10,000

4.07

⁽²⁾

07/01/2008

07/01/2018

07/01/2017

30,000

(1) Interest rate resets quarterly on the 17th of January, April, July and October of each year until maturity. Embedded within the contract is a cap interest rate of 3.61%.

(2) Interest rate is fixed through maturity date.

At December 31, 2016, Heartland had eight wholly-owned trust subsidiaries that were formed to issue trust preferred securities, which includes one wholly-owned trust subsidiary acquired with the Community Banc-Corp. of Sheboygan, Inc., acquisition and one wholly-owned trust subsidiary acquired with the Community Bancorporation of New Mexico, Inc. acquisition. The proceeds from the offerings were used to purchase junior subordinated debentures from Heartland and were in turn used by Heartland for general corporate purposes. Heartland has the option to shorten the maturity date to a date not earlier than the callable date. Heartland may not shorten the maturity date without prior approval of the Board of Governors of the Federal Reserve System, if required. Prior redemption is permitted under certain circumstances, such as changes in tax or regulatory capital rules. In connection with these offerings of trust preferred securities, the balance of deferred issuance costs included in other borrowings was $149,000 as of December 31, 2016. These deferred costs are amortized on a straight-line basis over the life of the debentures. The majority of the interest payments are due quarterly. A schedule of Heartland’s trust preferred offerings outstanding, excluding deferred issuance costs, as of December 31, 2016, were as follows, in thousands:

Amount

Issued

Interest

Rate

Interest Rate as
of 12/31/16⁽¹⁾

Maturity

Date

Callable

Date

Heartland Financial Statutory Trust IV

25,774

2.75% over LIBOR

3.74

⁽²⁾

03/17/2034

03/17/2017

Heartland Financial Statutory Trust V

20,619

1.33% over LIBOR

2.21

⁽³⁾

04/07/2036

04/07/2017

Heartland Financial Statutory Trust VI

20,619

6.75%

6.75

⁽⁴⁾

09/15/2037

03/15/2017

Heartland Financial Statutory Trust VII

20,619

1.48% over LIBOR

2.41

⁽⁵⁾

09/01/2037

06/01/2017

Morrill Statutory Trust I

8,806

3.25% over LIBOR

4.25

⁽⁶⁾

12/26/2032

03/26/2017

Morrill Statutory Trust II

8,420

2.85% over LIBOR

3.84

⁽⁷⁾

12/17/2033

12/17/2017

Sheboygan Statutory Trust I

6,265

2.95% over LIBOR

3.94

09/17/2033

03/17/2017

CBNM Capital Trust I

4,259

3.25% over LIBOR

4.21

12/15/2034

03/15/2017

115,381

(1) Effective weighted average interest rate as of December 31, 2016, was 4.97% due to interest rate swap transactions as discussed in Note 12 to Heartland's consolidated financial statements.

(2) Effective interest rate as of December 31, 2016, was 5.01% due to an interest rate swap transaction as discussed in Note 12 to Heartland's consolidated financial statements.

(3) Effective interest rate as of December 31, 2016, was 4.69% due to an interest rate swap transaction as discussed in Note 12 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 December 31, 2016, was 4.70% due to an interest rate swap transaction as discussed in Note 12 to Heartland's consolidated financial statements.

(6) Effective interest rate as of December 31, 2016, was 4.92% due to an interest rate swap transaction as discussed in Note 12 to Heartland's consolidated financial statements.

(7) Effective interest rate as of December 31, 2016, was 4.51% due to an interest rate swap transaction as discussed in Note 12 to Heartland's consolidated financial statements.

For regulatory purposes, $115.2 million and $114.9 million of the trust preferred securities qualified as Tier 1 capital as of December 31, 2016 and 2015, respectively.

Between 2010 and 2012, Heartland completed private debt offerings of its senior notes. The notes were sold in a private placement to various accredited investors. The senior notes are unsecured and bear interest at 5% per annum payable quarterly. During 2015, Heartland offered to prepay the senior notes, resulting in the prepayment of $1.0 million of these senior notes as of December 31, 2015.

Senior notes valued at $12.5 million matured in accordance with the maturity schedule on December 1, 2015. The maturity schedule of the remaining senior notes is such that $5.0 million will mature on February 1, 2017, $6.0 million on February 1, 2018, and $5.0 million on February 1, 2019. Total senior notes outstanding were $16.0 million at both December 31, 2016 and December 31, 2015.

On April 20, 2011, Heartland obtained a $15.0 million amortizing term loan from an unaffiliated bank with a maturity date of April 20, 2016. At the time of origination, Heartland entered into an interest rate swap transaction designated as a cash flow hedge, with the bank to fix the term loan at 5.14% for the full five-year term. On April 20, 2016, this amortizing term loan was repaid with an advance on Heartland's non-revolving credit line. The outstanding balance on this amortizing term loan was $0 and $8.9 million at December 31, 2016 and December 31, 2015, respectively.

In addition to the credit line described in Note 10, "Short-Term Borrowings," Heartland entered into another non-revolving credit facility with the same unaffiliated bank on December 15, 2015, which provided a borrowing capacity not to exceed $50.0 million when combined with the outstanding balance on its then existing amortizing term loan with the same unaffiliated bank. On May 10, 2016, $40.0 million of this variable rate non-revolving credit facility was swapped to a fixed rate of 2.50% over LIBOR with an amortizing term of five years, which is due on April 2021, and was reclassified as long-term debt. At December 31, 2016, a balance of $37.7 million was outstanding on this term debt compared to no balance outstanding at December 31, 2015. At December 31, 2016, $27.1 million was available on the non-revolving credit facility, of which no balance was outstanding.

On December 17, 2014, Heartland issued $75.0 million of subordinated notes with a maturity date of December 30, 2024. The notes were issued at par with an underwriting discount of $1.1 million. The interest rate on the notes is fixed at 5.75% per annum, payable semi-annually. The notes were sold to qualified institutional buyers, and the proceeds are being used for general corporate purposes. For regulatory purposes, $73.9 million of the subordinated notes qualified as Tier 2 capital as of December 31, 2016. In connection with the sale of the notes, the balance of deferred issuance costs included in other borrowings was $303,000 at December 31, 2016. These deferred costs are amortized on a straight-line basis over the life of the notes.

Effective with the acquisition of CIC Bancshares, Inc. on February 5, 2016, Heartland assumed $2.0 million of subordinated convertible notes with a fair value discount of $16,000 and $6.0 million of subordinated debentures with a fair value premium of $168,000. The interest rate is fixed at 6.50% per annum on the convertible notes and 8.00% per annum on the non-convertible notes, both payable quarterly. During the third quarter of 2016, $1.4 million of the subordinated convertible notes were converted into 52,913 shares of Heartland common stock. In connection with the acquisition of the notes, the balance of deferred issuance costs included in other borrowings was $44,000 at December 31, 2016. These deferred costs are amortized on a straight-line basis over the life of the notes.

Future payments at December 31, 2016, for other borrowings follow in the table below, in thousands. Callable FHLB advances, wholesale repurchase agreements, convertible debt and subordinated debt are included in the table at their call date.



2017	$	40,119
2018	13,123
2019	15,520
2020	5,652
2021	21,623
Thereafter	192,497
Total	$	288,534