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Section 1: S-4/A (S-4/A)

Document



As filed with the Securities and Exchange Commission on April 9, 2018          Registration No. 333-223763

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
AMENDMENT NO. 1 TO FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HEARTLAND FINANCIAL USA, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
6022
(Primary Standard Industrial Classification Code Number
42-1405748
(I.R.S. Employer Identification No.)
 
1398 Central Avenue
Dubuque, Iowa 52001
(563) 589-2100
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
Bryan R. McKeag
Executive Vice President and Chief Financial Officer
Heartland Financial USA, Inc.
1398 Central Avenue
Dubuque, Iowa 52001
(563) 589-2100
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Jay L. Swanson
Cam C. Hoang
Dorsey & Whitney LLP
50 South Sixth Street
Minneapolis, Minnesota 55402
(612) 340-2600
Geoffrey S. Kay
William T. Teten
Fenimore, Kay, Harrison & Ford, LLP
812 San Antonio Street
Suite 600
Austin, Texas 78701
(512) 583-5909

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "small reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x         Accelerated filer ¨          Non-accelerated filer ¨ (do not check if smaller reporting company)
Smaller reporting company ¨     Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ¨      Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ¨

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.



The information in this proxy statement/prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 9, 2018
FIRST BANK LUBBOCK BANCSHARES, INC.
PROPOSED MERGER-YOUR VOTE IS VERY IMPORTANT

Dear Shareholder of First Bank Lubbock Bancshares, Inc.:
We are happy to advise you that the board of directors of First Bank Lubbock Bancshares, Inc. ("FBLB") has unanimously approved the merger (the "merger") of FBLB into Heartland Financial USA, Inc. ("Heartland") in accordance with an Agreement and Plan of Merger dated as of December 12, 2017 (the "merger agreement"). Before we can complete the merger, we must obtain the approval of the FBLB shareholders. We are sending you this proxy statement/prospectus to ask you to vote in favor of approval and adoption of the merger agreement. The FBLB board of directors unanimously recommends that you vote "FOR" approval and adoption of the merger agreement.
In the merger, FBLB will merge with and into Heartland, and FBLB shareholders will receive merger consideration of 3.0934 shares of Heartland common stock and approximately $4.96 in cash for each share of FBLB common stock, subject to certain adjustments described below.
The exchange ratio for the stock component of the merger consideration is fixed and will not be adjusted to reflect changes in the price of Heartland common stock occurring prior to the completion of the merger. However, if the price of Heartland common stock drops below certain levels, as described under the section titled "The Merger Agreement—Termination" in this proxy statement/prospectus, FBLB may exercise a "walk-away" right to terminate the merger agreement unless Heartland increases the exchange ratio or cash component of the merger consideration by exercising a "top-up" option.
The stock component of the merger consideration will be subject to a tax holdback of 0.3586 shares of Heartland common stock per share of FBLB common stock (the "tax holdback") if FBLB has not received certain rulings from the Internal Revenue Service prior to the effective time of the merger. The amount of Heartland common stock in the tax holdback may not be paid, or only partially paid, to FBLB shareholders if Heartland incurs a tax loss because FBLB failed to qualify as an "S corporation" or any of FBLB's subsidiaries failed to qualify as a "qualified subchapter S subsidiary" (within the meaning of the Internal Revenue Code of 1986, as amended, or comparable provisions of state, local or other tax law) prior to the effective time of the merger. A claim against the tax holdback may reduce the number of shares of Heartland stock that will be issued in the merger by up to 0.3586 shares for each share of FBLB common stock.

Pursuant to the merger agreement, the aggregate amount of the cash component of the merger consideration paid to FBLB shareholders will be $17,505,724, less amounts payable under award agreements for FBLB stock appreciation rights ("SARs") granted to executive officers and other employees of FirstBank & Trust Company, FBLB's wholly owned banking subsidiary. Based on the value of the merger consideration as of April 6, 2018 (the last practicable trading date prior to the date of this proxy statement/prospectus), the aggregate amount of such SAR payments is anticipated to be approximately $12.1 million.

In addition, the aggregate cash component of the merger consideration is subject to certain adjustments. If FBLB's Adjusted Tangible Common Equity (as defined on page 36) is less than $83.0 million on the last business day of the month immediately preceding the month in which the closing date of the merger occurs (the "determination date"), then the cash component of the merger consideration will be reduced by the amount by which FBLB’s Adjusted Tangible Common Equity is less than $83.0 million. If FBLB's Adjusted Tangible Common Equity is greater than $85.0 million on the determination date, then the cash component of the merger consideration will be increased by the amount, up to $5.0 million, by which FBLB's Adjusted Tangible Common Equity is greater than $85.0 million.

Based on the closing price of a share of Heartland common stock as of December 11, 2017 (the last trading day before the merger agreement was executed) of $50.15, the aggregate merger consideration payable to FBLB shareholders was valued at approximately $174.0 million, or $160.65 for each share of FBLB common stock. Based on the price of a share of Heartland common stock as of April 6, 2018 (the last practicable trading date before the date of this proxy statement/prospectus) of $52.05, the aggregate merger consideration payable to FBLB shareholders was valued at approximately $179.8 million, or



$165.97 for each share of FBLB common stock. These valuations are based on the assumptions that no adjustments will be made to the cash component of the aggregate merger consideration based on FBLB's Adjusted Tangible Common Equity and no claims will be made by Heartland against the tax holdback. Heartland common stock is listed on the Nasdaq Global Select Market under the symbol "HTLF." Because the market price for Heartland common stock and the Adjusted Tangible Common Equity of FBLB will fluctuate prior to the effective date of merger, the value of the actual consideration you will receive may be different from the amounts described above.

To complete the merger, we must receive regulatory approvals, and the holders of two-thirds of the issued and outstanding shares of FBLB common stock entitled to vote must approve and adopt the merger agreement. FBLB will hold a special meeting of shareholders to vote on this merger proposal. Your vote is important. Whether or not you plan to attend the special meeting, please submit your proxy with voting instructions for your shares of FBLB common stock in accordance with the instructions contained in this proxy statement/prospectus. If you mark "ABSTAIN" on your proxy card or do not vote your shares of FBLB common stock, it will have the same effect as voting against the merger.
We urge you to read this proxy statement/prospectus carefully before voting, including the section titled "Risk Factors" beginning on page 13. This proxy statement/prospectus gives you detailed information about the merger and includes a copy of the merger agreement as Appendix A.
Sincerely,
 
/s/ Barry Orr
Barry Orr
Chairman, President and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
These securities are not savings accounts, deposits or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.
The date of this proxy statement/prospectus is April , 2018, and it is first being mailed to FBLB shareholders on or about April , 2018.





FIRST BANK LUBBOCK BANCSHARES, INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 2018

First Bank Lubbock Bancshares, Inc. ("FBLB") will hold a special meeting (the "special meeting") of its shareholders at the FirstBank & Trust Company Operations Center located at 9826 Slide Road, Lubbock,Texas 79424, at 4:00 p.m. local time on May 15, 2018, to consider and vote upon the following matters:
a proposal to approve and adopt the merger agreement, dated as of December 12, 2017 (the "merger agreement"), between Heartland Financial USA, Inc. ("Heartland") and FBLB, as it may be amended from time to time, pursuant to which FBLB will merge (the "merger") with and into Heartland; and
a proposal to adjourn the FBLB special meeting, if necessary or appropriate.
Upon completion of the merger, each share of FBLB common stock will be converted into the right to receive shares of Heartland common stock and cash. This proxy statement/prospectus contains a detailed discussion of the merger and certain related transactions, and a copy of the merger agreement is included as Appendix A to this proxy statement/prospectus.
The board of directors has fixed the close of business on April 2, 2018 as the record date for the special meeting. Holders of record of FBLB common stock at such time are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting.
The FBLB board of directors has unanimously approved the merger agreement and unanimously recommends that holders of FBLB common stock vote "FOR" approval and adoption of the merger agreement.
FBLB shareholders who do not vote in favor of the merger agreement and who strictly comply with Chapter 10, Subchapter H of Title 1 of the Texas Business Organizations Code have the right to assert dissenters’ rights under that statute. For a description of the procedures that must be followed to make written demand for dissenters’ rights, see the copy of the statutes which are attached as Appendix B to this proxy statement/prospectus. In addition, a summary of the procedures to be followed in order to obtain payment for dissenting shares is set forth under the section titled "Dissenters' Rights of FBLB Shareholders" in this proxy statement/prospectus.
Whether or not you plan to attend the special meeting, please submit your proxy with voting instructions for your shares of FBLB common stock. To submit your proxy by mail, please complete, sign, date and return the accompanying proxy form in the enclosed self-addressed, stamped envelope. Any holder of FBLB common stock present at the special meeting may vote in person instead of by proxy, and a proxy may be revoked in writing at any time before the special meeting. The presence of a shareholder at the special meeting will not automatically revoke that shareholder’s proxy. A shareholder may revoke a proxy at any time prior to the voting of such proxy on any matter (without, however, affecting any vote taken prior to such revocation) by (i) filing with the Corporate Secretary of FBLB a written notice of revocation, (ii) delivering to FBLB a duly executed proxy bearing a later date, or (iii) attending the meeting and voting in person.
Sincerely,
 
/s/ Barry Orr
Barry Orr
Chairman, President and Chief Executive Officer

Your vote is important. Please complete, sign, date and return your proxy form,
whether or not you plan to attend the special meeting




REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and financial information about Heartland Financial USA, Inc. ("Heartland") from documents that are not included in or delivered with this proxy statement/prospectus. You can obtain documents incorporated by reference in this proxy statement/prospectus and other filings of Heartland by requesting them in writing or by telephone from Heartland at the following address:
Heartland Financial USA, Inc.
1398 Central Avenue
P.O. Box 778
Dubuque, Iowa 52004-0778
Attention: Michael J. Coyle, Corporate Secretary
(Telephone (563) 589-2100)

You will not be charged for any of these documents that you request. Shareholders of First Bank Lubbock Bancshares, Inc. ("FBLB") requesting documents should do so by May 5, 2018 in order to receive them before the special meeting.
See the section titled "Where You Can Find More Information" beginning on page 55.
You should rely only on the information contained or incorporated by reference into this proxy statement/prospectus in determining whether to vote in favor of the proposed merger of FBLB with and into Heartland. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated April , 2018. You should not assume that the information contained in, or incorporated by reference into, this proxy statement/prospectus is accurate as of any date other than that date. Neither the mailing of this proxy statement/prospectus to FBLB shareholders nor the issuance by Heartland of common stock in connection with the merger of Heartland and FBLB will create any implication to the contrary.

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TABLE OF CONTENTS
 
Page
REFERENCES TO ADDITIONAL INFORMATION
(ii)
TABLE OF CONTENTS
(iii)
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
1
SUMMARY
4
HEARTLAND SELECTED CONSOLIDATED FINANCIAL DATA
11
RISK FACTORS
13
FORWARD-LOOKING STATEMENTS
15
THE FBLB SPECIAL MEETING
16
BACKGROUND AND REASONS FOR THE MERGER
18
REGULATORY MATTERS AND TAX CONSEQUENCES AND ACCOUNTING TREATMENT OF THE MERGER
29
DISSENTERS' RIGHTS OF FBLB SHAREHOLDERS
33
THE MERGER AGREEMENT
35
INFORMATION ABOUT FBLB
45
INFORMATION ABOUT HEARTLAND
47
COMPARISON OF RIGHTS OF HOLDERS OF HEARTLAND COMMON STOCK AND FBLB COMMON STOCK
48
CERTAIN OPINIONS
55
EXPERTS
55
WHERE YOU CAN FIND MORE INFORMATION
55
APPENDIX A - AGREEMENT AND PLAN OF MERGER
A-1
APPENDIX B - TEXAS DISSENTERS’ RIGHTS STATUTES
B-1
APPENDIX C - FAIRNESS OPINION OF FINANCIAL ADVISOR TO FBLB
C-1



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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following sections include questions and answers that address some commonly asked questions about the merger and the special meeting of FBLB shareholders and summary information regarding the merger agreement and the merger. They may not include all the information that may be important to you. You should read the entire document carefully, including the Appendices, and any additional documents incorporated by reference into this proxy statement/prospectus to fully understand the merger agreement and the transactions contemplated thereby, including the merger, the issuance of Heartland common stock in connection with the merger, the proposals to the considered at the special meeting, and the voting procedures for the special meeting.

Q:
What is the merger?
A:
Heartland and FBLB entered into the merger agreement on December 12, 2017. Under the merger agreement, FBLB will merge with and into Heartland, with Heartland continuing as the surviving corporation. A copy of the merger agreement is attached as Appendix A to this proxy statement/prospectus. The merger cannot be completed unless, among other things, the parties receive all necessary regulatory approvals to consummate the merger, and the holders of at least two-thirds of the issued and outstanding shares of FBLB common stock vote "FOR" the merger proposal at the special meeting.
Q:
Why am I receiving this proxy statement/prospectus?
A:
Heartland and FBLB are delivering this document to you for two purposes. First, FBLB has called a special meeting of its shareholders to consider the merger proposal, among other things. This document serves as proxy statement for the meeting and describes the proposals to be presented at the meeting. It also constitutes a notice with respect to the meeting. In addition, this document is a prospectus that is being delivered to FBLB shareholders because Heartland is offering shares of its common stock to FBLB shareholders in connection with the merger. This proxy statement/prospectus contains important information about the merger, the proposals being voted on at the special meeting and an investment in Heartland common stock. You should read it carefully and in its entirety. The enclosed materials allow you to have your shares of common stock voted by proxy without attending the special meeting. Your vote is important, and FBLB encourages you to submit your proxy as soon as possible.
Q:
When and where are the special meeting?
A:
The special meeting will be held at the FirstBank & Trust Operations Center, located at 9826 Slide Road, Lubbock, Texas 79424 on Tuesday, May 15, 2018 at 4:00 p.m., local time.
Q:
What are FBLB shareholders being asked to vote on at the special meeting?
A:
FBLB is soliciting proxies from its shareholders with respect to the following matters:
A proposal to approve and adopt the merger agreement, as it may be amended from time to time; and
A proposal to adjourn the FBLB special meeting, if necessary or appropriate.

Q:
What will FBLB shareholders be entitled to receive in the merger?

A:
If the merger is completed, FBLB shareholders will be entitled to receive cash and Heartland common stock in exchange for their shares of FBLB common stock. For a summary of the merger consideration, see the section titled "Summary—What You Will Receive In The Merger," beginning on page 4.
Q:
What is the value of the merger consideration?
A:
The value of the merger consideration will fluctuate between the date of this proxy statement/prospectus and the completion of the merger based on the value of Heartland common stock and certain other potential adjustments. Based on the price of a share of Heartland common stock as of April 6, 2018 (the last practicable trading date before the date of this proxy statement/prospectus) of $52.05, the merger consideration to be received by FBLB shareholders was valued in the aggregate amount of approximately $179.8 million, or $165.97 for each per share of FBLB common stock. This valuation assumes the anticipated cost to cash out employee stock appreciation rights ("SARs") as of April 6, 2018, no adjustments to the cash merger consideration based on FBLB's Adjusted Tangible Common Equity and the

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distribution to FBLB shareholders of all shares of Heartland common stock subject to the tax holdback. Because the market price for Heartland common stock and the Adjusted Tangible Common Equity of FBLB will fluctuate prior to the merger, the value of the actual consideration you will receive may be different from the amounts described above. See the section titled "Summary—What You Will Receive In The Merger" beginning on page 4.
Q:
Who is entitled to vote at the special meeting?
A:
The FBLB board of directors has fixed the close of business on April 2, 2018 as the record date for the special meeting. Accordingly, if you were a record shareholder at that time, you are entitled to notice of and to vote at the special meeting. As of April 2, 2018, there were 1,083,275 shares of FBLB common stock issued and outstanding and held of record by 128 shareholders.
Q:
What constitutes a quorum for the special meeting?
A:
The presence in person or by proxy of holders of at least a majority of the issued and outstanding shares of FBLB common stock entitled to be voted at the special meeting constitutes a quorum for transacting business at the special meeting. All shares of FBLB common stock present in person or represented by proxy, including abstentions, if any, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the special meeting.
Q:
What is the vote required to approve each proposal at the special meeting?
A:
The affirmative vote of not less than two-thirds of the outstanding shares of FBLB common stock is required to approve the merger proposal. If you mark "ABSTAIN" on your proxy card, fail to submit a proxy card or fail to vote in person at the special meeting, it will have the effect of a vote "AGAINST" the proposal.
The affirmative vote of a majority of votes cast on the proposal at the special meeting is required to approve the adjournment proposal. If you mark "ABSTAIN" on your proxy card, fail to submit a proxy card or fail to vote in person at the special meeting, it will have no effect on the proposal.
Q:
How does the FBLB board of directors recommend that I vote at the special meeting?
A:
The FBLB board of directors unanimously recommends that you vote "FOR" the merger proposal and "FOR" the adjournment proposal. For a discussion of the factors considered by the FBLB board of directors in reaching its decision to approve the merger agreement, see the section titled "Background and Reasons for the Merger—FBLB's Reasons for the Merger."
Q:
What do I need to do now?
A:
After you have carefully read this proxy statement/prospectus and have decided how you wish to vote your shares, please complete, sign, date and mail your proxy card in the enclosed postage-paid return envelope as soon as possible.
Q:
How do I vote if I own shares through the FBLB Employee Stock Ownership with 401(k) Provisions Plan?
A:
If you hold FBLB common stock beneficially through the Employee Stock Ownership with 401(k) Provisions Plan (the "KSOP"), you will receive separate voting instructions from the trustees who administer the KSOP. If you follow those instructions, you will be able to direct the trustees with respect to the manner in which you would like your shares voted on the merger proposal.
Q:
Do I have dissenters' rights?
A:
Yes. FBLB shareholders may exercise dissenters' rights in connection with the merger. For further information, see "Summary—You Have Dissenters' Rights Under the TBOC" and "Dissenters' Rights of FBLB Shareholders," which discussions are qualified by the full text of the provisions of the Texas Business Organizations Code (the "TBOC") relating to rights of dissent set forth in Appendix B to this proxy statement/prospectus.

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Q:
Why is my vote important?
A:
If you do not vote, it will be more difficult for FBLB to obtain the necessary quorum to hold the special meeting and to obtain approval of the proposals to be voted upon at the special meeting. In addition, your failure to vote will have the effect of a vote "AGAINST" the merger proposal. The FBLB board of directors unanimously recommends that you, as a FBLB shareholder, vote "FOR" the merger proposal.
Q:
Can I attend the special meeting and vote my shares in person?
A:
Yes. All shareholders of FBLB are invited to attend and vote at the special meeting, and voting by proxy will not affect your ability to attend the meeting and vote in person. However, voting by proxy will enable us to ensure the presence of a quorum to conduct business at the special meeting in the event that you intend, but are unable, to attend the meeting. Accordingly, FBLB encourages you to vote by proxy, even if you expect to attend the meeting in person.
Q:
Can I change my vote?
A:
Yes. You may change your vote or revoke any proxy at any time before it is voted by (1) sending a written notice to the Corporate Secretary of FBLB, stating that you are revoking your proxy; (2) completing and submitting a new proxy form, which form is actually received by the Corporate Secretary prior to the vote at the special meeting; or (3) attending the special meeting and voting in person (although your presence at the meeting, without voting, will not automatically revoke your proxy).
Q:
Should I send in my FBLB stock certificates now?
A:
No. Please do not send in your FBLB stock certificates at this time or with your proxy. After the merger is completed, Heartland’s exchange agent will send you instructions for exchanging FBLB stock certificates for the merger consideration.
Q:
When do you expect to complete the merger?
A:
Heartland and FBLB currently expect to complete the merger in the second quarter of 2018. However, neither Heartland nor FBLB can assure you of when or if the merger will be completed. Before the merger is completed, FBLB must obtain the approval of its shareholders for the merger proposal, necessary regulatory approvals must be obtained and certain other closing conditions must be satisfied.
Q:
Where can I find information about Heartland and FBLB?
A:
You can find more information about Heartland in the section titled "Information About Heartland" and from the various sources described under "Where You Can Find More Information." You can find more information about FBLB in the section titled "Information About FBLB."
Q:
Whom should I call with questions?
A:
If you have any questions about the merger, the special meeting or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus or need help voting your shares of FBLB common stock, please contact:
Barry Orr
Chairman, President and Chief Executive Officer
First Bank Lubbock Bancshares, Inc.
9816 Slide Road
Lubbock, Texas 79424
(806) 788-0800




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SUMMARY
This summary highlights selected information from this proxy statement/prospectus. It does not contain all of the information that may be important to you. We urge you to read carefully this entire document and the other documents to which we refer in order to understand fully the merger and any related transactions. In addition, important business and financial information about Heartland is incorporated by reference in this proxy statement/prospectus. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions in the section titled "Where You Can Find More Information" beginning on page 55. Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.
FBLB and Heartland (Pages 45 to 48).
FBLB. FBLB is a bank holding company headquartered in Lubbock, Texas. Through its wholly-owned banking subsidiary, FirstBank & Trust Company, a Texas state non‑member bank ("FB&T"), FBLB provides a broad range of financial products and services tailored to meet the needs of small to medium-sized businesses, professionals and retail customers who live or do business in its markets. FB&T operates from eight locations in West Texas, with four banking offices in Lubbock, Texas and one banking office in each of Tahoka, Wilson, Colorado City and Snyder, Texas. Through its subsidiary, PrimeWest Mortgage Corporation ("PrimeWest"), FB&T also engages in mortgage lending in Lubbock, the Permian Basin and across parts of north Texas. As of December 31, 2017, FBLB had approximately $930.1 million in total assets, total loans held to maturity of $669.3 million, total deposits of $821.7 million and shareholders’ equity of $89.4 million.
FBLB's principal executive office is located at 9816 Slide Road, Lubbock, Texas 79424, and its telephone number is (806) 788-2800.
Heartland. Heartland is a publicly-held, multi-bank bank holding company headquartered in Dubuque, Iowa with 10 bank subsidiaries in the States of Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Missouri, Kansas, Texas and California. Together, Heartland’s banking subsidiaries operate a total of 118 banking locations. Heartland also has an active consumer finance subsidiary with offices in Iowa, Illinois and Wisconsin. At December 31, 2017, Heartland had approximately $9.81 billion of total assets, total loans held to maturity of $6.39 billion, total deposits of $8.15 billion and common stockholders’ equity of $990.5 million.
Heartland was formed as an Iowa corporation in 1981 and reincorporated in Delaware in 1993. Heartland’s principal executive office is located at 1398 Central Avenue, Dubuque, Iowa 52001, and its telephone number is (563) 589‑2100.
FBLB Will be Merged into Heartland (Page 35).
We encourage you to read the merger agreement, which is attached as Appendix A to this proxy statement/prospectus. The merger agreement provides that FBLB will be merged with and into Heartland. Heartland will survive the merger, and the separate corporate existence of FBLB will cease. At the effective time of the merger, FB&T will become a wholly-owned subsidiary of Heartland, and will continue to operate under its present brand and management team as Heartland’s 11th state-chartered bank.
What You Will Receive in the Merger (Pages 35 to 37).
You will receive merger consideration of 3.0934 shares of Heartland common stock and, based on the closing price of a share of Heartland common stock on April 6, 2018 (the last practicable trading date before the date of this proxy statement/prospectus) of $52.05, approximately $4.96 in cash for each share of FBLB common stock you own, subject to certain adjustments described below. The exchange ratio for the stock component of the merger consideration is fixed and will not be adjusted to reflect changes in the price of Heartland common stock occurring prior to the completion of the merger. However, if the price of Heartland common stock drops below certain levels, as described under the section titled "The Merger Agreement—Termination," FBLB may exercise a "walk-away" right to terminate the merger agreement unless Heartland increases the exchange ratio or cash component of the merger consideration by exercising a "top-up" option.
The stock component of the merger consideration is subject to a tax holdback of 0.3586 shares of Heartland common stock for each share of FBLB common stock (or an aggregate of 388,506 shares of Heartland common stock), if FBLB has not received certain rulings from the IRS prior to the effective time of the merger. The amount of the tax holdback may not be paid, or only be partially paid, to FBLB shareholders if Heartland incurs a tax loss because FBLB failed to qualify as an "S corporation" or any of FBLB’s subsidiaries failed to qualify as a "qualified subchapter S subsidiary" (within the meaning of the

4


Code or comparable provisions of state, local or other tax law) prior to the effective time of the merger. A claim against the tax holdback may reduce the shares of Heartland common stock that will be issued in the merger by up to 0.3586 shares for each share of FBLB common stock. To the extent that Heartland or any of its subsidiaries incurs a tax loss based on the circumstances described above, Heartland will be indemnified for any such tax loss. The tax holdback will be the sole source from which Heartland may satisfy any indemnification claim. Any portion of the shares of Heartland common stock subject to the tax holdback not used to compensate Heartland for a tax loss will be released to Barry Orr, as representative of the former holders of shares of FBLB common stock (the "Stockholder Representative"), for the benefit of and for distribution to such former FBLB shareholders. Such shares of Heartland common stock will be released on the earliest of receipt by FBLB of an IRS ruling in form and substance reasonably satisfactory to Heartland or on the applicable release dates, subject in the case of each release date to later distribution upon the resolution of any pending tax claims.
In addition, the aggregate amount of the cash component of the merger consideration is subject to certain adjustments. If FBLB’s Adjusted Tangible Common Equity (as defined on pages 36 and 37) is less than $83.0 million on the last business day of the month immediately preceding the month in which the closing date of the merger occurs (the “determination date”), then the aggregate amount of cash component of the merger consideration will be reduced by the amount by which FBLB’s Adjusted Tangible Common Equity is less than $83.0 million. If FBLB’s Adjusted Tangible Common Equity is greater than $85.0 million on the determination date, then the aggregate amount of cash component of the merger consideration will be increased by the amount, up to $5.0 million, by which FBLB’s Adjusted Tangible Common Equity is greater than $85.0 million.

