STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Heartland may grant, through its Nominating, Compensation and Corporate Governance 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 2020 Long-Term Incentive Plan (the "Plan"). The Plan was approved by stockholders in May 2020 and replaces the 2012 Long-Term Incentive Plan. The Plan increased the number of shares of common stock authorized for issuance to 1,460,000 and made certain other changes to the Plan. At December 31, 2020, 1,409,320 shares of common stock were reserved for future issuance under awards that may be granted under the Plan to employees and directors of, and service providers to, Heartland or its subsidiaries.

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. Forfeitures are accounted for as they occur.

Heartland's income tax expense included $93,000 of tax expense for the year ended December 31, 2020, compared to a tax benefit of $266,000 for the year ended December 31, 2019, related to the vesting and forfeiture of equity-based awards.

Restricted Stock Units

The Plan permits the Compensation Committee to grant restricted stock units ("RSUs"). In the first quarter of 2020, the Compensation Committee granted time-based RSUs with respect to 114,944 shares of common stock, and in the first quarter of 2019, the Compensation Committee granted time-based RSUs with respect to 90,073 shares of common stock to selected officers and employees. The time-based RSUs, which represent the right, without payment, to receive shares of Heartland common stock at a specified date in the future. The time-based RSUs granted in 2020 and 2019 vest over three years in equal installments on March 6 of each of the three years following the year of the grant. The time-based RSUs may also vest upon death or disability, upon a change in control or upon a "qualified retirement" (as defined in the RSU agreement). The retiree is required to sign a non-solicitation agreement as a condition to vesting.

The Compensation Committee granted three-year performance-based RSUs with respect to 50,787 shares and 34,848 shares of common stock in the first quarter of 2020 and 2019, respectively. These performance-based RSUs will be earned based upon satisfaction of performance targets for the three-year performance period ended December 31, 2022, and December 31, 2021. These performance-based RSUs or a portion thereof may vest in 2023 and 2022, respectively, after measurement of performance in relation to the performance targets.

The three-year performance-based RSUs vest to the extent that they are earned upon death or disability or upon a "qualified retirement" after measurement of performance. Upon a change in control, performance-based RSUs shall become vested at 100% of target if the RSU obligations are not assumed by the successor company. If the successor company does assume the RSU obligations, the 2020 and 2019 performance-based RSUs will vest at 100% of target upon a "Termination of Service" within the period beginning six months prior to a change in control and ending 24 months after a change in control.

All of Heartland's RSUs will be settled in common stock upon vesting and are not entitled to dividends until vested.

The Compensation Committee may grant RSUs under the Plan to directors as part of their compensation, to new management level employees at the commencement of employment, and to other employees as incentives. During the years ended December 31, 2020, 2019, and 2018, 66,855, 37,544 and 36,462 RSUs, respectively, were granted to directors and new employees.

A summary of the status of RSUs as of December 31, 2020, 2019 and 2018, and changes during the years ended December 31, 2020, 2019, and 2018, follows:


	2020			2019			2018
	Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1	254,383	$	46.76	266,995	$	43.89	301,578	$	34.74
Granted	232,586	32.06		162,465	45.09		123,711	55.13
Vested	(119,916)	44.47		(148,158)	39.27		(127,744)	32.73
Forfeited	(18,778)	46.10		(26,919)	49.20		(30,550)	45.69
Outstanding at December 31	348,275	$	38.22	254,383	$	46.76	266,995	$	43.89

Total compensation costs recorded for RSUs were $7.2 million, $5.8 million and $4.4 million, for 2020, 2019 and 2018, respectively. As of December 31, 2020, there were $5.8 million of total unrecognized compensation costs related to the Plan for RSUs which are expected to be recognized through 2023.

Employee Stock Purchase Plan

Heartland maintains an employee stock purchase plan (the "ESPP"), which was adopted in May 2016 and replaced the 2006 ESPP, that permits all eligible employees to purchase shares of Heartland common stock at a discounted price as determined by the Compensation Committee. Under ASC Topic 718, compensation expense related to the ESPP of $186,000 was recorded in 2020, $222,000 was recorded in 2019, and $91,000 was recorded in 2018.

A maximum of 500,000 shares is available for purchase under the ESPP, and as of December 31, 2020, 380,342 shares remain available for purchase. Beginning with the 2020 plan year, the Compensation Committee authorized Heartland to make ESPP purchases semi-annually, and the purchases are to be made as soon as practicable on or after June 30 and December 31. For employee deferrals made in the 2020 plan year, shares purchased in 2020 totaled 43,207. On January 2, 2020, 32,179 shares were purchased under the ESPP for the employee deferrals made during the plan year ended December 31, 2019. On January 4, 2019, 32,331 shares were purchased under the ESPP for employee deferrals made during the plan year ended December 31, 2018.