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 December 31, 2017, and December 31, 2016, 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 | December 31, 2017 | | | | | | | | Assets | | | | | | | | Securities available for sale | | | | | | | | U.S. government corporations and agencies | $ | 5,328 |
| | $ | 3,484 |
| | $ | 1,844 |
| | $ | — |
| Mortgage and asset-backed securities | 1,753,736 |
| | — |
| | 1,753,736 |
| | — |
| Obligations of states and political subdivisions | 441,015 |
| | — |
| | 441,015 |
| | — |
| Equity securities | 16,674 |
| | — |
| | 16,674 |
| | — |
| Derivative financial instruments(1) | 3,933 |
| | — |
| | 3,933 |
| | — |
| Interest rate lock commitments | 1,738 |
| | — |
| | — |
| | 1,738 |
| Forward commitments | 80 |
| | — |
| | 80 |
| | — |
| Total assets at fair value | $ | 2,222,504 |
| | $ | 3,484 |
| | $ | 2,217,282 |
| | $ | 1,738 |
| Liabilities | | | | | | | | Derivative financial instruments(2) | $ | 5,167 |
| | $ | — |
| | $ | 5,167 |
| | $ | — |
| Forward commitments | 232 |
| | — |
| | 232 |
| | — |
| Total liabilities at fair value | $ | 5,399 |
| | $ | — |
| | $ | 5,399 |
| | $ | — |
| December 31, 2016 | | | | | | | | Assets | | | | | | | | Securities available for sale | | | | | | | | U.S. government corporations and agencies | $ | 4,700 |
| | $ | 517 |
| | $ | 4,183 |
| | $ | — |
| Mortgage-backed securities | 1,290,500 |
| | — |
| | 1,288,276 |
| | 2,224 |
| Obligations of states and political subdivisions | 536,144 |
| | — |
| | 536,144 |
| | — |
| Equity securities | 14,520 |
| | — |
| | 14,520 |
| | — |
| Derivative financial instruments(1) | 3,222 |
| | — |
| | 3,222 |
| | — |
| Interest rate lock commitments | 2,790 |
| | — |
| | — |
| | 2,790 |
| Forward commitments | 2,546 |
| | — |
| | 2,546 |
| | — |
| Total assets at fair value | $ | 1,854,422 |
| | $ | 517 |
| | $ | 1,848,891 |
| | $ | 5,014 |
| Liabilities | | | | | | | | Derivative financial instruments(2) | $ | 7,027 |
| | $ | — |
| | $ | 7,027 |
| | $ | — |
| Forward commitments | 266 |
| | — |
| | 266 |
| | — |
| Total liabilities at fair value | $ | 7,293 |
| | $ | — |
| | $ | 7,293 |
| | $ | — |
| | (1) Includes embedded derivatives, back-to-back loan swaps and cash flow hedges | (2) Includes cash flow hedges, fair value hedges, back-to-back loan swaps, embedded conversion options and free standing derivative instruments |
|
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 December 31, 2017 | | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | (Gains)/Losses | Collateral dependent impaired loans: | | | | | | | | | | Commercial | $ | 3,212 |
| | $ | — |
| | $ | — |
| | $ | 3,212 |
| | $ | 1,119 |
| Commercial real estate | 9,480 |
| | — |
| | — |
| | 9,480 |
| | 322 |
| Agricultural and agricultural real estate | 8,406 |
| | — |
| | — |
| | 8,406 |
| | 2,028 |
| Residential real estate | 1,137 |
| | — |
| | — |
| | 1,137 |
| | — |
| Consumer | 1,234 |
| | — |
| | — |
| | 1,234 |
| | — |
| Total collateral dependent impaired loans | $ | 23,469 |
| | $ | — |
| | $ | — |
| | $ | 23,469 |
| | $ | 3,469 |
| Loans held for sale | $ | 44,560 |
| | $ | — |
| | $ | 44,560 |
| | $ | — |
| | $ | 190 |
| Other real estate owned | $ | 10,777 |
| | $ | — |
| | $ | — |
| | $ | 10,777 |
| | $ | 737 |
| Premises, furniture and equipment held for sale | $ | 1,977 |
| | $ | — |
| | $ | — |
| | $ | 1,977 |
| | $ | 192 |
| Commercial servicing rights | $ | 291 |
| | $ | — |
| | $ | — |
| | $ | 291 |
| | $ | (21 | ) |
| | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2016 | | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | (Gains)/Losses | Collateral dependent impaired loans: | | | | | | | | | | Commercial | $ | 1,683 |
| | $ | — |
| | $ | — |