Based on the closing price of a share of Heartland common stock as of December 11, 2017 (the last trading date before the merger agreement was executed) of $50.15, the aggregate merger consideration to be received by FBLB shareholders was valued at approximately $174.0 million, or $160.65 for each share of FBLB common stock. Based on the price of a share of Heartland common stock as of April 6, 2018 (the last practicable trading date before the date of this proxy statement/prospectus) of $52.05, the aggregate merger consideration to be received by FBLB shareholders was valued at approximately $179.8 million, or $165.97 for each share of FBLB common stock. These valuations are based on the assumption that no adjustments will be made to the cash component of the merger consideration based on FBLB's Adjusted Tangible Common Equity and no claims will be made against the tax holdback. Heartland common stock is listed on the Nasdaq Global Select Market under the symbol "HTLF." Because the market price for Heartland common stock and the Adjusted Tangible Common Equity of FBLB will fluctuate prior to completion of the merger and shares of Heartland common stock subject to the tax holdback may or may not be issued to FBLB shareholders, the value of the actual consideration you will receive may be different from the amounts described above.
FBLB's board of directors unanimously recommends that you vote "FOR" the approval and adoption of the merger agreement (Pages 20 to 22).
The board of directors of FBLB believes that the merger is in the best interests of FBLB and its shareholders and has unanimously approved the merger agreement. For a discussion of the factors considered by the FBLB board of directors in reaching its decision to approve the merger agreement, see the section titled "Background and Reasons for the MergerFBLB's Reasons for the Merger and Recommendation of the FBLB Board."
Opinion of FBLB Financial Advisor (Pages 22 to 27).
In deciding to approve the merger, the board of directors of FBLB considered the opinion of its financial advisor, Stephens Inc. ("Stephens"). On December 12, 2017, the board of directors of FBLB received a written opinion from Stephens to the effect that, as of December 12, 2017 and subject to the assumptions and qualifications set forth in the opinion, the consideration to be received by the disinterested shareholders of FBLB in the merger was fair, from a financial point of view. A copy of this opinion is attached to this proxy statement/prospectus as Appendix C. FBLB shareholders should read the opinion completely and carefully to understand the assumptions made, matters considered and limitations on the review undertaken by Stephens in providing its opinion.
Regulatory Approvals Required for the Merger (Page 29).
The completion of the merger is subject to the receipt of approvals from the FRB and the TDB and the expiration of all required waiting periods, and each of Heartland and FBLB has agreed to cooperate with the other to obtain all regulatory approvals and authorizations required to complete the merger. Although the parties expect to receive all required regulatory approvals in a timely manner, they cannot be certain when or if the approvals will be obtained or, if obtained, whether the approvals will contain terms, conditions or restrictions not currently contemplated that will be detrimental to Heartland or FB&T after the completion of the merger.

5


Conditions That Must Be Satisfied or Waived for the Merger to Occur (Pages 39 to 40).
The parties currently expect to complete the merger in the second quarter of 2018. As more fully described in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include, among others:
The approval of the merger agreement by the requisite vote of the shareholders of FBLB;
The receipt of all required regulatory approvals;
The absence of any government action that would restrain or prohibit the merger, prohibit ownership by Heartland of a material portion of FBLB’s business or assets, or required Heartland to divest any of its or FBLB’s businesses or assets;
The exercise of dissenters’ rights by the holders of not more than 7.5% of the issued and outstanding shares of FBLB common stock;
The effectiveness of the registration statement of which this proxy statement/prospectus is a part;
The truth and correctness of the representations and warranties of each other party to the merger agreement, subject to the materiality standards contained in the merger agreement;
The performance by each party in all material respects of their obligations under the merger agreement;
The receipt by FBLB of a legal opinion from its special counsel that the merger will qualify as a tax-free reorganization under Section 368(a) of the Code;
The employment agreements by and among Heartland, FBLB, FB&T and each of Barry Orr and Greg Garland being in full force and effect; and
The execution and delivery by the directors of FBLB of support agreements in favor of Heartland and FB&T.

The parties cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.
Termination Provisions of the Merger Agreement (Pages 41 to 42).
Heartland or FBLB may terminate the merger agreement:
if the boards of directors of Heartland and FBLB mutually consent to the termination of the merger agreement;
if there is a law or governmental order that prohibits the merger; or
if a governmental entity has denied the approval of the merger on a final and non-appealable basis.

FBLB may also terminate the merger agreement:

if the merger has not been completed by July 31, 2018, unless FBLB has failed to comply fully with its obligations under the merger agreement;
if Heartland has or will have breached any representation, warranty or agreement in any material respect and such breach cannot be or is not cured within 30 days after written notice of the breach is given;
if holders of at least two-thirds of the issued and outstanding shares of FBLB common stock fail to approve the merger at the special meeting; or
FBLB has breached any of the provisions of its covenant not to solicit superior proposals.
FBLB also may terminate the merger agreement pursuant to a "walk-away" right at any time within five business days after the determination date, if both of the following conditions are met:

the volume weighted average closing price of Heartland common stock during the 15 trading days ending on, and including, the trading day immediately preceding the 10th day prior to the determination date (the "Heartland determination date stock price") is below $41.37; and
the ratio of the Heartland determination date stock price to $50.15, the closing price of Heartland common stock on the trading day immediately prior to the date of the merger agreement, is less than the ratio of the average daily closing value of the KBW Nasdaq Regional Banking Index (^KRX) (the "Index") during the same time period used to calculate the Heartland determination date stock price, to the closing value of the Index on the trading day immediately prior to the date of the merger agreement, after subtracting 0.175 from the second ratio.

6


 
However, FBLB's written notice to terminate the merger agreement will have no force and effect if Heartland exercises its "top-up" option and agrees in writing within five business days to increase the original exchange ratio to an amount equal to:
the original exchange ratio (3.0394 shares of Heartland common stock for each share of FBLB common stock), divided by the Heartland determination date stock price, and
multiplied by $41.37.

Alternatively, Heartland may retain the original exchange ratio, and increase cash consideration so that FBLB shareholders are entitled to receive the same value for each share of FBLB common stock as the holder would have received had the original exchange ratio been increased as described above. Because the "walk-away" formula is dependent on the future price of Heartland common stock and the Index, it is not possible to determine what the adjusted merger consideration would be at this time, but, in general, more cash or more shares of Heartland common stock would be issued to take into account the extent to which the Heartland determination date stock price is less than $41.37.

Heartland may terminate the merger agreement:
if the merger has not been completed by July 31, 2018, unless Heartland has failed to comply fully with its obligations under the merger agreement;
if FBLB has or will have breached any representation, warranty or agreement in any material respect and such breach cannot be or is not cured within 30 days after written notice of the breach is given;
if holders of at least two-thirds of the issued and outstanding shares of FBLB common stock fail to approve the merger at the special meeting; or
if any of the mutual conditions or Heartland's conditions to complete the merger become impossible to satisfy (other than through a failure of Heartland to comply with its obligations under the merger agreement).
In certain events of termination, where a party has materially breached its obligations under the merger agreement, and the breach cannot be cured in a 30-day period, or where the merger agreement has not been adopted by the requisite vote of the FBLB shareholders, the breaching party must reimburse the other party for out-of-pocket expenses not to exceed $750,000 in the aggregate.
FBLB must pay a termination fee of $7.4 million in cash if the merger agreement is terminated:
by FBLB because it has determined to enter into an agreement with another acquirer that has submitted a superior proposal;
by Heartland if FBLB has breached its agreement to call a meeting of shareholders and to recommend that its shareholders adopt the merger agreement at such meeting; or
FBLB has breached any of the provisions of its covenant not to solicit superior proposals.
If FBLB is required to pay the termination fee, FBLB will not be obligated to reimburse Heartland for its out-of-pocket expenses.

You have Dissenters' Rights under the Texas Business Organizations Code (Pages 33 to 35).

FBLB shareholders are entitled to dissenters’ rights under Chapter 10, Subchapter H of the TBOC. As a result, if the merger is completed, you are entitled to obtain payment equal to the fair value of your shares of common stock instead of the per share merger consideration. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement. To exercise your dissenters’ rights, you must submit a written objection to the merger to FBLB before the vote is taken on the merger agreement, vote "AGAINST" the proposal to approve the merger agreement, and submit a written demand for appraisal after the vote is taken on the merger agreement. Your failure to follow exactly the procedures specified under the TBOC may result in the loss of your dissenters’ rights. If you hold your shares of common stock through a nominee and you wish to exercise dissenters’ rights, you should consult with your nominee to determine the appropriate procedures for the making of a demand for appraisal by your nominee. In light of the complexity of the TBOC, shareholders who may wish to pursue dissenters’ rights should consult their legal and financial advisors. See the section titled "Dissenters’ Rights of FBLB Shareholders" in this proxy statement/prospectus and the text of Chapter 10, Subchapter H of the TBOC reproduced in its entirety as Appendix B to this proxy statement/prospectus.


7


The Interests of Certain Executive Officers and Directors of FBLB May Be Different from the Interests of FBLB’s Shareholders Generally (Pages 28 to 29).

Certain executive officers and directors of FBLB have interests in the merger that are different from, or in addition to, those of FBLB’s shareholders generally. For a description of these interests, please see “Background and Reasons for the Merger—Certain Interests of FBLB Directors and Executive Officers in the Merger” beginning on page 28. These interests and arrangements may cause the directors and executive officers to view the merger proposal differently than you may view it. FBLB’s board of directors was aware of these interests and considered them, among other matters, when making a decision to approve the merger agreement and recommend that FBLB shareholders approve the merger agreement.
United States Federal Income Tax Consequences (Pages 29 to 32).
The merger is intended to qualify as a reorganization under Section 368(a) of the Code, and the obligations of FBLB to complete the merger are subject to the receipt of the opinion of Fenimore, Kay, Harrison & Ford, LLP, special counsel to FBLB, that the merger will qualify as a "reorganization" under Section 368(a) of the Code. FBLB does not currently intend to waive this opinion condition to its obligation to complete the merger.

Assuming the merger is consummated in accordance with the terms and conditions of the merger agreement, without any waiver of those terms and conditions, and further assuming the accuracy at the effective time of certain assumptions and representations as to factual matters, the merger will qualify as a reorganization under Section 368 of the Code. Accordingly, U.S. Holders (as defined in the section of this proxy statement/prospectus titled "Regulatory Matters and Tax Consequences and Accounting Treatment of the Merger—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 29) will not recognize gain or loss for U.S. federal income tax purposes on the exchange of their FBLB common stock for Heartland common stock (including Heartland common stock, if any, received by U.S. Holders that is subject to the tax holdback). U.S. Holders will recognize gain, but not loss, with respect to cash received in the merger, including any cash received in lieu of fractional shares.

The material federal income tax consequences of the merger to U.S. Holders are described further in the section titled "Regulatory Matters and Tax Consequences and Accounting Treatment of the Merger—Material U.S. Federal Income Tax Consequences of the Merger." The tax consequences of the merger and the tax holdback are complex. FBLB shareholders should consult their own tax advisors regarding the tax consequences of the merger and the tax holdback to them in light of their particular circumstances, including the tax consequences under state, local, foreign and other tax laws.
Comparative Per Share Data
The following table presents comparative historical per share data of Heartland and FBLB and unaudited pro forma per share data that reflect the combination of Heartland and FBLB using the purchase method of accounting:
 
As of and for the Year Ended
December 31, 2017
 
Heartland
 
FBLB(1)
 
Pro Forma
Combined
(1)
 
Equivalent
Pro Forma
(1)(2)
Net income per share
 
 
 
 
 
 
 
Basic
$
2.67

 
$
12.70

 
$
2.82

 
$
8.72

Diluted
2.65

 
12.70

 
2.80

 
8.66

Dividends per common share(3)
0.51

 
6.58

 
0.68

 
2.12

Book value per common share
33.07

 
82.84

 
32.44

 
100.35

                                       
(1)
FBLB is taxed as an "S corporation" under the Code. The basic and diluted net income per share data presented in the table under the headings "FBLB," "Pro Forma Combined" and "Equivalent Pro Forma" were calculated using net income per share of FBLB determined on an after-tax basis at an assumed income tax rate of 35% in order to present FBLB's net income per share on a basis comparable to the net income per share data shown for Heartland. Because FBLB is an "S corporation," its actual basic and diluted income per share was $19.54 for the year ended December 31, 2017.
(2)
The data under the heading "Equivalent Pro Forma" was determined by multiplying the amounts under the "Pro Forma Combined" heading by the fixed exchange ratio of 3.0934.
(3)
Dividends per common share of FBLB included an amount equal to approximately 40% of FBLB's net income to provide FBLB shareholders with funds to pay their federal income tax obligations on their proportionate share of FBLB's net income.


8


Heartland expects it will incur merger and integration charges as a result of the merger. Heartland also anticipates that the merger will provide Heartland with financial benefits that include reduced operating expenses and the opportunity to earn more revenue. The pro forma information, although helpful in illustrating the financial characteristics of Heartland after the merger under one set of assumptions, does not reflect these expenses or benefits. Accordingly, the pro forma information is not intended to predict future results. The pro forma financial information also does not necessarily reflect what the historical results of Heartland would have actually been had Heartland and FBLB been combined as of the date and for the year presented.

Market Price Information
Heartland common stock is quoted on the Nasdaq Global Select Market under the symbol "HTLF." FBLB common stock is not publicly-traded. The following table sets forth the closing sale prices per share of Heartland common stock on December 11, 2017, the last trading day before Heartland and FBLB executed the merger agreement, and on April 6, 2018, the last practicable trading day before the date of this proxy statement/prospectus:
 
Closing Sale Price
 
Heartland
Common Stock
 
FBLB
Common Stock
(1)
 
Equivalent Price per Share of
 Heartland Common Stock(2)
December 11, 2017
$
50.15

 

 
$
155.13

April 6, 2018
$
52.05

 

 
$
161.01

                                       
(1)
There is no active trading market for FBLB common stock.
(2)
The "Equivalent Price per Share of Heartland Common Stock" at each of the specified dates in the table represents the product of the closing sales price of a share of Heartland common stock on such date multiplied by the fixed exchange ratio of 3.0934, which is the number of shares of Heartland common stock that a FBLB shareholder would receive for each share of FBLB common stock. FBLB shareholders should obtain current market price quotations for shares of Heartland common stock prior to making any decisions with respect to approval of the merger.
The market price of Heartland common stock will likely fluctuate between the date of this proxy statement/prospectus and the date on which the merger is completed and thereafter. Because the market price of Heartland common stock is subject to fluctuations, the value of the shares of Heartland common stock that FBLB shareholders will receive in the merger may increase or decrease prior to and after the effective date of the merger.
By voting to approve the merger agreement, holders of FBLB common stock will be choosing to invest in Heartland because they will receive Heartland common stock in partial exchange for their shares of FBLB common stock pursuant to the merger agreement. An investment in Heartland’s common stock involves significant risk. In addition to the other information included in this proxy statement/prospectus, including the matters addressed in the section of this proxy statement/prospectus titled "Forward-Looking Statements" beginning on page 15, FBLB shareholders should carefully consider the matters described below in section titled "Risk Factors" beginning on page 13 of this proxy statement/prospectus when determining whether to approve the merger agreement.

9


Historical Market Prices and Dividend Information
Heartland. The following table sets forth, for each calendar quarter indicated, the high and low intraday sales prices per share of Heartland common stock, as reported on the Nasdaq Global Select Market, and the dividends paid per share of Heartland common stock:
Calendar Quarter
 
High
 
Low
 
Dividends
2016
 
 
 
 
 
 
First
 
$
32.44

 
$
25.95

 
$
0.10

Second
 
35.96

 
29.58

 
0.10

Third
 
37.90

 
33.50

 
0.10

Fourth
 
49.15

 
35.30

 
0.20

2017
 
 
 
 
 
 
First
 
$
51.70

 
$
44.55

 
$
0.11

Second
 
52.65

 
44.15

 
0.11

Third
 
50.10

 
42.10

 
0.11

Fourth
 
56.40

 
46.50

 
0.18

2018
 
 
 
 
 
 
First
 
$
56.05

 
$
50.10

 
$
0.13

Second (Through April 6, 2018)
 
$
53.60

 
$
51.45

 

The timing and amount of future cash dividends paid on shares of Heartland common stock will depend upon Heartland's earnings, cash requirements and financial condition, applicable government regulations and other factors deemed relevant by Heartland’s board of directors.

FBLB. There is no active trading market for shares of FBLB common stock.
The following table sets forth, for the calendar quarter indicated, the dividends paid per share of FBLB common stock:
Calendar Quarter
 
Dividends(1)
2016
 
 
First
 
$
3.92

Second
 

Third
 

Fourth
 

2017
 
 
First
 
$
5.58

Second
 
1.00

Third
 

Fourth
 

2018
 
 
First
 
8.27

Second (Through April 6, 2018)
 

                                       
(1) FBLB is taxed as an "S corporation" under the Code. As a result, dividends per common share included an amount equal to 40% of FBLB's net income to provide FBLB shareholders with funds to pay their federal income tax obligations on their proportionate share of FBLB's net income.


10


HEARTLAND SELECTED CONSOLIDATED FINANCIAL DATA
The summary selected consolidated financial data of Heartland presented below as of and for each of the years in the five-year period ended December 31, 2017, is derived from Heartland’s audited historical consolidated financial statements. This financial data is only a summary and should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference into this proxy statement/prospectus from Heartland’s Annual Report on Form 10‑K for the fiscal year ended December 31, 2017. The historical results presented below, included elsewhere or incorporated by reference into this proxy statement/prospectus are not necessarily indicative of the future performance of Heartland.

Selected Financial Data
 
As of and for the Years Ended December 31,
(Dollars in thousands, except per share data)
2017
 
2016
 
2015
 
2014
 
2013
Statement of Income Data
 
 
 
 
 
 
 
 
 
Interest income
$
363,658

 
$
326,479

 
$
265,968

 
$
237,042

 
$
199,511

Interest expense
33,350

 
31,813

 
31,970

 
33,969

 
35,683

Net interest income
330,308

 
294,666

 
233,998

 
203,073

 
163,828

Provision for loan losses
15,563

 
11,694

 
12,697

 
14,501

 
9,697

Net interest income after provision for loan losses
314,745

 
282,972

 
221,301

 
188,572

 
154,131

Noninterest income
102,022

 
113,601

 
110,685

 
82,224

 
89,618

Noninterest expenses
297,675

 
279,668

 
251,046

 
215,800

 
196,561

Income taxes
43,820

 
36,556

 
20,898

 
13,096

 
10,335

Net income
75,272

 
80,349

 
60,042

 
41,900

 
36,853

Net income available to noncontrolling interest, net of tax

 

 

 

 
(64
)
Net income attributable to Heartland
75,272

 
80,349

 
60,042

 
41,900

 
36,789

Preferred dividends and discount
(58
)
 
(292
)
 
(817
)
 
(817
)
 
(1,093
)
Interest expense on convertible debt
12

 
51

 

 

 

Net income available to common stockholders
$
75,226

 
$
80,108

 
$
59,225

 
$
41,083

 
$
35,696

 
 
 
 
 
 
 
 
 
 
Per Common Share Data
 
 
 
 
 
 
 
 
 
Net income-diluted
$
2.65

 
$
3.22

 
$
2.83

 
$
2.19

 
$
2.04

Cash dividends
$
0.51

 
$
0.50

 
$
0.45

 
$
0.40

 
$
0.40

Dividend payout ratio
19.25
%
 
15.53
%
 
15.90
%
 
18.26
%
 
19.61
%
Book value per common share (GAAP)
$
33.07

 
$
28.31

 
$
25.92

 
$
22.40

 
$
19.44

Tangible book value per common share (non-GAAP)(1)
$
23.99

 
$
22.55

 
$
20.57

 
$
19.99

 
$
16.90

Weighted average shares outstanding-diluted
28,425,652

 
24,873,430

 
20,929,385

 
18,741,921

 
17,460,066

                                       
(1)
Tangible book value per common share is total common stockholders' equity less goodwill and core deposit intangibles and customer relationship intangibles, net, divided by common shares outstanding, net of treasury shares. This amount is not a financial measure determined in accordance with United States generally accepted accounting principles ("GAAP") but has been included as it is considered to be a critical metric with which to analyze and evaluate the financial condition and capital strength of Heartland. This measure should not be considered a substitute for operating results determined in accordance with GAAP. See the table titled "Reconciliation of Tangible Book Value Per Common Share (non-GAAP)" on page 13 of this proxy statement/prospectus.

