SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of September 30, 2017, and December 31, 2016, are summarized in the table below, in thousands:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2017
U.S. government corporations and agencies	$	7,435	$	14	$	(34	)	$	7,415
Mortgage-backed securities	1,593,677		4,656		(32,933		)	1,565,400
Obligations of states and political subdivisions	506,867		4,307		(7,200		)	503,974
Total debt securities	2,107,979		8,977		(40,167		)	2,076,789
Equity securities	16,253		343		—			16,596
Total	$	2,124,232	$	9,320	$	(40,167	)	$	2,093,385
December 31, 2016
U.S. government corporations and agencies	$	4,716	$	16	$	(32	)	$	4,700
Mortgage-backed securities	1,321,760		7,026		(38,286		)	1,290,500
Obligations of states and political subdivisions	553,020		2,436		(19,312		)	536,144
Total debt securities	1,879,496		9,478		(57,630		)	1,831,344
Equity securities	14,451		69		—			14,520
Total	$	1,893,947	$	9,547	$	(57,630	)	$	1,845,864

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of September 30, 2017, and December 31, 2016, are summarized in the table below, in thousands:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2017
Obligations of states and political subdivisions	$	256,355	$	14,722	$	(691	)	$	270,386
Total	$	256,355	$	14,722	$	(691	)	$	270,386
December 31, 2016
Obligations of states and political subdivisions	$	263,662	$	12,282	$	(1,145	)	$	274,799
Total	$	263,662	$	12,282	$	(1,145	)	$	274,799

At September 30, 2017, approximately 74% of Heartland's mortgage-backed securities were issued by government-sponsored enterprises.

The amortized cost and estimated fair value of debt securities available for sale at September 30, 2017, 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.



	September 30, 2017
	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	185	$	186
Due in 1 to 5 years	40,716		41,077
Due in 5 to 10 years	93,240		91,514
Due after 10 years	380,161		378,612
Total debt securities	514,302		511,389
Mortgage-backed securities	1,593,677		1,565,400
Equity securities	16,253		16,596
Total investment securities	$	2,124,232	$	2,093,385

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 2017, 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.



	September 30, 2017
	Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	1,510	$	1,533
Due in 1 to 5 years	21,157		22,090
Due in 5 to 10 years	105,030		109,119
Due after 10 years	128,658		137,644
Total investment securities	$	256,355	$	270,386

As of September 30, 2017, and December 31, 2016, securities with a fair value of $758.1 million and $810.6 million, respectively, were pledged to secure public and trust deposits, short-term borrowings and for other purposes as required or permitted by law.

Gross gains and losses realized related to the sales of securities available for sale for the three- and nine-month periods ended September 30, 2017 and 2016, are summarized as follows, in thousands:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Proceeds from sales	$	503,083	$	146,242	$	1,127,091	$	768,617
Gross security gains	2,088		1,763		8,585		11,416
Gross security losses	409		177		3,023		1,332

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, 2017, and December 31, 2016. The investments were segregated into two categories: those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or more. The reference point for determining how long an investment was in an unrealized loss position was September 30, 2016, and December 31, 2015, respectively. Securities for which Heartland has taken credit-related other-than-temporary impairment ("OTTI") write-downs are categorized as being "less than 12 months" or "12 months or longer" in a continuous loss position based on the point in time that the fair value declined to below the cost basis and not the period of time since the credit-related OTTI write-down.



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, 2017
U.S. government corporations and agencies	$	6,901	$	(34	)	$	—	$	—		$	6,901	$	(34	)
Mortgage-backed securities	761,235		(11,558		)	431,669		(21,375		)	1,192,904		(32,933		)
Obligations of states and political subdivisions	149,931		(1,820		)	153,068		(5,380		)	302,999		(7,200		)
Total debt securities	918,067		(13,412		)	584,737		(26,755		)	1,502,804		(40,167		)
Equity securities	—		—			—		—			—		—
Total temporarily impaired securities	$	918,067	$	(13,412	)	$	584,737	$	(26,755	)	$	1,502,804	$	(40,167	)
December 31, 2016
U.S. government corporations and agencies	$	4,185	$	(32	)	$	—	$	—		$	4,185	$	(32	)
Mortgage-backed securities	744,202		(23,527		)	272,449		(14,759		)	1,016,651		(38,286		)
Obligations of states and political subdivisions	414,151		(19,309		)	251		(3		)	414,402		(19,312		)
Total debt securities	1,162,538		(42,868		)	272,700		(14,762		)	1,435,238		(57,630		)
Equity securities	—		—			—		—			—		—
Total temporarily impaired securities	$	1,162,538	$	(42,868	)	$	272,700	$	(14,762	)	$	1,435,238	$	(57,630	)