| | $ | 1,683 |
| | $ | 41 |
| Commercial real estate | 3,026 |
| | — |
| | — |
| | 3,026 |
| | 527 |
| Agricultural and agricultural real estate | 1,955 |
| | — |
| | — |
| | 1,955 |
| | — |
| Residential real estate | 3,565 |
| | — |
| | — |
| | 3,565 |
| | 85 |
| Consumer | 1,193 |
| | — |
| | — |
| | 1,193 |
| | — |
| Total collateral dependent impaired loans | $ | 11,422 |
| | $ | — |
| | $ | — |
| | $ | 11,422 |
| | $ | 653 |
| Loans held for sale | $ | 61,261 |
| | $ | — |
| | $ | 61,261 |
| | $ | — |
| | $ | (640 | ) | Other real estate owned | $ | 9,744 |
| | $ | — |
| | $ | — |
| | $ | 9,744 |
| | $ | 1,341 |
| Premises, furniture and equipment held for sale | $ | 414 |
| | $ | — |
| | $ | — |
| | $ | 414 |
| | $ | 35 |
| Commercial servicing rights | $ | 326 |
| | $ | — |
| | $ | — |
| | $ | 326 |
| | $ | 33 |
|
|
Summary of Changes in Fair Value of Level 3 Assets Measured at Fair Value on Recurring Basis |
The changes in fair value of the Z-TRANCHE, a Level 3 asset that is measured at fair value on a recurring basis, are summarized in the following table, in thousands: | | | | | | | | | | For the Years Ended | | December 31, 2017 | | December 31, 2016 | Balance at January 1, | $ | 2,224 |
| | $ | 2,039 |
| Total gains (losses), net: | | |
|
| Included in earnings | 2,810 |
| | — |
| Included in other comprehensive income | (2,166 | ) | | 185 |
| Purchases, issuances, sales and settlements: | | |
| Purchases | — |
| | — |
| Sales | (2,868 | ) | | — |
| Settlements | — |
| | — |
| Balance at period end, | $ | — |
| | $ | 2,224 |
|
The changes in fair value of the corporate debt securities, Level 3 assets that are measured on a recurring basis, are summarized in the following table, in thousands: | | | | | | | | | | For the Years Ended | | December 31, 2017 | | December 31, 2016 | Balance at January 1, | $ | — |
| | $ | 846 |
| Total gains (losses), net: | | | | Included in earnings | — |
| | 56 |
| Included in other comprehensive income | — |
| | (106 | ) | Purchases, issuances, sales and settlements: | | | | Purchases | — |
| | — |
| Acquired | — |
| | — |
| Sales | — |
| | (796 | ) | Settlements | — |
| | — |
| Balance at period end, | $ | — |
| | $ | — |
|
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 Years Ended | | December 31, 2017 | | December 31, 2016 | Balance at January 1, | $ | 2,790 |
| | $ | 3,168 |
| Total gains (losses), net, included in earnings | (1,479 | ) | | (1,564 | ) | Issuances | 1,875 |
| | 5,373 |
| Settlements | (1,448 | ) | | (4,187 | ) | Balance at period end, | $ | 1,738 |
| | $ | 2,790 |
|
|
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, obtaining deposits or fee generating activities. Many of the estimates presented below 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 December 31, 2017 | | 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 | $ | 196,003 |
| | $ | 196,003 |
| | $ | 196,003 |
| | $ | — |
| | $ | — |
| Time deposits in other financial institutions | 9,820 |
| | 9,820 |
| | 9,820 |
| | — |
| | — |
| Securities: | | | | | | | | | | Available for sale | 2,216,753 |
| | 2,216,753 |
| | 3,484 |
| | 2,213,269 |
| | — |
| Held to maturity | 253,550 |
| | 265,494 |
| | — |
| | 265,494 |
| | — |
| Other investments | 22,563 |
| | 22,563 |
| | — |
| | 22,563 |
| | — |
| Loans held for sale | 44,560 |
| | 44,560 |
| | — |
| | 44,560 |
| | — |
| Loans, net: | | | | | | | | | | Commercial | 1,628,043 |
| | 1,617,956 |
| | — |
| | 1,614,744 |
| | 3,212 |
| Commercial real estate | 3,140,427 |
| | 3,132,542 |
| | — |
| | 3,123,062 |
| | 9,480 |
| Agricultural and agricultural real estate | 508,075 |
| | 508,987 |
| | — |
| | 500,581 |
| | 8,406 |
| Residential real estate | 620,939 |
| | 614,667 |
| | — |