11


 
As of and for the Years Ended December 31,
(Dollars in thousands)
2017
 
2016
 
2015
 
2014
 
2013
Balance Sheet Data
 
 
 
 
 
 
 
 
 
Investments
$
2,492,866

 
$
2,131,086

 
$
1,878,994

 
$
1,706,953

 
$
1,895,044

Loans held for sale
44,560

 
61,261

 
74,783

 
70,514

 
46,665

Total loans receivable(1)
6,391,464

 
5,351,719

 
5,001,486

 
3,878,003

 
3,502,701

Allowance for loan losses
55,686

 
54,324

 
48,685

 
41,449

 
41,685

Total assets
9,810,739

 
8,247,079

 
7,694,754

 
6,051,812

 
5,923,716

Total deposits
8,146,909

 
6,847,411

 
6,405,823

 
4,768,022

 
4,666,499

Long‑term obligations
285,011

 
288,534

 
263,214

 
395,705

 
350,109

Preferred equity
938

 
1,357

 
81,698

 
81,698

 
81,698

Common stockholders’ equity
990,519

 
739,559

 
581,475

 
414,619

 
357,762

Earnings Performance Data
 
 
 
 
 
 
 
 
 
Return on average total assets
0.83
%
 
0.98
%
 
0.88
%
 
0.70
%
 
0.70
%
Return on average common stockholders' equity
8.63
%
 
11.80
%
 
11.92
%
 
10.62
%
 
10.87
%
Annualized net interest margin (GAAP)
4.04
%
 
3.95
%
 
3.80
%
 
3.77
%
 
3.58
%
Annualized net interest margin, fully tax-equivalent
     (non-GAAP)(2)
4.22
%
 
4.13
%
 
3.97
%
 
3.96
%
 
3.78
%
Asset Quality Ratios
 
 
 
 
 
 
 
 
 
Nonperforming assets to total assets
0.76
%
 
0.91
%
 
0.67
%
 
0.74
%
 
1.23
%
Nonperforming loans to total loans
0.99
%
 
1.20
%
 
0.79
%
 
0.65
%
 
1.21
%
Net loan charge-offs to average loans
0.24
%
 
0.11
%
 
0.12
%
 
0.39
%
 
0.22
%
Allowance for loan losses to total loans
0.87
%
 
1.02
%
 
0.97
%
 
1.07
%
 
1.19
%
Allowance for loan losses to nonperforming loans
87.82
%
 
84.37
%
 
122.77
%
 
165.33
%
 
98.27
%
Consolidated Capital Ratios
 
 
 
 
 
 
 
 
 
Average equity to average assets
9.69
%
 
8.53
%
 
8.55
%
 
8.00
%
 
8.09
%
Average common equity to average assets
9.68
%
 
8.31
%
 
7.35
%
 
6.60
%
 
6.46
%
Total capital to risk-weighted assets
13.45
%
 
14.01
%
 
13.74
%
 
15.73
%
 
14.69
%
Tier 1 capital to risk-weighted assets
11.70
%
 
11.93
%
 
11.56
%
 
12.95
%
 
13.19
%
Common equity tier 1 to risk-weighted assets(3)
10.07
%
 
10.09
%
 
8.23
%
 

 

Tier 1 leverage
9.20
%
 
9.28
%
 
9.58
%
 
9.75
%
 
9.67
%
                                       
(1)
Excludes loans held for sale.
(2)
Computed on a fully tax-equivalent basis using an effective tax rate of 35%. Annualized net interest margin, fully tax-equivalent, is a non-GAAP measure, which adjusts net interest income for the tax-favored status of certain loans and securities. Management of Heartland believes this measure enhances the comparability of net interest income arising from taxable and tax-exempt sources. This measure should not be considered a substitute for operating results determined in accordance with GAAP. See the table titled "Reconciliation of Annualized Net Interest Margin, Fully Tax-Equivalent (non-GAAP)" on page 13 of this proxy statement/prospectus.
(3)
Prior to the adoption of Basel III requirements effective January 1, 2015, the common equity tier 1 capital ratio was not a capital standard required by bank regulatory agencies.


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Non-GAAP Financial Measures
Reconciliation of Tangible Book Value Per
     Common Share (non-GAAP)
     (Dollars in thousands, except per share data)
As of and for the Years Ended December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Common stockholders’ equity (GAAP)
$
990,519

 
$
739,559

 
$
581,475

 
$
414,619

 
$
357,762

Less goodwill
236,615

 
127,699

 
97,852

 
35,583

 
35,583

Less core deposit intangibles and customer
     relationship intangibles, net
35,203

 
22,775

 
22,020

 
8,948

 
11,171

Tangible common stockholders’ equity (non-GAAP)
$
718,701

 
$
589,085

 
$
461,603

 
$
370,088

 
$
311,008

Common shares outstanding
29,953,356

 
26,119,929

 
22,435,693

 
18,511,125

 
18,399,156

Common stockholders’ equity (book value) per
     share (GAAP)
$
33.07

 
$
28.31

 
$
25.92

 
$
22.40

 
$
19.44

Tangible book value per common share (non-GAAP)
$
23.99

 
$
22.55

 
$
20.57

 
$
19.99

 
$
16.90


Reconciliation of Annualized Net Interest
     Margin, Fully Tax-Equivalent (non-GAAP)
     (Dollars in thousands)

As of and for the Years Ended December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Net interest income (GAAP)
$
330,308

 
$
294,666

 
$
233,998

 
$
203,073

 
$
163,828

Plus tax-equivalent adjustment(1)
15,139

 
12,919

 
10,216

 
10,298

 
9,465

Net interest income, fully tax-equivalent
     (non-GAAP)
$
345,447

 
$
307,585

 
$
244,214

 
$
213,371

 
$
173,293

Average earning assets
$
8,181,914

 
$
7,455,217

 
$
6,152,090

 
$
5,384,275

 
$
4,582,296

Net interest margin (GAAP)
4.04
%
 
3.95
%
 
3.80
%
 
3.77
%
 
3.58
%
Net interest margin, fully tax-equivalent (non-GAAP)
4.22
%
 
4.13
%
 
3.97
%
 
3.96
%
 
3.78
%
                                       
(1)
Computed on a tax-equivalent basis using an effective tax rate of 35%.

RISK FACTORS

By voting in favor of the merger, you will be choosing to invest in Heartland’s common stock. In addition to the information contained elsewhere in this proxy statement/prospectus or incorporated in this proxy statement/prospectus by reference, as a shareholder of FBLB, you should carefully consider the following factors in making your decision as to how to vote on the merger.
Risks Relating to the Merger
The cash component of the merger consideration could be reduced if either FBLB's Adjusted Tangible Common Equity is less than $83.0 million as of the determination date or the market price of Heartland's common stock price increases.
The amount of cash that will be paid in the merger is dependent upon the Adjusted Tangible Common Equity of FBLB as of the determination date and will be reduced to the extent that Adjusted Tangible Common Equity is less than $83.0 million. Changes in Adjusted Tangible Common Equity may result from higher loan loss provisions, ordinary business conditions that impact the net interest and noninterest income of FBLB, or more general market and economic conditions that impact FBLB operations.
In addition, if the trading price of shares of Heartland common stock increases, the value of the SARs will be greater. In this case, holders of SARs will receive larger payments and the cash component of the merger consideration paid to FBLB shareholders will be less.

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Because the exchange ratio is fixed and the market price of the Heartland common stock may fluctuate prior to the completion of the merger, FBLB shareholders cannot be sure of the value of the Heartland common stock to be received in the merger.
Upon completion of the merger, each share of FBLB common stock will be converted into the right to receive, subject to certain adjustments as set forth in the merger agreement, 3.0934 shares of Heartland common stock. The exchange ratio used to determine the stock consideration will not increase based on fluctuations in the market price of Heartland common stock regardless of how far the price of Heartland common stock decreases, except if the price of Heartland common stock falls below certain levels and FBLB invokes its "walk away" right. Heartland may subsequently exercise its right to make a "top-up" election and increase the exchange ratio to void the "walk away" right as described in the section of this proxy statement/prospectus titled "The Merger Agreement—Termination." The market value of Heartland common stock has varied since Heartland and FBLB entered into the merger agreement and will continue to vary in the future due to changes in the business, operations or prospects of Heartland, market assessments of the merger, regulatory considerations, market and economic considerations, and other factors both within and beyond the control of Heartland. Therefore, at the time of the special meeting, FBLB's shareholders will not know or be able to calculate the market value of the Heartland common stock they will receive upon completion of the merger.
The stock component of the merger consideration is subject to the tax holdback.
The stock component of the merger consideration is subject to a tax holdback of 0.3586 shares of Heartland common stock for each share of FBLB common stock (or an aggregate of 388,506 shares of Heartland common stock), if FBLB has not received certain rulings from the IRS prior to the effective time of the merger. The amount of the tax holdback may not be released, or only be partially released, to FBLB shareholders if Heartland incurs a tax loss because FBLB failed to qualify as an "S corporation" or any of FBLB's subsidiaries failed to qualify as a "qualified subchapter S subsidiary" (within the meaning of the Code or comparable provisions of state, local or other tax law) prior to the effective time of the merger. A claim against the tax holdback may reduce the number of shares of Heartland common stock that will be received by FBLB shareholders in the merger by up to 0.3586 shares of Heartland common stock per share of FBLB common stock. To the extent that Heartland or any of its subsidiaries incurs a tax loss based on the circumstances described above, Heartland will be indemnified for the tax loss. Indemnification claims by Heartland relating to any such tax loss will be satisfied solely from the tax holdback. Any portion of the tax holdback not used to indemnify Heartland for a tax loss will be distributed to the Stockholder Representative for the benefit of and for further distribution to the former holders of FBLB common stock on the earliest of receipt by FBLB of an IRS ruling in form and substance reasonably satisfactory to Heartland or on the applicable release dates provided for in the merger agreement, subject in the case of each release date to later distribution upon the resolution of any pending tax claims.

The interests of certain directors and executive officers of FBLB may be different from the interests of FBLB’s shareholders generally.

Certain executive officers and directors of FBLB have interests in the merger that are different from, or in addition to, the interests of FBLB's shareholders generally. For a description of these interests, please see "Background and Reasons for the Merger—Certain Interests of FBLB Directors and Executive Officers in the Merger" beginning on page 28. These interests and arrangements may cause the directors and executive officers to view the merger proposal differently than you may view it. FBLB's board of directors was aware of these interests and considered them, among other matters, when making a decision to approve the merger agreement and recommend that FBLB shareholders approve the merger agreement.

The merger is subject to certain closing conditions that, if not satisfied or waived, will result in the merger not being completed, which may cause the price of Heartland common stock and the value of FBLB common stock to decline.
Consummation of the merger is subject to customary conditions to closing in addition to the receipt of required bank regulatory approvals and approval by FBLB shareholders of the merger agreement. If any condition to the merger is not satisfied or waived, the merger will not be completed. In addition, Heartland and FBLB may terminate the merger agreement under certain circumstances even if the merger agreement is approved by FBLB shareholders, including if the merger has not been completed on or before July 31, 2018. If the merger is not completed, the trading price of Heartland common stock on the Nasdaq Global Select Market may decline to the extent that the current price reflects a market assumption that the merger will be completed, and the continued operations of FBLB may be impaired because of costs, the departure of employees and customers, or other dislocation caused by the terminated merger. In addition, neither Heartland nor FBLB would realize any of the expected benefits of having completed the merger. For more information on closing conditions to the merger, see the section titled "The Merger Agreement—Conditions to Completion of the Merger" beginning on page 39 of this proxy statement/prospectus.

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The shares of Heartland common stock to be received by FBLB shareholders as a result of the merger will have different rights than shares of FBLB common stock.
Upon completion of the merger, FBLB shareholders will become Heartland stockholders, and their rights as stockholders will be governed by the Delaware General Corporation Law and the Heartland certificate of incorporation and bylaws. The rights associated with FBLB common stock are different from the rights associated with Heartland common stock. See the section titled "Comparison of Rights of Holders of Heartland Common Stock and FBLB Common Stock" beginning on page 48 of this proxy statement/prospectus.
Post-Merger Risks
Difficulties in combining the operations of FBLB and Heartland may prevent the combined company from achieving the expected benefits from the acquisition.
The combination of FBLB with Heartland may cause Heartland difficulty achieving fully the strategic objectives and operating efficiencies it hopes to achieve from the merger. The success of the merger will depend on a number of factors, including Heartland’s ability to:
integrate the operations of FB&T with the operations of Heartland;
maintain existing relationships with depositors so as to minimize withdrawals of deposits after the merger;
maintain and enhance existing relationships with borrowers;
control the incremental noninterest expense so as to maintain overall operating efficiencies;
retain and attract qualified personnel; and
compete effectively in the communities served by FBLB and in nearby communities.

These factors could contribute to the combined company not achieving the expected benefits from the merger within the desired time frames, if at all.

Heartland, as the surviving company from the merger, and its stockholders, including the former shareholders of FBLB, will be subjected to risks if Heartland effects future acquisitions.
Heartland intends to continue to investigate strategic acquisitions of other bank holding companies, banks and other businesses after the merger. Acquiring other banks and businesses will involve risks commonly associated with acquisitions, including:
potential exposure to liabilities of any bank holding companies, banks or other businesses acquired;
the difficulty and expense of integrating the operations and personnel of any bank holding companies, banks or other businesses acquired;
potential dilution of existing Heartland stockholders as a result of additional equity issuances as merger consideration;
possible increases in leverage resulting from borrowings needed to finance an acquisition or augment regulatory capital;
potential disruption to Heartland's business;
potential diversion of the time and attention of Heartland's management; and
impairment of relationships with and the possible loss of key employees and customers of any bank holding companies, banks or other businesses acquired by Heartland.

FORWARD-LOOKING STATEMENTS

Heartland has made forward-looking statements in this proxy statement/prospectus (and in documents that are incorporated by reference in this proxy statement/prospectus) that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of Heartland's operations or its performance both before and after the merger is completed. When any of the words "believes," "expects," "anticipates," "plans," "intends," "estimates," "may," "will," "would," "could," "should" or similar expressions are used in this proxy statement/prospectus and the documents that are incorporated by reference in this proxy statement/prospectus, Heartland is making forward-looking statements. Many events or factors could affect the future financial results and performance of Heartland after the merger and

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could cause those results or performance to differ materially from those expressed in Heartland's forward-looking statements. These risks are described in detail in Heartland’s Annual Report on Form 10-K incorporated by reference into this proxy statement/prospectus. These risks include, but are not limited to, the following:

The strength of the U.S. economy in general and the strength of the local economies in which Heartland conducts its operations, which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of Heartland’s assets;
The economic impact of past and any future terrorist threats and attacks, acts of war or threats thereof, and the response of the United States to any such threats and attacks;
The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, taxes, securities, insurance and monetary and financial matters;
The effects of changes in interest rates (including the effects of changes in the rate of prepayment of loans) and the policies of the FRB;
Heartland’s ability to compete with other financial institutions as effectively as it currently intends to do as a result of increased competitive pressures in the financial services sector;
Heartland’s ability to obtain new customers and to retain existing customers;
The timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet;
Technological changes implemented by Heartland and by other parties, including third party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to Heartland and its customers;
Heartland’s ability to develop and maintain secure and reliable electronic delivery systems;
Heartland’s ability to retain key executives and employees, including executives and employees of FBLB and FB&T, and the difficulty that Heartland may experience in replacing key executives and employees in an effective manner;
Consumer spending and saving habits that may change in a manner that adversely affects Heartland’s business;
Business combinations and the integration of acquired businesses that may be more difficult or expensive than expected;
Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; and
Other factors discussed in the "Risk Factors" section of this proxy statement/prospectus and in the documents incorporated by reference in this proxy statement/prospectus.

These risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on these statements.

Any forward-looking earnings estimates included in this proxy statement/prospectus (or included in any of the documents incorporated by reference in this proxy statement/prospectus) have not been examined or compiled by Heartland's independent registered public accounting firm, nor has Heartland's independent registered public accounting firm applied any procedures to these estimates. Accordingly, Heartland’s independent registered public accounting firm does not express any opinion or any other form of assurance on them. The forward-looking statements included in this proxy statement/prospectus are made only as of the date of this proxy statement/prospectus, and Heartland undertakes no obligation to update any statement in light of new information or future events. Further information concerning Heartland and its business, including additional factors that could materially affect Heartland’s financial results, is included in Heartland’s filings with the Securities and Exchange Commission (the "SEC"). See the section titled "Where You Can Find More Information" beginning on page 55 of this proxy statement/prospectus.
THE FBLB SPECIAL MEETING

Date, Time and Place

The FBLB special meeting will be held at the FirstBank & Trust Company Operations Center located at 9826 Slide Road, Suite 100, Lubbock,Texas 79424, at 4:00 p.m. local time on Tuesday, May 15, 2018.


16


Matters to be Considered

At the special meeting, holders of FBLB common stock will be asked to consider:
a proposal to approve and adopt the merger agreement; and
a proposal to adjourn the FBLB special meeting, if necessary or appropriate.

Proxies

You should complete and return the proxy form accompanying this proxy statement/prospectus to ensure that your vote is counted at the special meeting, regardless of whether you plan to attend the special meeting. If your shares of FBLB common stock are indirectly owned by you through the KSOP, you will receive separate voting instructions from the KSOP trustees with your proxy materials. In order to have your shares voted at the special meeting by the KSOP trustees, you must follow such voting instructions.

You can revoke the proxy at any time before the vote is taken at the special meeting. Your presence at the special meeting will not automatically revoke your proxy. You may revoke your proxy at any time prior to the voting of such proxy on either matter (without, however, affecting any vote taken prior to such revocation) by (i) filing with the Corporate Secretary of FBLB a written notice of revocation, (ii) delivering to FBLB a duly executed proxy bearing a later date, or (iii) attending the special meeting and voting in person. All written notices of revocation and other communications with respect to revocation of proxies in connection with the special meeting should be addressed as follows:

Corporate Secretary
c/o Denise Thomas
First Bank Lubbock Bancshares, Inc.
9816 Slide Road
Lubbock, Texas 79424

If your shares of FBLB common stock are held in the KSOP, you should follow the instructions of the KSOP trustees regarding the revocation of your instructions on the manner in which your shares should be voted at the special meeting.

All shares of FBLB common stock represented by valid proxies received through this solicitation, and that are not revoked, will be voted in accordance with the instructions on the proxy form. If you make no specification on your proxy form as to how you want your shares of FBLB common stock voted before signing and returning it, your proxy will be voted "FOR" approval and adoption of the merger agreement and "FOR" the proposal to adjourn the special meeting, if necessary or appropriate.

Solicitation of Proxies

FBLB will bear the entire cost of soliciting proxies from you. In addition to soliciting proxies by mail, FBLB will request that banks, brokers and other record holders send proxies and proxy materials to the beneficial owners of FBLB common stock and secure their voting instructions, if necessary. FBLB will reimburse the record holders for their reasonable expenses in taking those actions. If necessary, FBLB may also use several of its regular employees, who will not be specially compensated, to solicit proxies from holders of FBLB common stock, either personally or by telephone, facsimile or letter.

Record Date

The FBLB board of directors has fixed the close of business on April 2, 2018 as the record date for determining the holders of FBLB common stock entitled to receive notice of and to vote at the special meeting. At that time, 1,083,275 shares of FBLB common stock were outstanding. As of such date, there were approximately 128 holders of record of FBLB common stock.

Quorum and Vote Required

General. The presence, in person or by properly executed proxy, of the holders of a majority of the shares of FBLB entitled to vote at the meeting is necessary to constitute a quorum at the special meeting. Abstentions will be counted solely for the purpose of determining whether a quorum is present.


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Approval and adoption of the merger agreement requires the affirmative vote of the holders of two-thirds of the issued and outstanding shares of FBLB common stock. Approval of the proposal relating to the adjournment of the special meeting, if necessary or appropriate, requires a majority of the votes cast with respect to the proposal. You are entitled to one vote for each share of FBLB common stock you held as of the record date. As of the record date of the special meeting, directors and executive officers of FBLB and their respective affiliates held 38.42% of the outstanding shares of FBLB common stock.

Abstentions and failures to vote will have the same effect as a vote against approval and adoption of the merger agreement, but will have no effect on the proposal to adjourn the special meeting.

Because the affirmative vote of the holders of two-thirds of the issued and outstanding shares of FBLB common stock is required to approve and adopt the merger agreement, the failure to vote by proxy or in person will have the same effect as a vote against the merger agreement. Abstentions also will have the same effect as a vote against the merger. Accordingly, the FBLB board of directors urges holders of FBLB common stock to complete, date and sign the accompanying proxy form and return it promptly in the enclosed postage-paid envelope.

Voting Agreement. Certain shareholders of FBLB have agreed to vote their shares in favor of the merger and the merger agreement. These shareholders have the right to vote, or direct the voting of, 35.4% of the outstanding shares of FBLB common stock as of the record date.

Other Business

FBLB is not currently aware of any business to be acted upon at the special meeting other than the matters discussed in this proxy statement/prospectus.

BACKGROUND AND REASONS FOR THE MERGER

The following discussion contains material information pertaining to the merger. This discussion is a summary only and may not contain all of the information that is important to you.

