Loans (Tables)

9 Months Ended

Sep. 30, 2017

Loans as of September 30, 2017, and December 31, 2016, were as follows, in thousands:



	September 30, 2017			December 31, 2016
Loans receivable held to maturity:
Commercial	$	1,613,903		$	1,287,265
Commercial real estate	3,163,953			2,538,582
Agricultural and agricultural real estate	511,764			489,318
Residential real estate	635,611			617,924
Consumer	450,088			420,613
Gross loans receivable held to maturity	6,375,319			5,353,702
Unearned discount	(605		)	(699		)
Deferred loan fees	(1,299		)	(1,284		)
Total net loans receivable held to maturity	6,373,415			5,351,719
Allowance for loan losses	(54,885		)	(54,324		)
Loans receivable, net	$	6,318,530		$	5,297,395

Allowance for Loan and Lease Losses, Based on Impairment Methodology

The following table shows the balance in the allowance for loan losses at September 30, 2017, and December 31, 2016, 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 losses during 2017.



	Allowance For Loan Losses						Gross Loans 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, 2017
Commercial	$	2,166	$	14,804	$	16,970	$	6,957	$	1,606,946	$	1,613,903
Commercial real estate	864		19,676		20,540		27,943		3,136,010		3,163,953
Agricultural and agricultural real estate	2,353		3,774		6,127		12,792		498,972		511,764
Residential real estate	393		1,873		2,266		29,833		605,778		635,611
Consumer	1,267		7,715		8,982		6,524		443,564		450,088
Total	$	7,043	$	47,842	$	54,885	$	84,049	$	6,291,270	$	6,375,319
December 31, 2016
Commercial	$	1,318	$	13,447	$	14,765	$	3,712	$	1,283,553	$	1,287,265
Commercial real estate	2,671		21,648		24,319		45,217		2,493,365		2,538,582
Agricultural and agricultural real estate	816		3,394		4,210		16,730		472,588		489,318
Residential real estate	497		1,766		2,263		25,726		592,198		617,924
Consumer	1,451		7,316		8,767		5,988		414,625		420,613
Total	$	6,753	$	47,571	$	54,324	$	97,373	$	5,256,329	$	5,353,702

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 at September 30, 2017, and December 31, 2016, in thousands:



	September 30, 2017		December 31, 2016
Nonaccrual loans	$	59,451	$	62,591
Nonaccrual troubled debt restructured loans	4,005		1,708
Total nonaccrual loans	$	63,456	$	64,299
Accruing loans past due 90 days or more	$	2,348	$	86
Performing troubled debt restructured loans	$	10,040	$	10,380

Troubled Debt Restructuring on Loans Modified

The following tables provide information on troubled debt restructured loans that were modified during the three- and nine-month periods ended September 30, 2017, and September 30, 2016, dollars in thousands:



	Three Months Ended September 30,
	2017					2016
	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	—	—		—		—	—		—
Residential real estate	8	1,174		1,174		5	651		651
Consumer	—	—		—		—	—		—
Total	8	$	1,174	$	1,174	5	$	651	$	651



	Nine Months Ended September 30,
	2017					2016
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial	3	$	131	$	131	1	$	100	$	100
Commercial real estate	—	—		—		1	179		179
Total commercial and commercial real estate	3	131		131		2	279		279
Agricultural and agricultural real estate	—	—		—		—	—		—
Residential real estate	22	2,977		2,977		5	651		651
Consumer	—	—		—		—	—		—
Total	25	$	3,108	$	3,108	7	$	930	$	930

The following table shows troubled debt restructured loans for which there was a payment default during the three- and nine-month periods ended September 30, 2017, and September 30, 2016, that had been modified during the twelve-month period prior to default, in thousands:



	With Payment Defaults During the Following Periods
	Three Months Ended September 30,
	2017			2016
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	—	$	—	—	$	—
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	—	—		—	—
Agricultural and agricultural real estate	—	—		—	—
Residential real estate	5	1,221		—	—
Consumer	—	—		—	—
Total	5	$	1,221	—	$	—



	With Payment Defaults During the Following Periods
	Nine Months Ended September 30,
	2017			2016
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial	—	$	—	1	$	95
Commercial real estate	—	—		—	—
Total commercial and commercial real estate	—	—		1	95
Agricultural and agricultural real estate	—	—		—	—
Residential real estate	8	1,480		—	—
Consumer	—	—		—	—
Total	8	$	1,480	1	$	95