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, 2017
Obligations of states and political subdivisions	$	6,278	$	(43	)	$	8,894	$	(648	)	$	15,172	$	(691	)
Total temporarily impaired securities	$	6,278	$	(43	)	$	8,894	$	(648	)	$	15,172	$	(691	)
December 31, 2016
Obligations of states and political subdivisions	$	31,479	$	(884	)	$	2,017	$	(261	)	$	33,496	$	(1,145	)
Total temporarily impaired securities	$	31,479	$	(884	)	$	2,017	$	(261	)	$	33,496	$	(1,145	)

Heartland reviews the investment securities portfolio on a quarterly basis to monitor its exposure to OTTI. A determination as to whether a security's decline in fair value is other-than-temporary takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors Heartland may consider in the OTTI analysis include the length of time the security has been in an unrealized loss position, changes in security ratings, financial condition of the issuer, as well as security and industry specific economic conditions. In addition, with regard to debt securities, Heartland may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral. For certain debt securities in unrealized loss positions, Heartland prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

The remaining unrealized losses on Heartland's mortgage-backed securities are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities. The losses are not related to concerns regarding the underlying credit of the issuers or the underlying collateral. It is expected that the securities will not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates or widening market spreads and not credit quality, and because Heartland has the intent and ability to hold these investments until a market price recovery or to maturity and does not believe it will be required to sell the securities before maturity, these investments are not considered other-than-temporarily impaired.

The remaining unrealized losses on Heartland's obligations of states and political subdivisions are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities. Management monitors the published credit ratings of these securities and the stability of the underlying municipalities. Because the decline in fair value is attributable to changes in interest rates or widening market spreads due to insurance company downgrades and not underlying credit quality, and because Heartland has the intent and ability to hold these investments until a market price recovery or to maturity and does not believe it will be required to sell the securities before maturity, these investments are not considered other-than-temporarily impaired.

There were no available for sale or held to maturity securities with OTTI write-downs held as of or for the nine-month period ended September 30, 2017. There were no gross realized gains and $85,000 of gross realized losses on the sale of available for sale securities with OTTI writedowns for the nine-month period ended September 30, 2016. Additionally, there were no gross realized gains and $439,000 of gross realized losses on the sale of held to maturity securities with OTTI write-downs for the nine-month period ended September 30, 2016.

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,
	2017		2016		2017		2016
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	—		—		—		—
Reduction of non-credit related impairment related to security sales	—		—		—		(120		)
Accretion of non-credit related impairment	—		—		—		(7		)
Total changes to AOCI for non-credit related impairment	—		—		—		(127		)
Total OTTI losses (accretion) recorded on debt securities, net	$	—	$	—	$	—	$	(127	)

Included in other securities at September 30, 2017, and December 31, 2016, were shares of stock in the Federal Home Loan Banks (the "FHLBs") of Des Moines, Chicago, Dallas, San Francisco and Topeka at an amortized cost of $14.0 million and $14.4 million, respectively.

The Heartland banks are required by federal law to maintain FHLB stock as members of the various FHLBs. These equity securities are "restricted" in that they can only be sold back to the respective institutions from which they were acquired or another member institution at par. Therefore, the FHLB stock is less liquid than other marketable equity securities, and the fair value approximates amortized cost. Heartland considers its FHLB stock as a long-term investment that provides access to competitive products and liquidity. Heartland evaluates impairment in these investments based on the ultimate recoverability of the par value and, at September 30, 2017, did not consider the investments to be other than temporarily impaired.