Structure
The merger agreement provides that FBLB will be merged with and into Heartland. Each share of FBLB common stock outstanding prior to the merger will be converted, upon completion of the merger, into the right to receive a combination of shares of Heartland common stock and cash. At the effective time of the merger, FB&T will become a wholly owned bank subsidiary of Heartland.
Background of the Merger
The following chronology summarizes certain key meetings and events that led to FBLB and Heartland entering into the merger agreement. In this process, executives, board members and other representatives of FBLB held many conversations, both by telephone and in person, about possible strategic alternatives, including continued independent operations and the potential sale or merger of FBLB. The chronology below covers certain key events leading to the execution of the merger agreement by FBLB and Heartland but does not purport to summarize every conversation among executives, board members and representatives of FBLB or between FBLB and Heartland.
From time to time, the board of directors and management of FBLB have periodically reviewed and updated strategic plans for FBLB and FB&T with a view to enhancing shareholder value. These discussions have focused on, among other things, the business and regulatory environment facing financial institutions in general and FBLB in particular, as well as ways to enhance FBLB's competitive position.
One of Heartland's primary objectives is to increase profitability and diversify its market area and asset base. In the current environment, Heartland has been actively seeking opportunities for growth through acquisitions. In 2017, Heartland completed two bank acquisitions and announced one other pending acquisition in addition to the acquisition of FB&T. On February 23, 2018, Heartland completed the acquisition of Signature Bank & Trust, a Minnesota state bank that is located in a suburb of Minneapolis, Minnesota.
Heartland's management has discussed expanding Heartland's banking operations in Texas for a considerable period of time. Currently, Heartland has one banking office in Dallas, Texas, which is a branch of Heartland's subsidiary, Morrill & Janes Bank and Trust Company, which is a Kansas state bank headquartered in Merriam, Kansas.

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In the context of reviewing its strategic plans, in May 2015, management of FBLB discussed with representatives of Stephens opportunities for FBLB to enhance or provide liquidity to shareholders while continuing to allow FB&T to operate and grow its business. As a part of these discussions, representatives of Stephens introduced to FBLB the business model being implemented by Heartland. These discussions led to an introductory meeting between senior management of FBLB and Heartland in July 2015.
Following that meeting, for the next 21 months, management of FBLB and Heartland continued a dialogue regarding their respective organizations, banking cultures and strategic plans. Over this period, the FBLB board of directors, together with senior management, also continued to deliberate about strategic opportunities, including high level discussions regarding remaining independent or partnering with a larger organization, such as Heartland, that shared FBLB's strategic vision.
After a series of meetings between senior management of FBLB and Heartland in March and April 2017, the parties decided to take additional steps to more deeply explore a potential strategic combination. In May 2017, Heartland and FBLB entered into a mutual non-disclosure agreement and, thereafter, began to share a limited amount of confidential information related to their respective businesses and operations. Management of Heartland discussed the possible acquisition of FBLB in broad terms with the Heartland board of directors at a meeting held on July 25, 2017. Initial diligence activities and more extensive discussions regarding a strategic combination continued through the summer of 2017, and senior management of FBLB and Heartland met again in August 2017 to discuss the broad outlines of a possible acquisition offer from Heartland.
At a meeting held on September 14, 2017, the Heartland board of directors authorized management to submit a non-binding letter of intent to FBLB with respect to the acquisition of all of the issued and outstanding shares of FBLB common stock in exchange for stock consideration and cash. Heartland delivered the non-binding letter of intent to FBLB on September 15, 2017. Over the succeeding two weeks, the parties negotiated various terms of the non-binding letter of intent, including the date on which the fixed exchange ratio would be set, potential adjustments to the merger consideration and employee-related matters. In addition, FBLB discussed the terms, including the consideration to be paid to its shareholders, with its legal and financial advisors.
Negotiations between the parties resulted in a revised non-binding letter of intent, dated September 28, 2017, which was considered by the FBLB board of directors and executed by FBLB and Heartland, effective October 3, 2017. The letter of intent provided for an exchange ratio of 3.0934 shares of Heartland common stock per share of FBLB common stock and $17.5 million in cash consideration (including the payments to be made to holders of SARs). The aggregate transaction value under the letter of intent (excluding repayment of certain indebtedness of FBLB) was approximately $183.0 million, based on Heartland’s closing stock price on September 28, 2017, subject to adjustment if FBLB's Adjusted Tangible Common Equity exceeded or fell below agreed upon thresholds. The letter of intent contemplated FB&T retaining its identity and Texas charter as a separate banking subsidiary of Heartland and continuity in senior management at FB&T. The letter of intent also included an exclusivity period of up to 60 days to enable Heartland to complete its diligence activities and for the parties to negotiate the terms of a definitive merger agreement.
During the months of October, November and early December, 2017, each party conducted extensive due diligence with respect to the other party, which included among other things an evaluation of the other party’s operations, material contracts and loan portfolio, and each party held discussions with selected members of the executive management team of the other party. In November 2017, a draft of the definitive merger agreement was circulated by Heartland, and Heartland and FBLB began negotiations towards a final agreement that would be mutually acceptable to the two parties. During these negotiations, as a result of the continuing diligence activities of Heartland, Heartland identified issues regarding FBLB's "S corporation" election, relating primarily to the failure of certain trusts to timely file election forms in connection with their acquisition of FBLB common stock in prior years. FBLB agreed to take action to seek determinations from the IRS that such failures to timely file the elections were inadvertent and that FBLB's "S corporation" qualification was effective at all times. However, to account for the risk to Heartland that FBLB's "S corporation" status would be deemed to have been terminated, resulting in additional tax liability to Heartland, the parties agreed that a portion of the shares of Heartland common stock to be issued to the FBLB shareholders in the merger would be subject to the tax holdback, pending the determination of the IRS with respect to the tax issues or the expiration of relevant statutes of limitations.
During the period from October until early December, 2017, Heartland's management kept the Heartland board of directors apprised of the negotiations relating to the merger and the proposed terms of the merger agreement. At a board meeting held on October 17, 2017, management provided the board with a detailed presentation regarding the terms of and reasons for the merger. On December 1, 2017, FBLB and Heartland extended the exclusivity period provided for in the non-binding letter of intent between the parties until December 13, 2017.

On December 12, 2017, the FBLB board of directors held a special meeting to consider approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of shares of

19


Heartland common stock as a portion of the merger consideration. Representatives of Stephens and Fenimore, Kay, Harrison & Ford, LLP, special counsel to FBLB, participated in the meeting, and all directors of FBLB were present. At the December 12, 2017 meeting, the FBLB board of directors reviewed a copy of the draft of the merger agreement which contemplated, among other things, that (1) FBLB would merge with and into Heartland with Heartland surviving the merger, (2) the exchange ratio would be 3.0934 shares of Heartland common stock for each outstanding share of FBLB common stock (or approximately 3,351,000 shares of Heartland common stock in the aggregate) subject to the tax holdback of 388,506 shares, and (3) FBLB shareholders would be entitled to receive cash consideration of $17.5 million (less the amount of the SAR payment), subject to certain potential adjustments.

At the special meeting, FBLB's legal counsel reviewed the material terms of the proposed merger agreement and related documents, as well as the regulatory and shareholder processes required to complete the merger, with the FBLB board of directors, and each member of the board had the opportunity to discuss and ask questions of FBLB’s legal counsel and management regarding the terms of the merger agreement and such related documents. At this special meeting, representatives of Stephens reviewed with the FBLB board of directors Stephens’ financial analysis of the merger consideration and rendered an opinion, dated as of December 12, 2017, to the FBLB board of directors to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as described in such opinion, the merger consideration was fair, from a financial point of view, to the disinterested shareholders of FBLB.

Following these discussions, and review and deliberation among the members of the FBLB board of directors, including consideration of the factors described in the section titled "The Merger—FBLB's Reasons for the Merger and Recommendation of the FBLB Board," the FBLB board of directors, by a unanimous vote, determined that the merger was advisable and in the best interests of FBLB and its shareholders and approved the merger agreement and the transactions contemplated thereby.

On December 12, 2017, Heartland's board of directors held a board meeting at which it considered approval of the merger in accordance with the merger agreement and the related documents negotiated by Heartland, FBLB and their respective financial and legal advisors. At this meeting, Heartland's management and legal counsel provided an in-depth summary of the terms of the merger agreement and the related documents. Management and legal counsel also provided a thorough review of the merger agreement and the related documents. After careful and deliberate consideration of the terms of the merger agreement and the related documents and the presentations by management and legal counsel relating thereto, the Heartland board of directors unanimously approved the merger agreement and the related documents.

The merger agreement and the related documents were executed by FBLB and Heartland after the meetings of the boards of directors of FBLB and Heartland on December 12, 2017. Also, on December 12, 2017 after the closing of the Nasdaq Global Select Market, Heartland and FBLB issued a joint press release announcing the execution of the merger agreement and the terms of the transactions contemplated by the merger agreement.

FBLB's Reasons for the Merger and Recommendation of the FBLB Board
After careful consideration, at its meeting on December 12, 2017, the board of directors of FBLB determined that the merger is in the best interests of FBLB and its shareholders and that the consideration to be received in the merger is fair to the FBLB shareholders. Accordingly, the FBLB board of directors unanimously approved the merger agreement and recommended that the FBLB shareholders vote "FOR" the merger proposal.
In reaching its decision to approve the merger agreement and recommend the merger to its shareholders, the FBLB board of directors evaluated the merger and the merger agreement, in consultation with FBLB's management, as well as its legal and financial advisors, and considered a number of positive factors, including the following material factors, which are not presented in order of priority:

its familiarity with and review of the business, operations, management, financial and regulatory condition, earnings, competitive position and future prospects of FBLB and Heartland;
the current and prospective environment in which FBLB and Heartland operate, including national, regional and local economic conditions and the interest rate environment, increased operating costs resulting for regulatory initiatives and compliance mandates, the competitive environment for financial institutions, evolving trends in technology, the trend toward consolidation in the banking industry generally, and the likely effects of these factors on the potential growth, development, productivity, profitability and strategic options of FBLB and Heartland;

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the results that FBLB could expect to obtain if it continued to operate independently, and the likely benefits to shareholders of that course of action, as compared with the value of the merger consideration offered by Heartland and FBLB's belief that a merger with Heartland would allow FBLB shareholders to participate in the future performance of a combined company that would have better future prospects than FBLB was likely to achieve over the long-term on a stand-alone basis or through other strategic alternatives;
the performance of Heartland common stock;
its expectation that FB&T would continue to operate as a separately-chartered bank and continue to serve the needs of its customers in its markets;
its belief that Heartland was committed to enhancing its strategic position in its markets and to evaluating growth opportunities in Texas that are aligned with Heartland's mission;
the limited liquidity that FBLB shareholders have with respect to their investment in FBLB, for which there is no active public market, and the fact that as Heartland shareholders, FBLB's shareholders would be expected to have increased liquidity by owning a publicly-traded, Nasdaq-listed security;
the immediate liquidity to FBLB shareholders, and the certainty of the amount, reflected by the cash portion of the merger consideration;
the treatment of the merger as a "reorganization" within the meaning of Section 368(a) of the Code with respect to FBLB common stock exchanged for Heartland common stock in the merger;
the value of the merger consideration compared to the current and projected book value of FBLB and compared to similar recent transactions in the industry;
the financial presentation of Stephens, dated December 12, 2017, to the FBLB board of directors and the opinion of Stephens, dated as of December 12, 2017, to the FBLB board of directors to the effect that, as of December 12, 2017, and subject to the assumptions, limitations and qualifications set forth in the opinion, the merger consideration was fair, from a financial point of view, to the disinterested shareholders of FBLB, as more fully described below under the section of this proxy statement/prospectus entitled "Background and Reasons for the Merger—Opinion of FBLB's Financial Advisor" beginning on page 22;
the terms of the merger agreement and the presentation by FBLB's legal advisors regarding the merger and the merger agreement;
Heartland's agreement to provide certain benefits to the employees of FB&T;
the regulatory and other approvals required in connection with the merger and the likelihood that the approvals needed to complete the merger will be obtained within a reasonable time and without unacceptable conditions; and
the likelihood of Heartland consummating the merger based upon Heartland’s history of completing other merger transactions.

The FBLB board of directors also considered potential risks and potentially negative factors concerning the merger in connection with its deliberations of the proposed transaction, including the following material factors:

the challenges of integrating FB&T into the Heartland organization;
the potential risk of diverting management focus and resources from other strategic opportunities and from operational matters while working to implement the merger;
the risks and costs to FBLB if the merger is not completed;
the fact that the merger consideration, a large component which consists of shares of Heartland common stock, provides less certainty of value to FBLB shareholders compared to a transaction in which they would receive only cash consideration;
the potential for a decline in the value of Heartland common stock – whether before or after consummation of the merger – reducing the value of the consideration received by FBLB's shareholders;
the provisions of the merger agreement restricting FBLB from soliciting acquisition proposals or, subject to certain exceptions, engaging in negotiations concerning or providing nonpublic information to any person relating to an acquisition proposal, as well as those provisions obligating FBLB to pay a termination fee following the termination of the merger agreement under certain circumstances;
the provisions related to the portion of the merger consideration that is subject to holdback pending the resolution of certain matters related to FBLB's "S corporation" status and the risks related to the request for relief from the IRS;

21


the requirement that FBLB conduct its business in the ordinary course and other restrictions on the conduct of FBLB's business before completion of the merger, which may delay or prevent FBLB from undertaking business opportunities that may arise before completion of the merger;
the fact that gains from the cash component of the merger consideration would generally be taxable to FBLB's U.S. shareholders for U.S. federal income tax purposes;
the risk that the anticipated benefits of the merger may not be realized or may take longer than expected to be realized;
the potential for unintended delays in the regulatory approval process; and
the interests of certain of FBLB's directors and executive officers in the merger that are different from, or in addition to, their interests as FBLB shareholders, which are further described in the section of this joint proxy statement/prospectus titled "Background and Reasons for the Merger—Certain Interests of FBLB's Directors and Executive Officers in the Merger" beginning on page 28.
The foregoing discussion of the factors considered by the FBLB board of directors is not intended to be exhaustive, but is believed to include the material factors considered. The FBLB board of directors collectively reached the unanimous conclusion to approve the merger agreement and the merger in light of the various factors described above and other factors that each member of the board of directors determined was appropriate. In view of the wide variety of the factors considered in connection with its evaluation of the merger and the complexity of these matters, the FBLB board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, the individual members of the FBLB board of directors may have given different weight to different factors. The board of directors conducted an overall analysis of the factors described above, including thorough discussions with FBLB management and FBLB's advisors, and considered the factors overall to be favorable to, and to support, its determination to approve the merger.
FBLB's board of directors unanimously recommends that holders of FBLB common stock vote "FOR" the merger agreement and the transactions contemplated by the merger agreement.

Opinion of FBLB’s Financial Advisor
Stephens was retained to serve as financial advisor to FBLB in connection with any business combination transaction involving FBLB. As part of its engagement, FBLB requested the opinion of Stephens as to the fairness, from a financial point of view, to FBLB's disinterested shareholders of the consideration to be received by them in the merger pursuant to the merger agreement. On December 12, 2017, Stephens delivered its oral opinion to the board of directors and subsequently confirmed in a written opinion, dated December 12, 2017, that, as of that date and based upon and subject to the assumptions and qualifications stated in its written opinion, the cash and stock consideration to be exchanged by Heartland for the outstanding common stock of FBLB in the merger was fair, from a financial point of view, to the disinterested shareholders of FBLB.
Stephens provided the opinion described above for the information and assistance of the board of directors of FBLB in connection with its consideration of whether to approve the merger agreement. The terms of the merger, including the amount and form of the consideration payable pursuant to the merger agreement to FBLB's stockholders, were determined through negotiations between FBLB and Heartland, and were approved by the board of directors of FBLB. Stephens did not recommend the amount or form of consideration payable pursuant to the merger agreement. The full text of the opinion letter of Stephens, dated December 12, 2017, which sets forth assumptions made, procedures followed, matters considered, qualifications stated and limitations to the review undertaken in connection with its opinion is attached as Appendix C to this proxy statement/prospectus.
Stephens' opinion does not address the merits of the underlying decision by FBLB to enter into the merger, the merits of the merger as compared to other alternatives potentially available to FBLB or the relative effects of any alternative transaction in which FBLB might engage, nor is it intended to be a recommendation to any person as to how to vote on the proposal to approve the merger. In addition, except as explicitly set forth in Stephens’ opinion, Stephens was not asked to address, and Stephens’ opinion does not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of FBLB other than the disinterested stockholders. Stephens was not asked to express any opinion, and does not express any opinion, as to the fairness of the amount or nature of the compensation to any of FBLB's officers, directors or employees, or to any group of such officers, directors or employees, relative to the compensation to other stockholders of FBLB, including (but not limited to) any consideration expected to be received by any such persons in connection with the merger. Stephens’ fairness opinion committee approved the issuance of Stephens' opinion.
    

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In connection with rendering its opinion Stephens:

analyzed certain publicly available financial statements and reports regarding FBLB and Heartland;
analyzed certain audited financial statements regarding FBLB and Heartland;
analyzed certain internal financial statements and other financial and operating data concerning FBLB and Heartland prepared by management of FBLB and Heartland, respectively;
analyzed, on a pro forma basis, the effect of the merger on the balance sheet, capitalization ratios, earnings and book value both in the aggregate and, where applicable, on a per share basis of Heartland;
reviewed the reported prices and trading activity for the common stock of Heartland;
compared the financial performance of FBLB and Heartland with that of certain other publicly-traded companies and their securities that Stephens deemed relevant to its analysis of the transaction;
reviewed the financial terms, to the extent publicly available, of certain merger or acquisition transactions that Stephens deemed relevant to its analysis of the transaction;
reviewed the most recent draft of the merger agreement and related documents provided to us by FBLB;
discussed with management of FBLB and Heartland the operations of and future business prospects for FBLB and Heartland and the anticipated financial consequences of the transaction to FBLB and Heartland;
assisted FBLB in its deliberations regarding the material terms of the transaction and negotiations with Heartland; and
performed such other analyses and provided such other services as Stephens deemed appropriate.

Stephens has relied on the accuracy and completeness of the information and financial data provided by FBLB and Heartland and of the other information reviewed by Stephens in connection with the preparation of Stephens' opinion, and its opinion is based upon such information. Stephens has not assumed any responsibility for independent verification of the accuracy or completeness of any of such information and financial data. The management of FBLB and Heartland have assured Stephens that they are not aware of any relevant information that has been omitted or remains undisclosed to Stephens. Stephens has not assumed any responsibility for making or undertaking an independent evaluation or appraisal of any of the assets or liabilities of FBLB or Heartland, and Stephens has not been furnished with any such evaluations or appraisals; nor has Stephens evaluated the solvency or fair value of FBLB or Heartland under any laws relating to bankruptcy, insolvency or similar matters. Stephens has not assumed any obligation to conduct any physical inspection of the properties or facilities of FBLB or Heartland. With respect to the financial forecasts prepared by the management of FBLB, including the forecasts of potential cost savings or synergies, Stephens has assumed that such financial forecasts have been reasonably prepared and reflect the best currently available estimates and judgments of the management of FBLB as to the future financial performance of FBLB and that the financial results reflected by such projections will be realized as predicted. In addition, Stephens has not received or reviewed any individual credit files nor has Stephens made an evaluation of the adequacy of the allowance for loan losses of FBLB or Heartland. Stephens has not assumed any responsibility for making or undertaking an independent evaluation or analysis of the KSOP, and Stephens has not been furnished with any such evaluation or analysis. Stephens has relied solely on the information provided by FBLB regarding the KSOP. Stephens has also assumed that the representations and warranties contained in the merger agreement and all related documents are true, correct and complete in all material respects.

Stephens' opinion is necessarily based upon market, economic and other conditions as they exist and can be evaluated on, and on the information made available to Stephens as of, the date hereof. It should be understood that subsequent developments may affect the opinion and that Stephens does not have any obligations to update, revise or reaffirm its opinion. Stephens has assumed that the merger will be consummated on the terms of the latest draft of the merger agreement provided to Stephens, without material waiver or modification. Stephens has assumed that in the course of obtaining the necessary regulatory, lending or other consents or approvals (contractual or otherwise) for the merger, no restrictions, including any divestiture requirements or amendments or modifications, will be imposed that would have a material adverse effect on the contemplated benefits of the merger to FBLB or its shareholders. Stephens is not expressing any opinion herein as to the price at which the common stock or any other securities of FBLB will trade following the announcement of the transaction.
The following is a summary of the material financial analyses performed and material factors considered by Stephens in connection with its opinion. Stephens performed certain procedures, including each of the financial analyses described below, and reviewed with FBLB's executive management and board of directors the assumptions upon which the analyses were based, as well as other factors. Although this summary does not purport to describe all of the analyses performed or factors considered by Stephens within this regard, it does set forth those considered by Stephens to be material in arriving at its opinion. The order of the summaries of analyses described does not represent the relative importance or weight given to those analyses by Stephens. It should be noted that in arriving at its opinion, Stephens did not attribute any particular weight to any

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analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Stephens believes that its analysis must be considered as a whole and that considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.

Summary of Proposed Transaction. Pursuant to the merger agreement and for purposes of its opinion, Stephens assumed the consideration to be exchanged by Heartland for the outstanding FBLB common stock to have an aggregate value of $185.6 million (which amount does not include the repayment of certain indebtedness of FBLB by Heartland), subject to potential adjustments as more fully defined in the merger agreement. Heartland will issue a total of 3,351,003 shares worth approximately $168.1 million, based upon Heartland’s common stock valued at $50.15 per share (i.e., the closing price of a share of Heartland common stock on December 11, 2017), and pay an aggregate of $17.5 million in cash to FBLB shareholders and holders of SARs. Based upon the unaudited financial information as of and for the 12 months ended September 30, 2017, Stephens calculated the following transaction multiples:
Transaction Value / Tangible Book Value:
2.22x

Transaction Value / Last Twelve Months ("LTM") Earnings(1):
14.2x

Transaction Value / 2018 Estimated Net Income(1):
13.5x

Core Deposit Premium:
16.4
%
___________________
(1) Reflects the impact of a 35% tax effect due to FBLB status as an "S corporation."

Note: The last 12 months net income of the acquired company based on the most recent available financial statements prior to announcement. Estimated 2018 net income based on assumptions provided by FBLB management.

Relevant Public Companies Analysis. Stephens compared the financial condition, operating statistics and market valuation of FBLB to selected relevant public companies. Stephens selected the companies outlined below because their relative asset size and financial performance, among other factors, are reasonably similar to FBLB; however, no selected company below is identical to FBLB. A complete analysis involves complex considerations and qualitative judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading values of the relevant public companies. Mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using relevant public company data.