Financing Receivable Credit Quality Indicators

The following table presents loans by credit quality indicator at September 30, 2017, and December 31, 2016, in thousands:



	Pass		Nonpass		Total
September 30, 2017
Commercial	$	1,523,080	$	90,823	$	1,613,903
Commercial real estate	2,992,663		171,290		3,163,953
Total commercial and commercial real estate	4,515,743		262,113		4,777,856
Agricultural and agricultural real estate	445,554		66,210		511,764
Residential real estate	597,987		37,624		635,611
Consumer	437,831		12,257		450,088
Total gross loans receivable held to maturity	$	5,997,115	$	378,204	$	6,375,319
December 31, 2016
Commercial	$	1,187,557	$	99,708	$	1,287,265
Commercial real estate	2,379,632		158,950		2,538,582
Total commercial and commercial real estate	3,567,189		258,658		3,825,847
Agricultural and agricultural real estate	424,311		65,007		489,318
Residential real estate	584,626		33,298		617,924
Consumer	409,474		11,139		420,613
Total gross loans receivable held to maturity	$	4,985,600	$	368,102	$	5,353,702

Past Due Financing Receivables

The following table sets forth information regarding Heartland's accruing and nonaccrual loans at September 30, 2017, and December 31, 2016, in thousands:



	Accruing Loans
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual		Total Loans
September 30, 2017
Commercial	$	2,591	$	133	$	215	$	2,939	$	1,603,397	$	7,567	$	1,613,903
Commercial real estate	6,140		465		—		6,605		3,140,672		16,676		3,163,953
Total commercial and commercial real estate	8,731		598		215		9,544		4,744,069		24,243		4,777,856
Agricultural and agricultural real estate	315		782		1,282		2,379		496,593		12,792		511,764
Residential real estate	5,033		449		—		5,482		607,165		22,964		635,611
Consumer	3,001		1,813		851		5,665		440,966		3,457		450,088
Total gross loans receivable held to maturity	$	17,080	$	3,642	$	2,348	$	23,070	$	6,288,793	$	63,456	$	6,375,319
December 31, 2016
Commercial	$	1,127	$	219	$	77	$	1,423	$	1,281,241	$	4,601	$	1,287,265
Commercial real estate	886		3,929		—		4,815		2,513,069		20,698		2,538,582
Total commercial and commercial real estate	2,013		4,148		77		6,238		3,794,310		25,299		3,825,847
Agricultural and agricultural real estate	199		3,191		—		3,390		472,597		13,331		489,318
Residential real estate	4,986		846		—		5,832		590,626		21,466		617,924
Consumer	3,455		1,021		9		4,485		411,925		4,203		420,613
Total gross loans receivable held to maturity	$	10,653	$	9,206	$	86	$	19,945	$	5,269,458	$	64,299	$	5,353,702

Summary of Impaired Loans

The following tables present, by category of loan, impaired loans, the unpaid contractual loan balances at September 30, 2017, and December 31, 2016; the outstanding loan balances recorded on the consolidated balance sheets at September 30, 2017, and December 31, 2016; any related allowance recorded for those loans as of September 30, 2017, and December 31, 2016; the average outstanding loan balances recorded on the consolidated balance sheets during the three- and nine-months ended September 30, 2017, and year ended December 31, 2016; and the interest income recognized on the impaired loans during the three- and nine-month periods ended September 30, 2017, and year ended December 31, 2016, 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, 2017
Impaired loans with a related allowance:
Commercial	$	3,190	$	3,190	$	2,166	$	4,885	$	—	$	3,829	$	1
Commercial real estate	11,272		9,416		864		10,637		—		12,106		7
Total commercial and commercial real estate	14,462		12,606		3,030		15,522		—		15,935		8
Agricultural and agricultural real estate	10,289		10,289		2,353		3,532		—		2,140		—
Residential real estate	1,640		1,640		393		1,633		—		2,197		10
Consumer	2,179		2,179		1,267		2,155		10		2,343		32
Total impaired loans with a related allowance	$	28,570	$	26,714	$	7,043	$	22,842	$	10	$	22,615	$	50
Impaired loans without a related allowance:
Commercial	$	4,887	$	3,767	$	—	$	2,727	$	—	$	2,017	$	112
Commercial real estate	19,132		18,527		—		18,237		201		21,750		536
Total commercial and commercial real estate	24,019		22,294		—		20,964		201		23,767		648
Agricultural and agricultural real estate	2,503		2,503		—		8,343		—		10,858		—
Residential real estate	28,197		28,193		—		27,556		112		26,006		230
Consumer	4,345		4,345		—		4,222		19		3,849		61
Total impaired loans without a related allowance	$	59,064	$	57,335	$	—	$	61,085	$	332	$	64,480	$	939
Total impaired loans held to maturity:
Commercial	$	8,077	$	6,957	$	2,166	$	7,612	$	—	$	5,846	$	113
Commercial real estate	30,404		27,943		864		28,874		201		33,856		543
Total commercial and commercial real estate	38,481		34,900		3,030		36,486		201		39,702		656
Agricultural and agricultural real estate	12,792		12,792		2,353		11,875		—		12,998		—
Residential real estate	29,837		29,833		393		29,189		112		28,203		240
Consumer	6,524		6,524		1,267		6,377		29		6,192		93
Total impaired loans held to maturity	$	87,634	$	84,049	$	7,043	$	83,927	$	342	$	87,095	$	989