| | 613,530 |
| | 1,137 |
| Consumer | 438,294 |
| | 440,820 |
| | — |
| | 439,586 |
| | 1,234 |
| Total Loans, net | 6,335,778 |
| | 6,314,972 |
| | — |
| | 6,291,503 |
| | 23,469 |
| Cash surrender value on life insurance | 142,818 |
| | 142,818 |
| | — |
| | 142,818 |
| | — |
| Derivative financial instruments(1) | 3,933 |
| | 3,933 |
| | — |
| | 3,933 |
| | — |
| Interest rate lock commitments | 1,738 |
| | 1,738 |
| | — |
| | — |
| | 1,738 |
| Forward commitments | 80 |
| | 80 |
| | — |
| | 80 |
| | — |
| Financial liabilities: | | | | | | | | | | Deposits | | | | | | | | | | Demand deposits | 2,983,128 |
| | 2,983,128 |
| | — |
| | 2,983,128 |
| | — |
| Savings deposits | 4,240,328 |
| | 4,240,328 |
| | — |
| | 4,240,328 |
| | — |
| Time deposits | 923,453 |
| | 923,453 |
| | — |
| | 923,453 |
| | — |
| Short term borrowings | 324,691 |
| | 324,691 |
| | — |
| | 324,691 |
| | — |
| Other borrowings | 285,011 |
| | 285,609 |
| | — |
| | 285,609 |
| | — |
| Derivative financial instruments(2) | 5,167 |
| | 5,167 |
| | — |
| | 5,167 |
| | — |
| Forward commitments | 232 |
| | 232 |
| | — |
| | 232 |
| | — |
| | (1) Includes cash flow hedges, embedded derivatives and back-to-back loan swaps | (2) Includes cash flow hedges, fair value hedges, back-to-back loan swaps, embedded conversion options and free standing derivative instruments |
| | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2016 | | 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 | $ | 158,724 |
| | $ | 158,724 |
| | $ | 158,724 |
| | $ | — |
| | $ | — |
| Time deposits in other financial institutions | 2,105 |
| | 2,105 |
| | 2,105 |
| | — |
| | — |
| Securities: | | | | | | | | | | Available for sale | 1,845,864 |
| | 1,845,864 |
| | 517 |
| | 1,843,123 |
| | 2,224 |
| Held to maturity | 263,662 |
| | 274,799 |
| | — |
| | 274,799 |
| | — |
| Other investments | 21,560 |
| | 21,560 |
| | — |
| | 21,365 |
| | 195 |
| Loans held for sale | 61,261 |
| | 61,261 |
| | — |
| | 61,261 |
| | — |
| Loans, net: | | | | | | | | | | Commercial | 1,272,089 |
| | 1,258,754 |
| | — |
| | 1,257,071 |
| | 1,683 |
| Commercial real estate | 2,513,446 |
| | 2,506,858 |
| | — |
| | 2,503,832 |
| | 3,026 |
| Agricultural and agricultural real estate | 485,820 |
| | 487,001 |
| | — |
| | 485,046 |
| | 1,955 |
| Residential real estate | 614,207 |
| | 604,233 |
| | — |
| | 600,668 |
| | 3,565 |
| Consumer | 411,833 |
| | 414,266 |
| | — |
| | 413,073 |
| | 1,193 |
| Total Loans, net | 5,297,395 |
| | 5,271,112 |
| | — |
| | 5,259,690 |
| | 11,422 |
| Cash surrender value on life insurance | 112,615 |
| | 112,615 |
| | — |
| | 112,615 |
| | — |
| Derivative financial instruments(1) | 3,222 |
| | 3,222 |
| | — |
| | 3,222 |
| | — |
| Interest rate lock commitments | 2,790 |
| | 2,790 |
| | — |
| | — |
| | 2,790 |
| Forward commitments | 2,546 |
| | 2,546 |
| | — |
| | 2,546 |
| | — |
| Financial liabilities: | | | | | | | | | | Deposits | | | | | | | | | | Demand deposits | 2,202,036 |
| | 2,202,036 |
| | — |
| | 2,202,036 |
| | — |
| Savings deposits | 3,788,089 |
| | 3,788,089 |
| | — |
| | 3,788,089 |
| | — |
| Time deposits | 857,286 |
| | 857,286 |
| | — |
| | 857,286 |
| | — |
| Short term borrowings | 306,459 |
| | 306,459 |
| | — |
| | 306,459 |
| | — |
| Other borrowings | 288,534 |
| | 288,534 |
| | — |
| | 288,534 |
| | — |
| Derivative financial instruments(2) | 7,027 |
| | 7,027 |
| | — |
| | 7,027 |
| | — |
| Forward commitments | 266 |
| | 266 |
| | — |
| | 266 |
| | — |
| | (1) Includes cash flow hedges, embedded derivatives and back-to-back loan swaps | (2) Includes cash flow hedges, fair value hedges, back-to-back loan swaps, embedded conversion options and free standing derivative instruments |
|