Stephens selected the following relevant public companies with assets between $500 million and $1.5 billion, with a last 12 months core return on average assets greater than 1.2% (total assets noted parenthetically):
Citizens & Northern Corp. ($1.3 billion)
Parke Bancorp, Inc. ($1.1 billion)
Northeast Bancorp ($1.1 billion)
FS Bancorp, Inc. ($994 million)
Timberland Bancorp, Inc. ($952 million)
Plumas Bancorp ($731 million)
Union Bankshares, Inc. ($705 million)


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To perform this analysis, Stephens examined publicly available financial information as of and for the last twelve month period ended September 30, 2017, or the most recently reported period available, and the market trading multiples of the relevant public companies based on December 11, 2017 closing prices. The financial data included in the table presented below may not correspond precisely to the data reported in historical financial statements as a result of the assumptions and methods used by Stephens to compute the financial data presented. The table below contains selected information utilized by Stephens in the analysis:
 
FBLB
 
25th
Percentile
 
Median
 
75th
Percentile
LTM Core Return on Average Equity(1)
17.1%
 
12.2%
 
13.6%
 
15.0%
LTM Core Return on Average Assets(1)
1.45%
 
1.33%
 
1.39%
 
1.47%
Tangible Common Equity / Tangible Assets
9.0%
 
9.6%
 
11.1%
 
11.8%
NPAs Plus 90 Days PD / Loans Plus OREO
1.1%
 
1.1%
 
1.4%
 
2.9%
Price / Tangible Book Value per Share
 
1.70x
 
1.83x
 
1.99x
Price / LTM EPS(2)
 
13.7x
 
14.2x
 
16.7x
Core Deposit Premium
 
10.9%
 
12.9%
 
13.7%
                                     
(1) Core income defined as net income after taxes, but excluding extraordinary items, nonrecurring items and gain / loss on sale of securities.
(2) Reflects the impact of a 35% tax effect due to FBLB's status as an "S corporation." Source: SNL Financial

Relevant Texas Transactions Analysis. Stephens analyzed selected transaction multiples and related financial data for relevant transactions in Texas announced since January 1, 2013 with target assets between $300 million and $1.5 billion, with a last twelve months return on average assets greater than 1.0%. The following transactions were considered by Stephens because each acquired company's relative asset size, financial performance and markets of operation, among other factors, is reasonably similar to FBLB's (in each case, the first named company was the acquirer and the second named company was the acquired company and the transaction announcement date is noted parenthetically):

Southside Bancshares, Inc. / Diboll State Bancshares, Inc. (6/12/17)
BancorpSouth Bank / Central Community Corporation (1/22/14)
Cullen/Frost Bankers, Inc. / WNB Bancshares, Inc. (8/13/13)
First Financial Bankshares, Inc. / Orange Savings Bank, SSB (2/6/13)

Stephens considered these selected transactions to be reasonably similar, but not identical, to the merger. A complete analysis involves complex considerations and qualitative judgments concerning differences in the selected transactions and other factors that could affect the transaction values in those selected transactions to which the merger is being compared. Mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using selected transaction data. Stephens compared certain proposed transaction multiples of the merger to the 25th percentile, median, mean and 75th percentile transaction multiples of the relevant transactions:
 
FBLB
 
25th
Percentile
 
Median
 
75th
Percentile
Target LTM ROAE
17.1%
 
11.1%
 
11.7%
 
13.7%
Target LTM ROAA
1.45%
 
1.16%
 
1.24%
 
1.27%
Target NPAs / Total Assets
0.8%
 
0.7%
 
0.9%
 
1.6%
Target TCE / TA
9.0%
 
8.0%
 
9.1%
 
9.4%
Transaction Value / Tangible Book Value
2.22x
 
1.66x
 
2.10x
 
2.52x
Transaction Value / LTM Earnings(1)
14.2x
 
13.0x
 
13.1x
 
14.5x
Core Deposit Premium
16.4%
 
9.8%
 
12.4%
 
13.9%
                                     
(1) Reflects the impact of a 35% tax effect due to FBLB's status as an "S corporation." Source: SNL Financial
    
Relevant Nationwide Transactions Analysis. Stephens analyzed selected transaction multiples and related financial data for relevant nationwide transactions announced since January 1, 2015 with target assets between $350 million and $1.5 billion, with a last twelve months return on average assets between 1.2% and 2.0%. The following transactions were considered by Stephens because each acquired company's relative asset size and financial performance, among other factors, is reasonably

25


similar to FBLB's asset size and financial performance (in each case, the first named company was the acquirer and the second named company was the acquired company and the transaction announcement date is noted parenthetically):

Independent Bank Group, Inc. / Integrity Bancshares, Inc. (11/28/17)
Glacier Bancorp, Inc. / Inter-Mountain Bancorp, Inc. (10/26/17)
First Financial Bankshares, Inc. / Commercial Bancshares, Inc. (10/12/17)
Susser Bank Holdings, LLC / BancAffiliated, Inc. (9/21/17)
Home Bancorp, Inc. / Saint Martin Bancshares, Inc. (8/23/17)
Horizon Bancorp / Wolverine Bancorp, Inc. (6/14/17)
Southside Bancshares, Inc. / Diboll State Bancshares, Inc. (6/12/17)
Glacier Bancorp, Inc. / Columbine Capital Corporation (6/6/17)
Bryn Mawr Bank Corporation / Royal Bancshares of Pennsylvania, Inc. (1/31/17)
CVB Financial Corp. / Valley Commerce Bancorp (9/22/16)
Equity Bancshares, Inc. / Community First Bancshares, Inc. (7/14/16)
State Bank Financial Corporation / NBG Bancorp, Inc. (4/5/16)
Charter Financial Corporation / CBS Financial Corporation (12/3/15)
Heartland Financial USA, Inc. / Premier Valley Bank (5/26/15)

Stephens considered these selected transactions to be reasonably similar, but not identical, to the merger. A complete analysis involves complex considerations and qualitative judgments concerning differences in the selected transactions and other factors that could affect the transaction values in those selected transactions to which the merger is being compared. Mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using selected transaction data. Stephens compared certain proposed transaction multiples of the merger to the 25th percentile, median, mean and 75th percentile transaction multiples of the relevant transactions:
 
FBLB
 
25th 
Percentile
 
Median
 
75th
Percentile
Target LTM ROAE
17.1%
 
10.9%
 
12.2%
 
13.3%
Target LTM ROAA
1.45%
 
1.21%
 
1.26%
 
1.35%
Target NPAs / Total Assets
0.8%
 
0.5%
 
0.9%
 
1.4%
Target TCE / TA
9.0%
 
7.6%
 
8.7%
 
9.9%
Transaction Value / Tangible Book Value
2.22x
 
1.65x
 
2.01x
 
2.30x
Transaction Value / LTM Earnings(1)
14.2x
 
12.7x
 
14.7x
 
17.3x
Core Deposit Premium
16.4%
 
9.6%
 
11.4%
 
14.5%
                                     
(1) Reflects the impact of a 35% tax effect due to FBLB's status as an "S corporation." Source: SNL Financial

Discounted Cash Flow Analysis. Stephens performed a discounted cash flow analysis using projections developed by FBLB executive management. Stephens calculated a range of implied equity values for FBLB based upon the discounted net present value of the projected after-tax free cash flows for the projected period. Stephens determined the amount of cash flow assuming (i) a terminal earnings multiple of 12.0x, (ii) dividend payments for earnings and excess capital above a tangible common equity to tangible asset ratio of 9.0% from 2018 to 2022 and (iii) the present value of FBLB's implied terminal value at the end of such period. Stephens calculated the terminal value of FBLB based on 2023 estimated earnings and multiples of 11.0x to 13.0x. Stephens considered discount rates from 11.0% to 13.0%. Based on this analysis, Stephens derived a range for the implied equity value of FBLB from $155.6 to $192.8 million.

Financial Impact Analysis. Stephens analyzed the estimated merger consequences of certain pro forma combined income statement and balance sheet information of FBLB and Heartland. Stephens discussed key assumptions regarding the expected accounting treatment, potential cost savings and other acquisition adjustments resulting from the merger with management of FBLB and Heartland. Stephens' analysis utilized consensus earnings estimates for Heartland as of December 11, 2017, as well as earnings estimates for FBLB provided by FBLB executive management. Based on this analysis, Stephens estimated that the merger would likely be accretive to Heartland’s consensus earnings per share in the first two years following the closing of the merger and would be dilutive to Heartland’s tangible book value per share. Stephens also estimated that Heartland would maintain capital ratios in excess of those required by Heartland to be considered well-capitalized under

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existing regulations. The actual results achieved by Heartland following the merger will likely vary from these projected results analyzed by Stephens, and the variations may be material.
Miscellaneous. As part of Stephens’ investment banking business, Stephens regularly issues fairness opinions and is continually engaged in the valuation of companies and their securities in connection with business reorganizations, private placements, negotiated underwritings, mergers and acquisitions and valuations for estate, corporate and other purposes.
Stephens served as financial adviser to FBLB in connection with the merger, and is entitled to receive from FBLB reimbursement of its expenses and a customary fee for its services as financial adviser to FBLB, a significant portion of which is contingent upon the consummation of the merger. Stephens also received a fee from FBLB for providing its opinion to the board of directors. FBLB has also agreed to indemnify Stephens for certain liabilities arising out of its engagement, including certain liabilities that could arise out of it providing the opinion letter. In the ordinary course of business, Stephens and its affiliates at any time may hold long or short positions, and may trade or otherwise effect transactions as principal or for the accounts of customers, in debt or equity securities or options on securities of FBLB or of any other participant in the merger.
Conclusion. Based upon the foregoing and its general experience as investment bankers, and subject to the assumptions and qualifications set forth in its fairness opinion letter, Stephens concluded that the consideration to be received by the disinterested shareholders in the merger is fair to them from a financial point of view. Each FBLB shareholder is encouraged to read Stephens’ fairness opinion in its entirety. The full text of the fairness opinion is included as Appendix C to this proxy statement/prospectus.

Heartland's Reasons for the Merger

As part of Heartland's business strategy, it evaluates opportunities to acquire bank holding companies, banks and other financial institutions. In reaching its conclusion to adopt and approve the merger agreement, Heartland's board of directors evaluated the merger in consultation with Heartland's financial and legal advisors.
Heartland's board of directors approved the merger because:
the merger will expand Heartland’s banking operations into a high-growth Texas banking market;
the establishment of banking operations in West Texas is a natural extension of the banking business conducted by Heartland in New Mexico through New Mexico Bank & Trust, which is Heartland's New Mexico state banking subsidiary headquartered in Albuquerque, New Mexico;
FB&T is a high-growth, high-profitability bank well positioned to achieve additional organic growth and possibly acquire other banks in Texas;
through the merger, Heartland will acquire PrimeWest, a highly successful mortgage company that is a subsidiary of FB&T;
following the merger, Heartland expects that it will be able to retain local management of its Texas banking operations by keeping the executive officers, board of directors and client relationship management personnel of FB&T in place;
the addition of FB&T's operations to the operations of Heartland's current state bank subsidiaries is strategically attractive and has compelling financial metrics;
Heartland believes the acquisition of FB&T has low execution risk, particularly in view of anticipated minimal disruption to FB&T's existing operations and Heartland's history of successfully executing acquisitions and integrating acquired banks;
Heartland and FBLB complement each other because of similar community banking business models, a common focus on customer service, compatible cultures and management and operating styles that are akin;
the merger offers the potential for Heartland to increase the services provided to FB&T customers;
the merger adds a seasoned management team, including Barry Orr, Chairman, President and Chief Executive Officer of FBLB and Chief Executive Officer of FB&T, and Greg Garland, Executive Vice President of FBLB and President of FB&T;
the merger extends the geographic diversity of Heartland's operations, and is consistent with Heartland’s objective of balancing its exposure to economic upswings and downturns in the different geographic markets it serves;
the merger is expected to be immediately accretive to Heartland’s GAAP earnings per share when it is completed in the second quarter of 2018; and
the merger is expected to enhance Heartland's long-term stockholder value.

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Certain Interests of FBLB Directors and Executive Officers in the Merger

In considering the recommendation of the FBLB board of directors with respect to the merger proposal, FBLB shareholders should be aware that certain persons, including the directors and executive officers of FBLB, have interests in the merger that are in addition to their interests as shareholders of FBLB generally. The FBLB board of directors was aware of these interests and considered them, among other matters, when making a decision to approve the merger agreement and recommend that FBLB shareholders approve the merger agreement.
SAR Awards. FBLB adopted a Stock Appreciation Rights Plan in 2015 to provide equity-linked incentives to certain executive officers and other employees of FBLB and FB&T. Of the 28 officers and employees who participate in the plan, three of them – Barry Orr, Greg Garland and Denise Thomas – are executive officers of FBLB and hold in the aggregate 22,600 SARs. Under the terms of the merger agreement, and on the same basis as all other holders of SAR awards, these individuals will receive payments based on the value of the SARs as of the closing date. See “The Merger Agreement—SAR Payments,” beginning on page 38. Assuming a market price of Heartland common stock of $52.05 per share, the closing price of a share of Heartland common stock on April 6, 2018 (the last practicable trading date before the date of this proxy statement/prospectus), Messrs. Orr and Garland and Ms. Thomas will receive payments of approximately $1.3 million, $851,000 and $291,000, respectively, for the SARs they hold. Payments made to the holders of outstanding SAR awards, including these executive officers, will reduce the amount of the aggregate cash consideration paid to the FBLB shareholders in the merger.
Indemnification and Insurance. From and following the effective time, the directors and officers of FBLB will be entitled to indemnification from Heartland to the same extent and subject to the conditions set forth in the articles of incorporation and bylaws of FBLB or as required by law. FBLB (or Heartland, if necessary) has agreed to obtain a “tail” insurance policy for a period of at least six years after completion of the merger for directors’ and officers’ liability and fiduciary liability. Heartland has agreed to pay the premium for such “tail” insurance policy, subject to certain reasonableness limitations, although any insurance premium payments made by Heartland for such “tail” insurance policy will be considered a transaction expense under the merger agreement.
Employment Agreements. Heartland, FBLB and FB&T have entered into employment agreements with each of Barry Orr and Greg Garland, which will become effective upon completion of the merger. The employment agreements provide that Messrs. Orr and Garland will serve as Chairman of the Board and Chief Executive Officer of FB&T and President and a director of FB&T, respectively. Under the employment agreements, Messrs. Orr and Garland are entitled to receive a base salary, a signing bonus, an annual retention bonus, an annual cash bonus payable upon achievement of certain objectives and annual grants of restricted stock units of Heartland. They will also be subject to certain ongoing confidentiality, noncompetition and nonsolicitation obligations.
Mr. Orr's employment agreement provides for a base salary of $350,000 per year, a signing bonus of $100,000, an annual retention bonus of $50,000, an annual performance-based cash bonus of up to 50% of his base salary and annual grants of Heartland restricted stock units having a fair market value on the date of grant of up to 35% of his annual base salary. In addition, pursuant to the employment agreement with Mr. Orr, Heartland has agreed to nominate Mr. Orr for election to the Heartland board of directors at such time as his appointment as a director would not result in the number of Heartland board members who are not "independent directors" exceeding the number of independent directors. Mr. Garland's employment agreement provides for a base salary of $275,000 per year, a signing bonus of $100,000, an annual retention bonus of $50,000, an annual performance-based cash bonus in an amount up to 40% of his base salary and annual grants of Heartland restricted stock units having a fair market value on the date of grant of up to 25% of his annual base salary. Mr. Orr previously did not have an employment agreement with FBLB or FB&T. However, his employment agreement does not provide for appreciably greater compensation than the compensation he currently receives. Mr. Garland has an existing employment with FB&T. Although the new employment agreement with Mr. Garland is structured differently than his existing employment agreement, the aggregate compensation payable under the new employment agreements does not differ substantially from the aggregate compensation payable to him under his existing employment agreement.
Change in Control Payments and Director Support Agreements. On September 23, 2014, the Board Leadership Committee of FBLB's board of directors adopted a plan to provide support payments to the board’s non-employee directors, as well as to the Chairman of the Board and certain officers who support the board of directors, upon the occurrence of a change in control transaction in recognition of their respective contributions to FBLB leading to such change in control and, with respect to the non-employee directors, in consideration for any obligations undertaken by these persons in connection with the change in control transaction. Pursuant to the plan, the board’s eight non-employee directors and the Chairman of the Board are each entitled to receive a lump sum payment of $48,000 upon a change in control. In addition, the Board Secretary and Board Scribe are each entitled to receive a lump sum amount of $18,000. In connection with the receipt of these payments, and as a condition to Heartland’s obligation to consummate the merger, each of the FBLB's non-employee directors will enter into a

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support agreement with Heartland, which is expected to (1) provide, among other things, that the director will use reasonable efforts to refrain from harming the goodwill and customer and client relationships of Heartland and FB&T and (2) restrict the director’s ability to solicit customers or employees of FB&T or otherwise engage in competitive activities with respect to FB&T for a period of time following the closing.
Employee Benefit Plans. All employees of FB&T who continue on as employees following the merger, including those who are executive officers of FBLB, will be entitled to participate in the employee benefit plans and programs maintained for employees of Heartland. These individuals will receive credit for their years of service with FB&T for purposes of eligibility and vesting (and, solely with respect to vacation and severance benefits, benefit accrual) under any employee benefit plans and programs sponsored by Heartland to the extent permitted by applicable law.

REGULATORY MATTERS AND TAX CONSEQUENCES AND
ACCOUNTING TREATMENT OF THE MERGER
Regulatory Matters

Heartland and FBLB have agreed to use all commercially reasonable efforts to obtain all regulatory approvals required to complete the transactions contemplated by the merger agreement. These approvals require applications by Heartland to acquire FBLB and FB&T with the FRB pursuant to the Bank Holding Company Act of 1956 and applications with the TDB pursuant to Chapters 201 and 202 of the Texas Finance Code. Heartland has completed, or will complete, the filing of applications to obtain these required regulatory approvals from the FRB and the TDB.
A transaction approved pursuant to the Bank Holding Company Act of 1956 may not be completed until 30 days after approval is received, during which time the Antitrust Division of the U.S. Department of Justice may challenge the merger. The commencement of an antitrust action would stay the effectiveness of an approval unless a court specifically ordered otherwise. With the consent of the Antitrust Division, the waiting period may be reduced to no less than 15 days.
We are not aware of any material governmental approvals or actions that are required for completion of the merger other than those described above. It is presently contemplated that if any such additional government approvals or actions are required, those approvals or actions will be sought.
Heartland and FBLB believe that neither the merger of FBLB with and into Heartland nor the acquisition of FB&T by Heartland raises significant regulatory concerns and that they will be able to obtain all requisite regulatory approvals on a timely basis without the imposition of any condition that could reasonably be expected to have a material adverse effect on FB&T or Heartland. However, there can be no assurance that all of the regulatory approvals described above will be obtained, and, if obtained, that the approvals will be received on a timely basis or that there will not be any litigation challenging such approvals. Likewise, no assurance can be provided that the Antitrust Division of the U.S. Department of Justice or any state attorney general will not attempt to challenge the merger on antitrust grounds. If such a challenge is made, the result of the challenge cannot be predicted.
Material U.S. Federal Income Tax Consequences of the Merger
The following describes the material anticipated U.S. federal income tax consequences to a U.S. Holder (as defined below) of FBLB common stock with respect to the exchange of FBLB common stock for Heartland common stock and cash at the effective time of the merger and contingent rights to receive additional shares of Heartland common stock subject to the tax holdback.
This discussion assumes that U.S. Holders hold their FBLB common stock as capital assets within the meaning of section 1221 of the Code. This discussion is based on the Code, administrative pronouncements, judicial decisions and Treasury Regulations, each as in effect as of the date of this proxy statement/prospectus. All of the foregoing are subject to change at any time, possibly with retroactive effect, and all are subject to differing interpretations. No advance ruling has been or will be sought or obtained from the IRS regarding the U.S. federal income tax consequences of the merger. As a result, no assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth below.
This discussion does not address any tax consequences arising under U.S. federal tax laws other than U.S. federal income tax laws, nor does it address the laws of any state, local, foreign or other taxing jurisdiction. In addition, this discussion does not address all aspects of U.S. federal income taxation that may apply to U.S. Holders of FBLB common stock in light of their particular circumstances or U.S. Holders that are subject to special rules under the Code, such as holders of FBLB

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common stock that are pass-through entities or trusts, persons who acquired shares of FBLB common stock as a result of the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan, persons subject to the alternative minimum tax, tax-exempt organizations, broker-dealers, traders in securities that have elected to apply a mark-to-market method of accounting, persons having a "functional currency" other than the U.S. dollar and persons holding their FBLB common stock as part of a straddle, hedging, constructive sale or conversion transaction.
For purposes of this summary, a "U.S. Holder" is a beneficial owner of FBLB common stock that is for U.S. federal income tax purposes:
a United States citizen or resident alien;
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any state therein or the District of Columbia;
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust if (1) it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) the trust has made a valid election to be treated as a United States person for United States federal income tax purposes.

U.S. Holders should consult with their own tax advisors regarding the specific tax consequences of the merger and the tax holdback in light of their particular circumstances, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in the United States federal or other tax laws.
Tax Classification of the Merger. The merger is intended to qualify as a reorganization under section 368(a) of the Code, and the obligations of FBLB to complete the merger are subject to the receipt of the opinion of Fenimore, Kay, Harrison & Ford, LLP, special counsel to FBLB ("Fenimore Kay"), that the merger will qualify as a "reorganization" under Section 368(a) of the Code. FBLB does not currently intend to waive this opinion condition to its obligation to complete the merger.
The following discussion, subject to the limitations and qualifications described herein, constitutes the opinion of Fenimore Kay regarding the material U.S. federal income tax consequences of the merger applicable to a U.S. Holder that exchanges FBLB common stock in the merger, to the extent the following discussion sets forth statements of U.S. federal income tax law or legal conclusions with respect thereto. The opinion of counsel relies on assumptions, including assumptions regarding the absence of changes in existing facts and law and the completion of the merger in the manner contemplated by the merger agreement, and on the accuracy of representations and covenants made by FBLB and Heartland, including those contained in representation letters of officers of FBLB and Heartland. If any of the representations or assumptions upon which the opinion is based are incorrect, the tax consequences of the merger could be adversely affected. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or any court, nor does it preclude the IRS from adopting a contrary position.
Based on the accuracy of representations made by FBLB and Heartland and subject to the limitations and qualifications described above, Fenimore Kay, special counsel to FBLB, has rendered its opinion that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, and that the following discussion constitutes its opinion regarding the material U.S. federal income tax consequences of the merger to U.S. Holders.

Exchange of FBLB Common Stock for Heartland Common Stock, Cash and Contingent Rights to Receive Additional Heartland Common Stock subject to the Tax Holdback. Based on and subject to the foregoing, the merger will qualify as a "reorganization" within the meaning of Section 368(a) of the Code. Subject to the discussion below regarding the tax treatment of the tax holdback, the U.S. federal income tax consequences of the merger to U.S. Holders of FBLB common stock will be as follows:

A U.S. Holder will recognize gain in an amount equal to the lesser of the amount of cash received by the U.S. Holder in the merger (other than cash received in lieu of a fractional share of FBLB common stock) and the gain realized. The gain realized is the excess of (1) the sum of the cash received by the U.S. Holder in the merger (other than cash received in lieu of a fractional share of FBLB common stock) plus the fair market value, determined at the Effective Time, of the Heartland common stock received at the effective time of the merger and the Heartland common stock subject to the tax holdback over (2) the U.S. Holder's adjusted tax basis in the FBLB common stock surrendered in the merger.
No losses will be recognized other than losses, if any, realized in connection with the receipt of cash in lieu of a fractional share interest, as described below.