	Unpaid Contractual Balance		Loan Balance		Related Allowance Recorded		Year-to- Date Avg. Loan Balance		Year-to- Date Interest Income Recognized
December 31, 2016
Impaired loans with a related allowance:
Commercial	$	2,852	$	2,840	$	1,318	$	3,136	$	2
Commercial real estate	14,221		14,221		2,671		10,625		21
Total commercial and commercial real estate	17,073		17,061		3,989		13,761		23
Agricultural and agricultural real estate	2,771		2,771		816		912		21
Residential real estate	3,490		3,490		497		3,371		43
Consumer	2,644		2,644		1,451		3,082		42
Total impaired loans with a related allowance	$	25,978	$	25,966	$	6,753	$	21,126	$	129
Impaired loans without a related allowance:
Commercial	$	925	$	872	$	—	$	5,329	$	251
Commercial real estate	31,875		30,996		—		39,632		1,647
Total commercial and commercial real estate	32,800		31,868		—		44,961		1,898
Agricultural and agricultural real estate	13,959		13,959		—		12,722		157
Residential real estate	22,408		22,236		—		18,446		202
Consumer	3,344		3,344		—		2,659		68
Total impaired loans without a related allowance	$	72,511	$	71,407	$	—	$	78,788	$	2,325
Total impaired loans held to maturity:
Commercial	$	3,777	$	3,712	$	1,318	$	8,465	$	253
Commercial real estate	46,096		45,217		2,671		50,257		1,668
Total commercial and commercial real estate	49,873		48,929		3,989		58,722		1,921
Agricultural and agricultural real estate	16,730		16,730		816		13,634		178
Residential real estate	25,898		25,726		497		21,817		245
Consumer	5,988		5,988		1,451		5,741		110
Total impaired loans held to maturity	$	98,489	$	97,373	$	6,753	$	99,914	$	2,454

Summary of Purchased Impaired and Nonimpaired Loans

At September 30, 2017, and December 31, 2016, the carrying amount of loans acquired since 2015 consist of purchased impaired and nonimpaired loans as summarized in the following table, in thousands:



	September 30, 2017						December 31, 2016
	Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans		Impaired Purchased Loans		Non Impaired Purchased Loans		Total Purchased Loans
Commercial	$	968	$	270,241	$	271,209	$	2,198	$	99,082	$	101,280
Commercial real estate	2,509		1,181,333		1,183,842		2,079		622,117		624,196
Agricultural and agricultural real estate	—		1,251		1,251		—		181		181
Residential real estate	211		184,167		184,378		186		157,468		157,654
Consumer loans	—		62,491		62,491		—		47,368		47,368
Total loans	$	3,688	$	1,699,483	$	1,703,171	$	4,463	$	926,216	$	930,679

Changes in Accretable Yield on Acquired Loans

Changes in accretable yield on acquired loans with evidence of credit deterioration at the date of acquisition for the three- and nine-month periods ended September 30, 2017, and September 30, 2016, were as follows, in thousands:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Balance at beginning of period	$	101		$	168		$	182		$	557
Original yield discount, net, at date of acquisitions	—			—			—			19
Accretion	(700		)	(379		)	(1,074		)	(845		)
Reclassification from nonaccretable difference⁽¹⁾	654			331			947			389
Balance at period end	$	55		$	120		$	55		$	120

(1) Represents increases in estimated cash flows expected to be received, primarily due to lower estimated credit losses.