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The gain recognized by a U.S. Holder in the merger generally will constitute capital gain, unless the receipt of cash has the effect of a distribution of a dividend, as discussed below in the section titled "Potential Treatment of Cash as a Dividend," in which case some or all of such gain may be treated as dividend income rather than as capital gain.
Any capital gain recognized by a U.S. Holder generally will constitute long-term capital gain if the shareholder's holding period for the FBLB common stock exchanged in the merger is more than one year as of the date of the merger, and otherwise will constitute short-term capital gain.
The aggregate tax basis of the shares of Heartland common stock received by a U.S. Holder at the effective time of the merger (including, for this purpose, any fractional share of Heartland common stock for which cash is received) plus the maximum number of shares of Heartland common stock that the U.S. Holder could receive from the tax holdback will equal the aggregate tax basis of the U.S. Holder's FBLB common stock surrendered in the merger, decreased by the amount of cash received by the U.S. Holder in the merger (excluding any cash received in lieu of a fractional share) and increased by the amount of gain recognized by the U.S. Holder in the merger. In the event that less than all of the Heartland common stock subject to the tax holdback is released to the Stockholder Representative for the benefit of FBLB shareholders, the tax basis of a U.S. Holder's shares of Heartland common stock will be recalculated, as discussed further in the section titled "Tax Treatment of Tax Holdback."
The holding period of the shares of Heartland common stock received by a U.S. Holder in the merger and subject to the tax holdback will include the holding period of the shareholder's FBLB common stock exchanged in the merger.

If a U.S. Holder exchanges more than one "block" of shares of FBLB common stock (that is, groups of shares that the holder acquired at different times or at different prices), the holder must calculate gain separately as to each block, and the results for each block may not be netted in determining the holder’s overall gain. Instead, the U.S. Holder will generally recognize gain on those shares on which gain is realized, but, as described above, losses may not be recognized.

Potential Treatment of Cash as a Dividend. In general, the determination of whether gain recognized by a U.S. Holder will be treated as capital gain or a dividend distribution will depend upon whether, and to what extent, the merger reduces the U.S. Holder’s deemed percentage stock ownership interest in Heartland. For purposes of this determination, a U.S. Holder will be treated as if the shareholder first exchanged all of its FBLB common stock solely for Heartland common stock (instead of a combination of Heartland common stock and cash as will actually be received) and then Heartland immediately redeemed a portion of that Heartland common stock in exchange for the cash the shareholder received in the merger. The IRS has held that any reduction in the interest of a shareholder that owns a small number of shares in a publicly and widely-held corporation and that exercises no control over corporate affairs would result in capital gain as opposed to distribution treatment.
If a U.S. Holder’s gain recognized in the merger is treated as a distribution, the U.S. Holder will be required to include the amount of this distribution in gross income as a dividend to the extent of our current and accumulated “earnings and profits.” To the extent a distribution exceeds our current and accumulated “earnings and profits,” the distribution will be treated first as a tax-free return of capital to the extent of the U.S. Holder’s adjusted tax basis in the Heartland common shares received (including the Heartland common stock subject to the tax holdback) and thereafter, as gain from the sale or exchange of the Heartland common shares. Dividends paid by us to non-corporate U.S. Holders generally will be eligible for the preferential tax rates applicable to long-term capital gains, provided certain holding period and other conditions are satisfied.

The remainder of this discussion assumes that the gain recognized in the merger will be treated as capital gain. Because the possibility of distribution treatment depends primarily on a U.S. Holder’s particular circumstances, including the application of constructive ownership rules, U.S. Holders should consult their tax advisers about the possibility of dividend distribution treatment.

Cash In Lieu of Fractional Shares. To the extent that a U.S. Holder receives cash in lieu of a fractional share of common stock of Heartland, the shareholder will be deemed to have received that fractional share in the merger and then to have received the cash in redemption of that fractional share. The U.S. Holder generally will recognize gain or loss equal to the difference between the cash received and the portion of the shareholder’s tax basis in the shares of FBLB common stock surrendered allocable to that fractional share. This gain or loss generally will be long-term capital gain or loss if the holding period for those shares of FBLB common stock is more than one year as of the date of the merger.
Tax Treatment of Tax Holdback. For U.S. federal income tax purposes, U.S. Holders should be treated as the owners of the Heartland common stock subject to the tax holdback beginning at the effective time of the merger. The remainder of this discussion assumes this treatment.

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Receipt of Heartland common stock upon release from the tax holdback will not be taxable to the U.S. Holders. At the time of each release, if any, of Heartland common stock from the tax holdback, the U.S. Holder will be required to recalculate the U.S. Holder’s aggregate tax basis in Heartland common stock, taking into account any change (due to the satisfaction of special tax losses) in the maximum number of shares of Heartland common stock the U.S. Holder may receive, and also making appropriate adjustments if the U.S. Holder has sold or otherwise disposed of Heartland common stock previously received.
To the extent that shares of Heartland common stock subject to the tax holdback are returned to Heartland to satisfy special tax claims, a U.S. Holder will recognize gain or loss equal to the difference between the U.S. Holder’s adjusted tax basis in the shares returned and the fair market value of those shares as of the time of return. The fair market value (determined as of the time of return) of any shares that are returned to Heartland to satisfy special tax claims will be added to the aggregate tax basis of the U.S. Holder’s remaining shares of Heartland common stock received in the merger and released from the tax holdback. Gain or loss recognized on return of shares of Heartland common stock to Heartland will be long-term capital gain or loss if the U.S. Holder’s holding period for the returned shares is more than one year as of the date of return. As noted above, the holding period of the shares of Heartland common stock subject to the tax holdback will include the holding period of the U.S. Holder’s FBLB common stock exchanged in the merger.
The tax treatment of the tax holdback is complex. Each U.S. Holder should consult with its own tax advisor regarding the federal income tax consequences of the tax holdback.

Backup Withholding. Backup withholding at the applicable rate may apply with respect to certain payments, including cash received in the merger and cash dividends paid with respect to Heartland common stock subject to the tax holdback, unless a U.S. Holder (1) is a corporation or is within certain other exempt categories and, when required, demonstrates this fact, or (2) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A U.S. Holder who does not provide its correct taxpayer identification number may be subject to penalties imposed by the IRS. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against the shareholder’s U.S. federal income tax liability, provided the shareholder furnishes certain required information to the IRS.

Reporting Requirements. A U.S. Holder will be required to retain records pertaining to the merger and will be required to file with such shareholder's U.S. federal income tax return for the year in which the merger takes place a statement setting forth certain facts relating to the merger. In addition, each U.S. Holder who is a "significant holder" that receives Heartland common stock in the merger will be required to file a statement with his, her or its federal income tax return setting forth his, her or its adjusted tax basis in the FBLB common stock surrendered and the fair market value of the Heartland common stock and cash, if any, received in the merger. A "significant holder" is a holder of FBLB common stock who, immediately before the merger, owned at least one percent (by vote or value) of the outstanding shares of FBLB common stock or owned FBLB securities with an adjusted tax basis of $1,000,000 or more.
TAX MATTERS REGARDING THE MERGER ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO ANY PARTICULAR FBLB SHAREHOLDER WILL DEPEND ON THAT SHAREHOLDER’S PARTICULAR SITUATION. FBLB SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER AND THE TAX HOLDBACK, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGE IN THE TAX LAWS TO THEM.
Accounting Treatment
The merger of FBLB into Heartland will be accounted for under the acquisition method of accounting by Heartland, as that term is used under GAAP, for accounting and financial reporting purposes. As a result, the historical financial statements of Heartland will continue to be the historical financial statements of Heartland following the completion of the merger. The assets (including identifiable intangible assets) and liabilities (including executory contracts and other commitments) of FBLB as of the effective time of the merger will be recorded at their respective fair values and added to the assets and liabilities of Heartland. Any excess of the aggregate merger consideration over the net fair values of FBLB assets and liabilities is recorded as goodwill (i.e., excess purchase price). Financial statements of Heartland issued after the merger will reflect such fair values and will not be restated retroactively to reflect the historical financial position or results of operations of FBLB. The results of operations of FBLB will be included in the results of operations of Heartland beginning on the effective date of the merger.

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Board of Directors and Management of Heartland Following Completion of the Merger
    The composition of Heartland's board of directors and its senior management will not be changed following completion of the merger. Information about the current Heartland directors and executive officers can be found in Heartland's proxy statement dated April 6, 2018 for its 2018 Annual Meeting of Stockholders. See "Where You Can Find More Information" on page 55.

DISSENTERS' RIGHTS OF FBLB SHAREHOLDERS

General.   If you hold one or more shares of FBLB common stock, you have the right to dissent from the merger and have the appraised fair value of your shares of common stock paid to you in cash. The ultimate amount that a dissenting shareholder receives in an appraisal proceeding may be less than, equal to or more than the amount he or she would have received under the merger agreement. If you are contemplating exercising your right to dissent, we urge you to read carefully the provisions of Chapter 10, Subchapter H of the TBOC, which are attached as Appendix B to this proxy statement/prospectus, and consult with your legal counsel before electing or attempting to exercise these rights. The following summary describes the steps you must take if you want to exercise your right to dissent. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Chapter 10, Subchapter H of the TBOC. You should read this summary and the full text of the law carefully.
How to Exercise and Perfect Your Right to Dissent.   To be eligible to exercise your right to dissent to the merger:
prior to the special meeting, you must deliver to FBLB written notice of your objection to the merger that (1) states that you will exercise your right to dissent if the merger proposal is approved and the merger is completed and (2) provides an address to which FBLB may send a notice to you if the merger is completed;
you must vote your shares of FBLB common stock "AGAINST" the merger proposal, either by proxy or in person, at the special meeting;
you must provide to FBLB, not later than the 20th day after FBLB sends you notice that the merger was completed, your written demand for payment that states (1) the number of shares of FBLB common stock you own, (2) your estimate of the fair value of such common stock and (3) an address to which a notice relating to the dissent and appraisal procedures may be sent to you;
you must submit to FBLB, not later than the 20th day after you deliver to FBLB your written demand for payment described in the preceding bullet point, (1) if your shares are certificated, your certificates representing the shares, or (2) if your shares are uncertificated, signed assignments of the ownership interests in the shares; and
you must continuously hold your shares of FBLB common stock from the record date through the completion of the merger.

If you intend to dissent from the merger, you must send written notice to FBLB's Chairman, President and Corporate Secretary at:
First Bank Lubbock Bancshares, Inc.
9816 Slide Rd.
Lubbock, Texas 79424
Attention: Chairman, President and Corporate Secretary

If you fail to vote your shares of FBLB common stock at the special meeting against the merger proposal, or otherwise fail to comply with any of these conditions and the merger is completed, you will lose your right to dissent from the merger and will instead receive the per share merger consideration. If you comply with the items set forth in the first two bullet points above and the merger is completed, FBLB will send you a written notice advising you that the merger has been completed. FBLB must deliver this notice to you within 10 days after the merger is completed. A proxy card which is signed and does not contain voting instructions will, unless revoked, be voted in favor of the merger proposal, will constitute a waiver of your dissenters’ rights, and will nullify any previous written demand for appraisal.
Your Demand for Payment and Delivery of Share Certificates.   If you wish to dissent from the merger and receive the fair value of your shares of FBLB common stock in cash, you must, within 20 days after the date the notice of completion of the merger was delivered or mailed to you by FBLB, send a written demand to FBLB for payment of the fair value of your shares of common stock that complies with the applicable statutory requirements. The fair value of your shares of FBLB common stock will be the value of the shares on the day immediately preceding the date of completion of the merger, excluding any appreciation or depreciation in anticipation of the merger. Additionally, within 20 days after the date on which your written demand for payment of the fair value of your shares of FBLB common stock is delivered to FBLB, you must submit to FBLB

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any certificates representing your shares for purposes of making a notation on such certificates that a demand for payment of fair value for your shares has been made under Chapter 10, Subchapter H of the TBOC. All such certificates must be submitted to FBLB at the address below. Your written demand and any notices to FBLB must be sent to FBLB's Chairman, President and Corporate Secretary at:
First Bank Lubbock Bancshares, Inc.
9816 Slide Rd.
Lubbock, Texas 79424
Attention: Chairman, President and Corporate Secretary

Your written demand must state how many shares of FBLB common stock you own and your estimate of the fair value of your shares of common stock. If you fail to send your written demand to FBLB within 20 days after the date the notice of completion of the merger was delivered or mailed to you by FBLB, you will be bound by the merger and you will not be entitled to receive a cash payment representing the fair value of your shares of FBLB common stock. Instead, you will receive the per share merger consideration. The failure to submit your share certificates will have the effect, at the option of FBLB, of terminating your rights of dissent and appraisal unless a court, for good cause shown, directs otherwise.
Actions of FBLB Upon Receipt of Your Demand for Payment.   Within 20 days after FBLB receives your demand for payment and your estimate of the fair value of your shares of FBLB common stock, FBLB must send you written notice stating whether or not it accepts your estimate of the fair value of your shares.
If FBLB's written notice accepts your estimate, FBLB will pay the amount of your estimate of fair value within 90 days after the merger is completed. FBLB will make this payment to you only if you have surrendered the share certificates, duly endorsed for transfer to FBLB, or the signed assignments of ownership in non-certificated shares, as applicable, representing your shares of common stock.
If FBLB's written notice does not accept your estimate, the notice will provide FBLB's estimate of the fair value of your shares and an offer to pay that amount to you within 120 days after the merger is completed. To accept FBLB's offer, you must provide notice of your acceptance to FBLB within 90 days after the merger is completed, and your failure to do so within that 90-day period will constitute rejection by you of FBLB's offer.
Payment of the Fair Value of Your Shares of Common Stock Upon Agreement of an Estimate.   If you and FBLB reach an agreement on the fair value of your shares of common stock within 90 days after the merger is completed, FBLB must pay you the agreed amount within 120 days after the merger is completed, if you have surrendered to FBLB the duly endorsed share certificates or the signed assignments of ownership in non-certificated shares, as applicable, representing your shares of common stock.
Commencement of Legal Proceedings if a Demand for Payment Remains Unsettled.   If you and FBLB have not reached an agreement as to the fair value of your shares of common stock within 90 days after the merger is completed, you or FBLB may, within 60 days after the expiration of that 90 day period, commence proceedings in Lubbock County, Texas, asking the court to determine the fair value of your shares of common stock. FBLB has no obligation to file such a petition in the event there are dissenting shareholders and FBLB and such dissenting shareholders are unable to reach an agreement as to the fair value of the shares. If court proceedings are initiated, the court will determine if you have complied with the dissent provisions of the TBOC and if you have become entitled to a valuation of and payment for your shares of common stock. The court will appoint one or more qualified persons to act as appraisers to determine the fair value of your shares. The appraisers will determine the fair value of your shares and will report this value to the court. The court will consider the report, and both you and FBLB may address the court about the report. The court will determine the fair value of your shares and direct FBLB to pay that amount, plus interest, which will begin to accrue 91 days after the merger is completed. If any shareholder files a petition with the court requesting a finding and determination of the fair value of its shares, then within 10 days of receipt of service of such petition by FBLB, FBLB must file with the court a list containing the names and addresses of all shareholders who have demanded payment for fair value of their shares and with whom agreements as to the fair value of their shares have not been reached by FBLB.
Rights as a Shareholder.   If you have made a written demand on FBLB for payment of the fair value of your shares of common stock, you will not thereafter be entitled to vote or exercise any other rights as a shareholder except the right to receive payment for your shares as described herein and the right to maintain an appropriate action to obtain relief on the ground that the merger would be or was fraudulent. In the absence of fraud in the merger, your right under the dissent provisions described herein is the exclusive remedy for the recovery of the value of your shares or money damages with respect to the merger.

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Withdrawal of Demand.   If you have made a written demand on FBLB for payment of the fair value of your common stock, you may unilaterally withdraw such demand at any time before payment for your shares has been made or before a petition has been filed with a court for determination of the fair value of your shares. However, if either payment of the fair value of your common stock has been made by FBLB or a petition has been filed with a court for determination of the fair value of your shares, you may not withdraw your demand on FBLB for payment of fair value without FBLB’s consent. If you withdraw your demand, your rights to dissent are terminated, or you are otherwise unsuccessful in asserting your dissenters’ rights, you will be bound by the terms of the merger and your status as a shareholder will be restored without prejudice to any corporate proceedings, dividends or distributions which may have occurred during the interim.

One condition to Heartland’s obligation to complete the merger is that the total number of dissenting shares cannot be more than 7.5% of the number of outstanding shares of FBLB common stock.

THE MERGER AGREEMENT

The following describes material provisions of the merger agreement, which is attached as Appendix A to this proxy statement/prospectus and which is incorporated by reference into this proxy statement/prospectus. The rights and obligations of the parties are governed by the express terms and conditions of the merger agreement and not by this summary or any other information contained in this proxy statement/prospectus. We urge you to read the merger agreement carefully and in its entirety.
The Merger
Pursuant to the merger agreement, and upon filing of a certificate of merger with the Secretary of State of Delaware and a certificate of merger with the Texas Secretary of State, FBLB will merge with and into Heartland, with Heartland as the surviving entity. Upon the completion of the merger, each share of FBLB common stock, other than shares held by either Heartland or FBLB and shares held by FBLB shareholders who properly assert their dissenters' rights, will be automatically converted into the right to receive Heartland common stock and cash. FBLB shareholders would receive merger consideration for each share of FBLB common stock of 3.0934 shares of Heartland common stock and, assuming the market value of a share of Heartland common stock is $52.05, the closing price of a share of Heartland common stock on April 6, 2018 (the last practicable trading date before the date of this proxy statement/prospectus), approximately $4.96 in cash, subject to certain adjustments described below.
Stock Component of Merger Consideration. The exchange ratio for the stock component of the merger consideration is fixed and will not be adjusted to reflect changes in the price of Heartland common stock occurring prior to the completion of the merger. However, if the price of Heartland common stock drops below certain levels, as described in the section titled "The Merger Agreement—Termination," FBLB may exercise a "walk-away" right and terminate the merger agreement, unless Heartland increases the exchange ratio or cash component of the merger consideration by exercising its "top-up" option.
The stock component of the merger consideration is subject to a tax holdback of 0.3586 shares of Heartland common stock for each share of FBLB common stock (or an aggregate of 388,506 shares of Heartland common stock), if FBLB has not received certain rulings from the IRS prior to the effective time of the merger. The shares subject to the tax holdback may not be released, or only be partially released, to FBLB shareholders if Heartland incurs a tax loss because FBLB failed to qualify as an "S corporation" or any of FBLB's subsidiaries failed to qualify as a "qualified subchapter S subsidiary" (within the meaning of the Code or comparable provisions of state, local or other tax law) prior to the effective time of the merger. A claim against the tax holdback may reduce the number of the shares of Heartland common stock that will be received by FBLB shareholders in the merger by up to 0.3586 shares for each share of FBLB common stock. To the extent that Heartland or any of its subsidiaries incurs a tax loss based on the circumstances described above, Heartland will be indemnified for any such tax loss. The tax holdback will be the sole source from which Heartland may satisfy any indemnification claim.
Any portion of the tax holdback not used to indemnify Heartland for a tax loss will be released to the Stockholder Representative for the benefit of the former holders of FBLB common stock on the earliest of receipt by FBLB of an IRS ruling in form and substance reasonably satisfactory to Heartland or on the applicable release dates, subject in the case of each release date to later release upon the resolution of any pending tax claims. However, prior to distribution by the Stockholder Representative of any shares of Heartland common stock subject to the tax holdback to former FBLB shareholders, the Stockholder Representative will be entitled to reimbursement from the tax holdback of reasonable third-party expenses incurred by the Stockholder Representative as a result of his acting in such capacity.
The release dates for the shares of Heartland common stock subject to the tax holdback and the potential number of shares to be distributed on each of these dates is set forth below:

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Within 10 business days after August 17, 2018 (i.e., the first release date), Heartland will issue 62,036 shares of Heartland common stock to the Stockholder Representative for the benefit of former holders of FBLB common stock, as reduced by any Heartland tax loss the amount of any pending tax claims against Heartland related to FBLB's 2014 tax liability.
Within 10 business days after September 8, 2019 (i.e., the second release date), Heartland will issue 77,441 shares of Heartland common stock to the Stockholder Representative for the benefit of former holders of FBLB common stock, as reduced by any Heartland tax loss the amount of any pending tax claims against Heartland related to FBLB's 2015 tax liability.
Within 10 business days after March 10, 2020 (i.e., the third release date), Heartland will issue 109,329 shares of Heartland common stock to the Stockholder Representative for the benefit of former holders of FBLB common stock, as reduced by any Heartland tax loss the amount of any pending tax claims against Heartland related to FBLB's 2016 tax liability.
Within 10 business days after the third anniversary of the date on which FBLB's 2017 federal income tax return is filed (i.e., the fourth release date), Heartland will issue 141,700 shares of Heartland common stock to the Stockholder Representative for the benefit of former holders of FBLB common stock, as reduced by any Heartland tax loss the amount of any pending tax claims against Heartland related to FBLB's 2017 tax liability.
The shares of Heartland common stock subject to the tax holdback will be issued and outstanding shares, but will be held by Heartland pending release as described above. Accordingly, FBLB shareholders will have the right to vote, and receive cash dividends on, the shares subject to holdback beginning on the effective date of the merger and until such time, if any, as such shares are utilized to satisfy an indemnification claim. However, until such time as the shares of Heartland common stock subject to holdback are released as described above, they will not be transferable.
Cash Component of Merger Consideration. Pursuant to the merger agreement, the aggregate amount of the cash component of the merger consideration to be paid to FBLB shareholders will be $17,505,724, less amounts payable to the holders of SARs. Assuming the market price of a share of Heartland common stock is $50.15, the closing price per share on December 11, 2017 (the last trading date before the merger agreement was executed), the payments to holders of SARs would be approximately $11.5 million. Assuming the market price of a share of Heartland common stock is $52.05, the closing price per share on April 6, 2018 (the last practicable trading date before the date of this proxy statement/prospectus), the payments to holders of SARs would be approximately $12.1 million.
In addition, the cash component of the merger consideration is subject to certain adjustments. If FBLB's Adjusted Tangible Common Equity (as defined below) is less than $83.0 million on the last business day of the month immediately preceding the month in which the closing date of the determination date, then the cash component of the merger consideration will be reduced by the amount by which FBLB's Adjusted Tangible Common Equity is less than $83.0 million. If FBLB's Adjusted Tangible Common Equity is greater than $84.0 million on the determination date, then the cash component of the merger consideration will be increased by the amount, up to $5.0 million, by which FBLB's Adjusted Tangible Common Equity is greater than $85.0 million.
"Adjusted Tangible Common Equity" means an amount equal to (a) the sum of (i) the total shareholders’ common equity of FBLB, determined in accordance with GAAP as of the close of business on the determination date as adjusted to reflect a reasonable projection of the operations of FBLB through the effective time of the merger, and (ii) the determination date transaction expenses, less (b) the sum of (x) the value of the intangible assets determined as of the close of business on the determination date as adjusted to reflect a reasonable projection of the operations of FBLB through the effective time of the merger, and (y) the amount, if any, by which transaction expenses exceed $7.5 million.

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The following table presents the value of the cash component of the merger consideration for each share of FBLB common stock, and its impact on total consideration per share, based upon various levels of FBLB's Adjusted Tangible Common Equity:
Adjusted Tangible Common Equity
 
Cash
Adjustment
per Share
 
Cash
Consideration
per Share
 
Stock
Consideration
per Share(1)
 
Total
Consideration
per Share
$88.00 million
 
$
3.347

 
$
8.310

 
$
161.011

 
$
169.322

$87.00 million
 
2.511

 
7.473

 
161.011

 
168.485

$86.00 million
 
1.674

 
6.637

 
161.011

 
167.648

$85.00 million
 
0.837

 
5.800

 
161.011

 
166.811

$84.00 million
 

 
4.963

 
161.011

 
165.974

$83.50 million
 

 
4.963

 
161.011

 
165.974

$83.00 million
 

 
4.963

 
161.011

 
165.974

$82.00 million
 
(0.837
)
 
4.126

 
161.011

 
165.137

$81.00 million
 
(1.674
)
 
3.289

 
161.011

 
164.301

$80.00 million
 
(2.511
)
 
2.452

 
161.011

 
163.464

$79.00 million
 
(3.347
)
 
1.616

 
161.011

 
162.627

________________________ 
(1)
Assumes the closing sales price of Heartland common stock of $52.05 as of April 6, 2018 (the last practicable trading date before the date of this proxy statement/prospectus) and the fixed exchange ratio of 3.0934 shares of Heartland common stock issued for each share of FBLB common stock.
Total Merger Consideration. Based on the closing price of a share of Heartland common stock as of December 11, 2017 (the last trading date before the merger agreement was executed) of $50.15, the aggregate merger consideration to be received by FBLB shareholders was valued at approximately $174.0 million, or $160.65 per share of FBLB common stock. Based on the price of a share of Heartland common stock as of April 6, 2018 (the last practicable trading date before the date of this proxy statement/prospectus) of $52.05, the aggregate merger consideration payable to FBLB shareholders was valued at approximately $179.8 million, or $165.97 per share of FBLB common stock. These valuations assume that no adjustments will be made to the cash component of the aggregate merger consideration based on FBLB's Adjusted Tangible Common Equity and no claims will be made by Heartland against the tax holdback. Because the market price for Heartland common stock and the Adjusted Tangible Common Equity of FBLB will fluctuate prior to the merger, the value of the actual consideration you will receive may be different from the amounts described above.
Fractional Shares
Heartland will not issue any fractional shares of Heartland common stock. Instead, a FBLB shareholder who would otherwise have received a fraction of a share of Heartland common stock will receive an amount of cash equal to the fraction of a share of Heartland common stock to which such holder would otherwise be entitled multiplied by the closing price of Heartland common stock on the last trading day immediately preceding the closing date.
Exchange of Stock Certificates
Exchange of Stock Certificates. Please do not send us your stock certificates at this time. Promptly after the completion of the merger, Heartland or its transfer agent will send transmittal materials to each holder of FBLB stock certificates (who has not previously surrendered his, her or its stock certificates) for use in exchanging FBLB stock certificates for certificates representing shares of Heartland common stock and cash. Heartland will deliver certificates or a book entry notification for Heartland common stock and a check to the holders of FBLB common stock once Heartland receives the properly completed transmittal materials and certificates representing such holder’s shares of FBLB common stock.
FBLB stock certificates may be exchanged for Heartland stock certificates and cash until such time that the stock certificates and cash would otherwise escheat to or become the property of any governmental unit or agency. At the end of that period, all unclaimed Heartland stock certificates and cash will become (to the extent permitted by abandoned property and any other applicable law) the property of Heartland.
If your FBLB stock certificate has been lost, stolen or destroyed, you may receive a Heartland stock certificate and cash upon the making of an affidavit of that fact. Heartland's transfer agent may require you to post a bond in a reasonable

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amount as an indemnity against any claim that may be made against the transfer agent or Heartland with respect to the lost, stolen or destroyed FBLB stock certificate.
Neither Heartland, Heartland’s transfer agent, FBLB, nor any other person will be liable to any former holder of FBLB stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
Transferability of Heartland Common Stock
The shares of Heartland common stock to be issued to former FBLB shareholders will be registered by Heartland with the SEC. Accordingly, these shares will be freely transferable under the applicable securities laws, except for shares issued to any former FBLB shareholder who may be deemed to be an affiliate of Heartland. Heartland common stock is quoted on the Nasdaq Global Select Market under the symbol "HTLF," and shares of Heartland common stock issued to former FBLB shareholders pursuant to the merger agreement may be traded on this market.
SAR Payments
In 2015, FBLB adopted a Stock Appreciation Rights Plan (the "SAR Plan") to provide equity-linked incentives to certain executive officers and employees of FBLB and FB&T. As an "S corporation," FBLB is limited in the number of shareholders that it may have at any time. Accordingly, the SAR Plan was designed to align the interests of these executive officers and employees with FBLB's shareholders by enabling the participants to realize the appreciation of FBLB's common stock value over the time that the SAR awards were outstanding, without FBLB having to issue those participants actual shares of common stock. As of April 6, 2018, an aggregate of 111,700 SARs were issued and outstanding, of which 22,600 were held by executive officers of FBLB and FB&T.
The SARs become vested only upon a "change in control" of FBLB. Accordingly, the outstanding SARs will vest at the effective time of the merger. As provided in the SAR Plan, the value of each SAR upon a change in control is determined by a formula. This formula provides that the value of an SAR will be equal to the difference between (a) the net price per share of FBLB common stock in the change in control transaction (after taking into account (i) taxes assuming a 20% capital gains rate, subject to adjustment due to changes in tax law, (ii) payoff of indebtedness of FBLB, and (iii) expenses of FBLB in connection with the change in control transaction (including payments to holders of SARs as a result of the change in control transaction)), and (b) the "initial value" of the SAR as set forth in the applicable award agreement relating to the SAR. The weighted average of the initial value of all outstanding SARs is $50.46.
The SAR Plan is administered by a committee of FBLB's board of directors. The committee presently estimates that the weighted average value of each SAR based on the above formula is approximately $159.05, assuming the market value of a share of Heartland common stock is $52.05 (which was the closing price on April 6, 2018 (the last practicable trading date prior to the date of this proxy statement/prospectus)). Accordingly, based on the above formula, the aggregate value of all outstanding SARs is approximately $12.1 million. This aggregate amount will be payable in cash at the effective time of the merger to all holders of SARs.
Repayment of Indebtedness to The Bankers' Bank
On the closing date, Heartland will, on behalf of FBLB, pay off all of the principal and interest outstanding as of the effective time of the merger of indebtedness owed to The Bankers' Bank pursuant to the Loan and Security Agreement dated April 22, 2017 between The Bankers' Bank and FBLB. FBLB anticipates that the amount of the payment to The Bankers' Bank will be approximately $4.6 million.
Statutory Trust Securities
FBLB has two wholly-owned, unconsolidated subsidiary grantor trusts that were established for the purpose of issuing trust preferred securities. The trusts used the net proceeds from each of the offerings to purchase a like amount of junior subordinated debentures of FBLB. As of the effective time of the merger, Heartland will assume FBLB's obligations and acquire its rights related to the trusts and the debentures underlying the trust securities. As of December 31, 2017, FBLB had outstanding $9.0 million in aggregate liquidation amount of trust preferred securities, and the aggregate principal amount of the junior subordinated debentures was $9.3 million.

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Conditions to Completion of the Merger
Unless the parties agree otherwise, the completion of the merger will take place at a time and place to be agreed upon by the parties as soon as practicable after all closing conditions have been satisfied or waived.
The merger will be completed when Heartland files a certificate of merger with the Secretary of State of the State of Delaware and FBLB files a certificate of merger with the Texas Secretary of State, unless Heartland and FBLB agree to a later time for the completion of the merger and specify that time in the certificates of merger. We currently expect to complete the merger in the second quarter of 2018, subject to receipt of required shareholder and regulatory approvals. However, we cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.
Mutual Conditions to Completion of the Merger. FBLB's and Heartland's respective obligations to complete the merger are subject to the fulfillment or waiver of the following mutual conditions:
the receipt of the required federal and state regulatory approvals;
the absence of any injunction or order that would impair the consummation of the merger;
the absence of any law or regulation enacted or promulgated that would materially impair the consummation of the merger;
the absence of any governmental action that would restrain or prohibit the merger, prohibit ownership by Heartland of a material portion of FBLB's businesses or assets, or require Heartland to divest any of its or FBLB's businesses or assets;
neither party will have terminated the merger agreement as permitted by its terms;
approval and adoption of the merger agreement by FBLB shareholders; and
the effectiveness of the registration statement relating to the issuance of Heartland common stock in exchange for FBLB common stock.

FBLB Conditions to Completion of the Merger. FBLB's obligations to complete the merger are subject to the fulfillment or waiver of the following conditions:
the truth and correctness of Heartland's representations and warranties, subject to the applicable standard of the materiality in the merger agreement;
Heartland's performance in all material respects of the obligations required to be performed by it under the merger agreement;
no change of control of Heartland;
the receipt by FBLB of a legal opinion from its special counsel that the merger will qualify as a tax-free reorganization pursuant to Section 368(a) of the Code; and
the release of all personal guarantees relating to indebtedness owed by FBLB to The Bankers' Bank.

Heartland Conditions to Completion of the Merger. Heartland's obligations to complete the merger are subject to the fulfillment or waiver of the following conditions:
the truth and correctness of FBLB's representations and warranties, subject to the applicable standard of the materiality in the merger agreement;
FBLB's performance in all material respects of the obligations required to be performed by it under the merger agreement;
FBLB will have furnished to Heartland Indemnification Waiver Agreements executed by KSOP trustees, pursuant to which the KSOP trustees will waive any rights to indemnification from FB&T, Heartland or any of their affiliates;
FBLB will have furnished to Heartland copies of the certificate executed by KSOP trustees stating, among other things, that the terms and conditions of the merger agreement, taken as a whole, are fair to and in the best interest of the KSOP from a financial point of view;
the total number of dissenting shares will be no greater than 7.5% of the number of issued and outstanding shares of FBLB common stock;
certain required consents to the merger will have been obtained and be in full force and effect;

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no persons other than the FBLB shareholders will have asserted that they are the owners of, or have the right to acquire, any capital stock in either FBLB or FB&T, or are entitled to any merger consideration payable to FBLB shareholders;
the Employment Agreement dated December 12, 2017, among Heartland, FBLB, FB&T and Barry Orr, the Chairman, President and Chief Executive Officer of FBLB, will be in full force and effect;
the Employment Agreement dated December 12, 2017, among Heartland, FBLB, FB&T and Greg Garland, the President of FB&T, will be in full force and effect;
FBLB will have provided for the distribution of the SAR Payment to all holders of SARs as of the closing date of the merger;
FBLB will have delivered to Heartland on or prior to the second business day prior to the closing date a payoff letter from The Bankers' Bank setting forth the aggregate amount of indebtedness owed to the Bankers' Bank outstanding as of the closing date and including a customary statement that, if such aggregate amount of indebtedness is paid on the closing date, such indebtedness will be repaid in full and all liens securing such closing date indebtedness will thereafter be automatically released and terminated; and
FBLB will have furnished Heartland with executed copies of Director Support Agreements, pursuant to which each non-employee director of FBLB will agree not to compete with, or solicit for employment the employees of, FBLB, FB&T or any of their affiliates or of Heartland or any of its affiliates, or to disclose any of their confidential information.

No Solicitation
FBLB has agreed that it will not, and will cause FB&T not to, and will use its best efforts to cause FBLB's and FB&T's officers, directors, employees, agents and authorized representatives not to:
solicit, initiate, encourage, induce or facilitate the making, submission or announcement of any "acquisition proposal" (as defined below), or take any action that would reasonably be expected to lead to an acquisition proposal;
furnish any information regarding FBLB or FB&T to any person in connection with or in response to an acquisition proposal or an inquiry or indication of interest that would reasonably be expected to lead to an acquisition proposal;
engage in any discussions or negotiations regarding any acquisition proposal, or that would reasonably be expected to lead to any acquisition proposal;
approve, endorse or recommend any acquisition proposal; or
enter into a letter of intent or contract contemplating any acquisition transaction.
However, prior to approval of the merger agreement by holders of two-thirds of the issued and outstanding FBLB common stock, FBLB may consider and participate in discussions and negotiations with respect to an unsolicited bona fide acquisition proposal, and furnish information regarding FBLB or FB&T in response to a "superior proposal," but only if: (1) the FBLB board of directors determines in good faith, after consultation with outside counsel, that such action is required in order to comply with its fiduciary obligations to FBLB' shareholders under applicable law; (2) the acquisition proposal did not result from any breach by FBLB of its obligations under the merger agreement relating to non-solicitation; (3) FBLB first enters into a confidentiality agreement with the party proposing the acquisition proposal and notifies Heartland of the identity of such person at least two business days before furnishing any information; and (4) FBLB also provides to Heartland any information it provides to the party proposing the acquisition proposal, at least two business days beforehand.
FBLB has also agreed:
to notify Heartland promptly (and in any event within 24 hours) of any request for information relating to an acquisition proposal and to provide Heartland with relevant information regarding the acquisition proposal or request;
to keep Heartland fully informed of the status of any such acquisition proposal (including any modifications or proposed modifications); and
to cease immediately and cause to be terminated any existing discussions with any persons regarding an acquisition proposal.

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As used in the merger agreement, "acquisition proposal" means any offer, proposal, inquiry or indication of interest contemplating or otherwise relating to (a) any merger, consolidation, share exchange, business combination, issuance of securities, acquisition of securities, tender offer, exchange offer or other similar transaction (i) in which FBLB or FB&T is involved, (ii) in which any person or group (as defined in the Securities Exchange Act of 1934 and the rules promulgated thereunder (the "Exchange Act")) acquires beneficial or record ownership of more than 15% of outstanding securities of any class of voting securities of FBLB or FB&T, or (iii) in which FBLB or FB&T sells more than 20% of outstanding securities of any class of its voting securities, or (b) any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets that constitute or account for 20% or more of the consolidated net revenues, net income or assets of FBLB, except transactions in the ordinary course of business.
As used in the merger agreement, "superior proposal" means any acquisition proposal by a third party on terms which the board of directors of FBLB determines in its good faith judgment, after consultation with, and receipt of written advice from, its financial advisors (which advice will be communicated to Heartland), to be more favorable from a financial point of view to its shareholders than the merger and the other transactions contemplated by the merger agreement, (a) after taking into account the likelihood of consummation of such transaction on the terms set forth therein, taking into account all legal, financial (including the financing terms of any such proposal), regulatory and other aspects of such proposal, and any other relevant factors permitted under applicable law, (b) after giving Heartland at least five Business Days to respond to such third-party acquisition proposal once the board of directors of FBLB has notified Heartland that in the absence of any further action by Heartland it would consider such acquisition proposal to be a superior proposal, and then (c) after taking into account any amendment or modification to the merger agreement proposed by Heartland.
Termination
Termination by Heartland or FBLB. Either Heartland or FBLB may decide to terminate the merger agreement:
if the boards of directors of Heartland and FBLB mutually consent to the termination of the merger agreement;
if there is a law or governmental order that prohibits the merger; or
if a governmental entity has denied the approval of the merger on a final and non-appealable basis.

Termination by FBLB. FBLB may decide to terminate the merger agreement:

if the merger has not been completed by July 31, 2018, unless FBLB has failed to comply fully with its obligations under the merger agreement;
if Heartland has or will have breached any representation, warranty or agreement in any material respect and such breach cannot be or is not cured within 30 days after written notice of the breach is given;
if holders of at least two-thirds of the issued and outstanding shares of FBLB common stock fail to approve the merger at the special meeting; or
if FBLB has breached any of the provisions of its covenant not to solicit superior proposals.
FBLB also may terminate the merger agreement pursuant to a "walk-away" right at any time within five business days after the determination date, if both of the following conditions are met:

the volume weighted average closing price of Heartland common stock during the 15 trading days ending on, and including, the trading day immediately preceding the 10th day prior to the Heartland determination date stock price is below $41.37; and
the ratio of the Heartland determination date stock price to $50.15, the closing price of Heartland common stock on the trading day immediately prior to the date of the merger agreement, is less than the ratio of the average daily closing value of the Index during the same time period used to calculate the Heartland determination date stock price, to the closing value of the Index on the trading day immediately prior to the date of the merger agreement, after subtracting 0.175 from the second ratio.
 
However, FBLB's written notice to terminate the merger agreement will have no force and effect if Heartland exercises its "top-up" option and agrees in writing within five business days to increase the original exchange ratio to an amount equal to:

41


the original exchange ratio (3.0394 shares of Heartland common stock for each share of FBLB common stock), divided by the Heartland determination date stock price, and
multiplied by $41.37.

Alternatively, Heartland may retain the original exchange ratio, and increase cash consideration so that FBLB shareholders are entitled to receive the same value for each share of FBLB common stock as the holder would have received had the original exchange ratio been increased as described above. Because the "walk-away" formula is dependent on the future price of Heartland common stock and the Index, it is not possible to determine what the adjusted merger consideration would be at this time, but, in general, more cash or more shares of Heartland common stock would be issued to take into account the extent to which the Heartland determination date stock price is less than $41.37.

Termination by Heartland. Heartland may terminate the merger agreement:
if the merger has not been completed by July 31, 2018, unless Heartland has failed to comply fully with its obligations under the merger agreement;
if FBLB has or will have breached any representation, warranty or agreement in any material respect and such breach cannot be or is not cured within 30 days after written notice of the breach is given;
if holders of at least two-thirds of the issued and outstanding shares of FBLB common stock fail to approve the merger at the special meeting; or
if any of the mutual conditions or Heartland's conditions to complete the merger become impossible to satisfy (other than through a failure of Heartland to comply with its obligations under the merger agreement.
Termination Fee and Payment of Expenses
If the merger agreement is terminated and abandoned for any reason other than fraud or willful breach, it will become void and there will be no liability on the part of Heartland, FBLB or their respective representatives, except that designated provisions of the merger agreement will survive the termination, including provisions relating to the payment of expenses and/or a termination fee in the circumstances described below.
Heartland and FBLB must reimburse the other party for out-of-pocket expenses (in an amount not to exceed $750.000 in the aggregate) in connection with the preparation, negotiation, execution and performance of the merger agreement as follows:
Heartland must pay to FBLB all out-of-pocket expenses incurred by FBLB in the event Heartland has breached a representation, warranty or agreement contained in the merger agreement in any material respect, and such breach is not or cannot be cured in a 30-day period.
FBLB must pay to Heartland all out-of-pocket expenses incurred by Heartland if the merger agreement is terminated because the merger agreement has not been adopted by the requisite vote of the shareholders of FBLB at the special meeting, or because FBLB has breached a representation, warranty or agreement contained in the merger agreement in any material respect, and such breach is not or cannot be cured in a 30-day period.
FBLB must pay a termination fee of $7.4 million in cash if the merger agreement is terminated:
by FBLB because it has determined to enter into an agreement with another acquirer that has submitted a superior proposal;
by Heartland if FBLB has breached its agreement to call a meeting of shareholders and to recommend that its shareholders adopt the merger agreement at such meeting; or
by Heartland if FBLB has breached any of its covenants relating to solicitation of a superior proposal.

If FBLB is required to pay the termination fee, FBLB will not be obligated to reimburse Heartland for its out-of-pocket expenses.
Other Covenants and Agreements
FBLB has undertaken customary covenants that place restrictions on it and FB&T until the completion of the merger. In general, FBLB has agreed to, and has agreed to cause each of its subsidiaries to, conduct its business in the ordinary course consistent with past practice, preserve intact in all material respects its business organization and the goodwill, use commercially reasonable efforts to keep available the services of its officers, employees and consultants, and maintain

42


satisfactory relationships with vendors, customers and others having business relationships with it. Also, subject to applicable laws, FBLB has agreed to confer on a regular and frequent basis with representatives of Heartland to report operational matters and the general status of ongoing operations as reasonably requested by Heartland. In addition, FBLB has agreed to not take any action that would render any representation or warranty made by FBLB in the merger agreement untrue on the closing date of the merger.
FBLB has further agreed that, except with Heartland's prior written consent, FBLB will not, and will cause FB&T not to, among other things, undertake any of the following actions:
amend or propose to amend its articles of incorporation or bylaws;
issue or sell any of its equity securities, securities convertible into or exchangeable for its equity securities, warrants, options or other rights to acquire its equity securities, or any bonds or other securities, except deposit and other bank obligations in the ordinary course of business;
redeem, purchase, acquire or offer to acquire any shares of capital stock of FBLB or any of its subsidiaries;
split, combine or reclassify any outstanding shares of capital stock of FBLB or any of its subsidiaries, or declare, set aside or pay any dividends or other distribution on any such shares of capital stock, except that FB&T may pay dividends to FBLB in the ordinary course of business, and FBLB may pay dividends in the ordinary course of business for the sole purpose of providing FBLB shareholders with funds to pay taxes on the income of FBLB;
incur any material indebtedness, except in the ordinary course of business;
discharge or satisfy any material encumbrance on its properties or assets or pay any material liability, except otherwise in the ordinary course of business;
sell, assign, transfer, mortgage, pledge or subject to any lien or other encumbrance any of its assets, except in the ordinary course of business;
cancel any material indebtedness or claims or waive any rights of material value, except in the ordinary course of business;
acquire (by merger, exchange, consolidation, acquisition of stock or assets or otherwise) any corporation, partnership, joint venture or other business organization or division or material assets thereof, or assets or any real estate or assets or deposits that are material to FBLB, except in exchange for indebtedness previously contracted, including other real estate owned;
make any single or group of related capital expenditures or commitments therefor in excess of $50,000 or enter into any lease or group of related leases with the same party which involves aggregate lease payments of more than $50,000 for any individual lease or involves more than $100,000 for any group of related leases in the aggregate;
change its accounting methods, other than changes required by GAAP or regulatory accounting principles;
cancel or terminate its current insurance policies or allow any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies providing coverage equal to or greater than the coverage under the canceled, terminated or lapsed policies for substantially similar premiums are in full force and effect;
enter into or modify any employment, severance or similar agreements or arrangements with, or grant any compensation increases to, any director, officer or management employee, except in the ordinary course of business;
enter into or modify any independent contractor or consultant contract outside the ordinary course of business in a manner that requires annual payments in excess of $100,000;
terminate the employment of any employee of FBLB or its subsidiaries, other than in the ordinary course of business;
terminate or amend any bonus, profit sharing, stock option, restricted stock, pension, retirement, deferred compensation, or other employee benefit plan, trust, fund, contract or arrangement for the benefit or welfare of any employees, except as contemplated under the merger agreement or as required by law;
make, modify or revoke any election with respect to taxes, consent to any waiver or extension of time to asses or collect any taxes, file any amended returns or file any refund claim;
enter into or modify any material contract with respect to the matters described in this section;
extend credit or enter into any commitment to extend credit, except in the ordinary course of business and in accordance with the lending practices of FB&T as disclosed to Heartland, or extend credit in excess of $500,000 on an unsecured basis or $1,000,000 on a secured basis, or in any amount to a borrower with a loan listed on the

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watch list, except, in each case after providing Heartland with prior written notice of such extension of credit and a copy of the loan underwriting analysis and credit memorandum and the basis of the credit decision;
sell, assign or otherwise transfer any participation in any loan without providing Heartland with prior written notice of such sale, assignment or other transfer; or
sell any equity securities in its investment portfolio.
Representations and Warranties
The merger agreement contains representations and warranties by each of FBLB and Heartland. Among others, FBLB's representations and warranties to Heartland cover the following:
corporate matters, including organization, standing and power;
authority relative to execution and delivery of the merger agreement, and the absence of conflicts with, or violations of, organizational documents, contracts or laws as a result of the merger;
the fact that the approval of holders of two-thirds of the issued and outstanding shares of FBLB common stock is the only vote required of any holders of FBLB capital stock with respect to the merger agreement;
capitalization;
ownership of FBLB common stock and the holders of the SARs;
financial statements;
absence of undisclosed liabilities;
FB&T loans, substandard loans, other real estate owned and commitments to extend credit;
allowance for loan and lease losses;
deposits;
reports and filings with federal and state banking authorities;
subsidiaries, interests in limited liability companies and off balance sheet arrangements;
the correctness of its books and records;
the absence of material adverse changes or events since September 30, 2017;
the absence of certain material actions and developments since September 30, 2017;
ownership and leases of real and personal property;
intellectual property;
environmental liability;
Community Reinvestment Act compliance;
information security;
taxes;
material contracts and commitments;
litigation;
financial advisors and brokers;
employee and labor matters;
employee benefit plans;
governance and administration of the KSOP;
insurance matters;
transactions with affiliates;
permits and compliance with laws;
absence of fiduciary accounts;
interest rate risk management instruments;
absence of guarantees;
absence of circumstances that would prevent regulatory approvals being obtained;
the fairness opinion of Stephens;
transactions in securities; and
registration obligations.

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Heartland’s representations and warranties to FBLB cover the following:
corporate matters, including organization, standing and power;
authority relative to execution and delivery of the merger agreement and the absence of conflicts with, or violations of, organizational documents, contracts or laws as a result of the merger;
validity of Heartland common stock to be issued pursuant to the merger;
capitalization;
accuracy of filings with the SEC;
the absence of any material adverse change since September 30, 2017;
reports and filings with federal and state banking regulatory authorities, and compliance with laws;
Community Reinvestment Act compliance;
the absence of circumstances that would prevent regulatory approvals being obtained;
the absence of any action that would cause the merger to fail to qualify for the tax treatment described in this proxy statement/prospectus;
the absence of any litigation that would prevent, enjoin, alter or materially delay the merger;
the financial capacity to pay the cash component of the merger consideration;
internal controls;
compliance with Nasdaq rules and regulations; and
financial advisors and brokers.
The representations described above and included in the merger agreement were made for purposes of the merger agreement and are subject to qualifications and limitations agreed by the respective parties in connection with negotiating the terms of the merger agreement. In addition, certain representations and warranties were made as of a specific date, may be subject to a contractual standard of materiality different from what might be viewed as material to shareholders, or may have been used for purposes of allocating risk between the respective parties rather than establishing matters as facts. This description of the representations and warranties, and their reproduction in the copy of the merger agreement attached to this proxy statement/prospectus as Appendix A, are included solely to provide investors with information regarding the terms of the merger agreement. Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead should only be read together with the information provided elsewhere in this proxy statement/prospectus and in the documents incorporated by reference into this proxy statement/prospectus, including the periodic and current reports and statements that Heartland files with the SEC. See the section titled "Where You Can Find More Information" beginning on page 55.
Expenses and Fees
In general, except as described in the section titled "The Merger Agreement—Termination Fee and Payment of Expenses," each party will be responsible for all expenses incurred by it in connection with the negotiation and completion of the transactions contemplated by the merger agreement. However, Heartland will pay the filing fees and printing and mailing costs in connection with the preparation and distribution of this proxy statement/prospectus and the filings with bank regulatory authorities.
Amendment or Waivers
The merger agreement may only be amended by written agreement, signed by both Heartland and FBLB. Any provisions of the merger agreement may be waived by the party benefited by those provisions.
INFORMATION ABOUT FBLB
Overview
FBLB is a bank holding company headquartered in Lubbock, Texas. Through its wholly-owned banking subsidiary, FB&T, a Texas state non‑member bank, FBLB provides a broad range of financial products and services tailored to meet the needs of small to medium-sized businesses, professionals and retail customers who live or do business in its markets. FB&T operates from eight locations in West Texas, with four banking offices in Lubbock, Texas and one banking office in each of Tahoka, Wilson, Colorado City and Snyder, Texas. Through its subsidiary, PrimeWest, FB&T also engages in mortgage lending in Lubbock, the Permian Basin and across parts of north Texas. As of December 31, 2017, FBLB had approximately

45


$930.1 million in total assets, total loans held to maturity of $669.3 million, total deposits of $821.4 million and shareholders' equity of $87.7 million.
FBLB's principal executive office is located at 9816 Slide Road, Lubbock, Texas 79424, and its telephone number is (806) 788-2800.
Beneficial Ownership Information
The following table sets forth information about the beneficial ownership of FBLB common stock as of March 19, 2018 by (1) each shareholder known by FBLB to be the beneficial owner of more than 5% of the outstanding shares of FBLB, (2) each director and executive officer of FBLB, FB&T or PrimeWest, and (3) all of the directors and executive officers of FBLB, FB&T and PrimeWest, as a group. The number of shares indicated as beneficially owned in the table below, and the percentage ownership information, has been determined in accordance with federal securities laws. In general, beneficial ownership includes shares owned by spouses, minor children and other relatives residing in the same household, as well as trusts, partnerships, corporations or deferred compensation plans which are affiliated with the principal. Except as indicated in the footnotes below, FBLB believes, based on its books and records and other information furnished to it, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws. The ownership percentages in the table are based on 1,083,275 shares of FBLB common stock outstanding as of April 6, 2018. Unless otherwise noted, the address for each shareholder listed below is the address of FBLB's principal office, which is 9816 Slide Road, Lubbock, Texas 79424. Beneficial ownership representing less than 1% is denoted with an asterisk (*).
Name and Position with FBLB, FB&T or PrimeWest(1)
 
Shares Beneficially Owned
 
Percent of Class
5% Shareholders
 
 
 
 
 
Barry Orr, Chairman, President, Chief Executive Officer and Director of FBLB
 
85,208

(2) 
 
7.87
%
Nancy Scholz
 
58,000

 
 
5.35
%
Directors and Executive Officers (Other than Barry Orr)
 
 
 
 
 
Drew Anderson, Executive Vice President and Chief Lending Officer of FB&T
 
10,520

 
 
0.97
%
Barry Brown, Director of FBLB
 
53,654

 
 
4.95
%
Duncan Burkholder, Director of FBLB
 
25,650

 
 
2.37
%
Abel Castro, Executive Vice President and Business Development Officer of FB&T
 
8,629

(2) 
 
0.80
%
Bill deTournillon, Director of FBLB and President of PrimeWest
 
18,804

(2)(3) 
 
1.74
%
Greg Garland, Executive Vice President and Director of FBLB
 
16,838

(2) 
 
1.26
%
Ricky Green, Director of FBLB
 
39,208

 
 
3.62
%
J.W. Holt, Director of FBLB
 
500

 
 
0.05
%
Ken Lackey, Director of FBLB
 
11,840

 
 
1.09
%
Bruce Orr, Director of FBLB
 
34,556

 
 
3.19
%
Allyn Piland, Executive Vice President of PrimeWest
 
6,251

(2) 
 
0.58
%
Hana Robertson, Executive Vice President and Chief Deposit Officer of FB&T
 
194

(2) 
 
0.02
%
Ron Rogers, Director of FBLB
 
11,535

 
 
1.06
%
Gary Rothwell, Director of FBLB
 
25,710

 
 
2.37
%
Denise Thomas, Executive Vice President and Treasurer of FBLB
 
3,151

(2) 
 
0.29
%
Bill Waller, Executive Vice President and Chief Operations Officer of FB&T
 
7,193

(2) 
 
0.66
%
Tim White, Executive Vice President and Chief Credit Officer of FB&T
 
9,773

 
 
0.90
%
James Young, Director of FBLB
 
47,047

 
 
4.34
%
Directors and Executive Officers as a Group (19 Persons)
 
416,261

 
 
38.42
%
                                            
(1)
Positions with FBLB are identified for each shareholder, unless a shareholder's primary role is with FB&T or PrimeWest.
(2)
Includes shares of FBLB common stock held in such person’s account in the KSOP. Each such person will have the right to direct the vote of his or her shares held through the KSOP with respect to the proposal to approve the merger.
(3)
Includes 4,000 shares held of record by Mr. deTournillon's wife.


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INFORMATION ABOUT HEARTLAND
General
Heartland is a publicly-held, multi-bank holding company. At December 31, 2017, Heartland had approximately $9.81 billion of total assets, total loans held to maturity of $6.39 billion, total deposits of $8.15 billion and common stockholders' equity of $990.5 million. Heartland’s total capital as of December 31, 2017, was $991.5 million.

Heartland conducts a community banking business through 10 bank subsidiaries, which are independently chartered community banks operating in the states of Iowa, Illinois, Wisconsin, New Mexico, Arizona, Montana, Colorado, Minnesota, Kansas, Missouri, Texas and California. All bank subsidiaries of Heartland are members of the FDIC. Listed below are Heartland's current bank subsidiaries, which operate a total of 118 banking locations:

Dubuque Bank and Trust Company, Dubuque, Iowa, is chartered under the laws of the state of Iowa.
Illinois Bank & Trust, Rockford, Illinois, is chartered under the laws of the state of Illinois.
Wisconsin Bank & Trust, Madison, Wisconsin, is chartered under the laws of the state of Wisconsin.
New Mexico Bank & Trust, Albuquerque, New Mexico, is chartered under the laws of the state of New Mexico.
Rocky Mountain Bank, Billings, Montana, is chartered under the laws of the state of Montana.
Arizona Bank & Trust, Phoenix, Arizona, is chartered under the laws of the state of Arizona.
Citywide Banks, Denver, Colorado, is chartered under the laws of the state of Colorado.
Minnesota Bank & Trust, Edina, Minnesota, is chartered under the laws of the state of Minnesota.
Morrill & Janes Bank and Trust Company, Merriam, Kansas, is chartered under the laws of the state of Kansas.
Premier Valley Bank, Fresno, California, is chartered under the laws of the state of California.

Dubuque Bank and Trust Company also has two wholly-owned non-bank subsidiaries:

DB&T Insurance, Inc., a multi-line insurance agency. DB&T has one wholly-owned subsidiary, Heartland Financial USA, Inc. Insurance Services. This subsidiary is a multi-line insurance agency that provides online insurance products to consumers and small business clients in the markets in which Heartland's bank subsidiaries conduct business.
DB&T Community Development Corp., a community development company that partners with other entities in the development of low-income housing and historic rehabilitation projects.

Heartland has three active non-bank subsidiaries as listed below:

Citizens Finance Parent Co., a consumer finance company with two wholly-owned subsidiaries:
Citizens Finance Co., a consumer finance company with offices in Iowa and Wisconsin.
Citizens Finance of Illinois Co., a consumer finance company with offices in Illinois.
Heartland Community Development Inc., a property management company that holds and manages certain nonperforming assets acquired from Heartland's bank subsidiaries.
Heartland Financial USA, Inc. Insurance Services, a multi-line insurance agency that provides online insurance products to consumers and small business clients in markets in which Heartland's bank subsidiaries conduct business.

In addition, as of December 31, 2017, Heartland had trust preferred securities issued through special purpose trust subsidiaries formed for the purpose of offering cumulative capital securities, including Heartland Financial Statutory Trust IV, Heartland Financial Statutory Trust V, Heartland Financial Statutory Trust VI, Heartland Financial Statutory Trust VII, Morrill Statutory Trust I, Morrill Statutory Trust II, Sheboygan Statutory Trust I, CBNM Capital Trust I, Citywide Capital Trust III, Citywide Capital Trust IV and Citywide Capital Trust V.

Heartland completed two strategic acquisitions in 2017. In July 2017, Heartland acquired Citywide Banks of Colorado, Inc., the parent company of Citywide Banks, a Colorado state bank. Immediately after this acquisition, Citywide Banks was merged with and into Heartland's existing Colorado banking subsidiary, and the surviving bank adopted the "Citywide Banks" name. In February 2017, Heartland acquired Founders Bancorp, the parent company of Founders Community Bank, a California state bank. Founders Community Bank was merged into Premier Valley Bank, Heartland's

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California state banking subsidiary. Also, on February 23, 2018, Heartland acquired Signature Bancshares (the "Signature Bancshares Acquisition"), the parent company of Signature Bank. Signature Bank was merged into Minnesota Bank & Trust, Heartland's Minnesota banking subsidiary.

All of Heartland’s subsidiaries are wholly-owned.

The principal business of Heartland's bank subsidiaries consists of making loans to and accepting deposits from businesses and individuals. Its bank subsidiaries provide full service commercial and retail banking in their communities. Both Heartland's loans and its deposits are generated primarily through strong banking and community relationships and through management that is actively involved in the community. Heartland's lending and investment activities are funded primarily by core deposits. This stable source of funding is achieved by developing strong banking relationships with customers through value-added product offerings, competitive market pricing, convenience and high-touch personal service. Deposit products, which are insured by the FDIC to the full extent permitted by law, include checking and other demand deposit accounts, NOW accounts, savings accounts, money market accounts, certificates of deposit, individual retirement accounts, health savings accounts and other time deposits. Loan products include commercial and industrial, commercial real estate, small business, agricultural, real estate mortgage, consumer, and credit cards for commercial, business and personal use.

Heartland supplements the local services of its bank subsidiaries with a full complement of ancillary services, including wealth management, investment and insurance services. Heartland provides convenient electronic banking services and client access to account information through business and personal online banking, mobile banking, bill payment, remote deposit capture, treasury management services, debit cards and automated teller machines.

Dubuque Bank and Trust Company, Heartland’s oldest bank subsidiary, was originally incorporated in Iowa in 1935. Heartland was formed as an Iowa corporation to serve as its holding company in 1981, and Heartland reincorporated in Delaware on June 30, 1993. Heartland's principal executive offices are located at 1398 Central Avenue, Dubuque, Iowa 52001. Heartland’s telephone number is (563) 589-2100 and its website address is www.htlf.com.

Additional Information About Heartland

Additional information about Heartland and its subsidiaries is included in documents incorporated by reference in this proxy statement/prospectus. See the section titled "Where You Can Find More Information."

COMPARISON OF RIGHTS OF HOLDERS OF HEARTLAND
COMMON STOCK AND FBLB COMMON STOCK

The rights of FBLB shareholders are currently governed by the Texas Business Organizations Code (the "TBOC"), and FBLB's articles of incorporation and bylaws. Upon completion of the merger, FBLB shareholders will become shareholders of Heartland and, as such, their rights with respect to the shares received in the merger will be governed by the Delaware General Corporation Law (the "DGCL"), and Heartland's certificate of incorporation and bylaws. The following discussion summarizes the material differences between the rights of FBLB shareholders and the rights of Heartland stockholders. While Heartland and FBLB believe that the summary includes the material differences between the rights of their respective shareholders prior to the merger, this summary does not include a complete description of all of the differences between the rights of Heartland's stockholders and the rights of FBLB's shareholders, nor does it include a complete description of the specific rights of the respective shareholders discussed. You should read carefully the relevant provisions of Heartland's certificate of incorporation and bylaws and FBLB's articles of incorporation and bylaws, as well as the TBOC and DGCL, for a more complete understanding the differences in rights. This summary is qualified in its entirety by reference to the constituent documents of each company, as well as the TBOC and DGCL.
Authorized Capital Stock
Heartland. The authorized capital stock of Heartland consists of 40,000,000 shares of common stock and 200,000 shares of preferred stock, of which (1) 16,000 have been designated as Series A Junior Participating Preferred, (2) 81,698 shares have been designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series B, (3) 81,698 shares of Non-Cumulative Perpetual Preferred Stock, Series C, and (4) 3,000 shares of Senior Non-Cumulative Perpetual Convertible Preferred Stock, Series D. As of December 31, 2017, Heartland had 29,953,356 shares of outstanding common stock and 745 shares of outstanding Series D preferred stock. On February 23, 2018, Heartland issued an additional 1,001,246 shares of common stock in connection with the Signature Bancshares Acquisition.

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FBLB. The authorized capital stock of FBLB consists of 2,000,000 shares of common stock and 1,000,000 shares of preferred stock. As of April 6, 2017, FBLB had 1,083,075 shares of outstanding common stock.
Size of Board of Directors
Heartland. The DGCL provides that the board of directors of a business corporation will consist of one or more members, each of whom will be a natural person, and that the number of directors will be fixed by, or in the manner provided in, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change will be made only by amendment. Heartland’s certificate of incorporation provides that the number of directors will not be less than three nor more than nine. Heartland will propose an amendment to its certificate of incorporation to increase the maximum number of directors from 9 to 11 at its 2018 annual meeting of stockholders.
FBLB. The TBOC provides that the board of directors will consist of one or more directors. The number of directors will be fixed by or in the manner provided in the certificate of formation or bylaws. FBLB's bylaws provide that the number of directors will consist of not less than one and not more than 40 members elected by the shareholders at the annual meeting.
Qualifications of Directors
Heartland. The DGCL provides that directors need not be stockholders unless otherwise required by the certificate of incorporation or the bylaws, and that other qualifications of directors may be prescribed in the certificate of incorporation or the bylaws.
The Heartland bylaws provide that directors need not be residents of Delaware or the United States or stockholders of the corporation. Heartland's certificate of incorporation and bylaws provide that a person will not be eligible for election to the board of directors if such person is 70 years of age or older on the date of such election, provided, however, that such restriction does not apply to any incumbent directors who attained the age of 65 years prior to January 1, 1993. Heartland will propose an amendment to its certificate of incorporation to increase the maximum age at which a person may be elected a director from 70 to 72 at its 2018 annual meeting of stockholders.
FBLB. Under the TBOC, a director is not required to be a resident of the State of Texas or a shareholder of the corporation, unless otherwise required by the corporation's certificate of formation or bylaws. FBLB's bylaws similarly provide that directors need not be residents of the State of Texas or shareholders of FBLB.
Filling Vacancies on the Board
Heartland. The DGCL provides that, unless the certificate of incorporation or bylaws state otherwise, a majority of the directors then in office (although less than a quorum) or the sole remaining director may fill any vacancy on the board of directors including newly created directorships resulting from an increase in the number of directors.
Heartland's bylaws provide that vacancies may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, by the nominating and compensation committee, or by the sole remaining director.
FBLB. The TBOC provides that a vacancy on the board of directors may be filled by election at an annual or special meeting of the shareholders called for that purpose or by the affirmative vote of the majority of the remaining directors then in office, even if the remaining directors constitute less than a quorum of the board of directors.
FBLB's bylaws provide that a vacancy on the board of directors may be filled by the vote of a majority of the remaining directors then in office.
Removal of Directors
Heartland. Under the DGCL, directors may be removed, with or without cause, by the holders of a majority of the shares entitled to vote on their election; however, in the case of a corporation whose board of directors is classified, stockholders may effect such removal only for cause unless the certificate of incorporation otherwise provides.
Heartland's certificate of incorporation provides that a director may only be removed for cause and by an affirmative vote of 70% of the outstanding shares entitled to vote generally in the election of directors at an annual meeting of stockholders or a meeting of the stockholders called for that purpose.

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FBLB. Unless otherwise provided in the certificate of formation or the bylaws of a corporation, the TBOC provides that at any meeting of shareholders called expressly for the purpose of removing a director, any director or the entire board of directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at any election of directors.
FBLB's articles of incorporation and bylaws do not specify procedures with respect to the removal of directors.
Nomination of Directors for Election
Heartland. If a stockholder wishes to nominate a person for election as director, the stockholder must give timely notice in proper written form to the Secretary of Heartland. To be timely, such stockholder notice must be received by the Secretary at Heartland's principal executive offices not later than the close of business on the 30th day nor earlier than the opening of business on the 75th day before the meeting; provided, however, that in the event the notice of the meeting is given less than 40 days before the meeting, notice must be received not later than 10 days after the date that notice of the meeting was given. To be in proper written form, such stockholder's notice must be in writing and contain information regarding the nominee to the board of directors and the stockholder bringing the nomination and other information specified in Heartland's bylaws.
FBLB. FBLB's bylaws do not specify procedures with respect to the nomination of directors.
Fiduciary Duty of Directors
Heartland. Directors of Delaware corporations have fiduciary obligations to act in accordance with the so-called duties of "due care" and "loyalty." The duty of care requires that the directors act in an informed and deliberative manner and to inform themselves, prior to making a business decision, of all material information reasonably available to them. The duty of loyalty requires the directors to act in good faith, not out of self-interest and in a manner that the directors reasonably believe to be in the best interests of the corporation.
FBLB. In Texas, the fiduciary duties of directors have been characterized as including duties of loyalty (including good faith), care and obedience, and these duties are owed to the corporation and its shareholders collectively.
Stockholder and Shareholder Meetings
Heartland Annual Meetings. Under Heartland's bylaws an annual meeting of the stockholders must be held on the Wednesday following the third Tuesday of May each year or on such other date as the board of directors may determine.
Heartland Special Meetings. Under the DGCL, a special meeting may be called by the board of directors or by other persons authorized by the certificate of incorporation or the bylaws. Heartland's bylaws provide that special meetings of the stockholders may be called by the chairman of the board, the vice chairman of the board, the president, the board, or at the written request of stockholders representing a majority of outstanding voting shares.
FBLB Regular Meetings. Under FBLB's bylaws, a regular meeting of the shareholders will be held at such time as specified by the board of directors, but in no event will such meeting be held later than May 15th of each calendar year.
FBLB Special Meeting. The TBOC provides that special meetings of the shareholders of a corporation may be called by the president, by the board of directors or by any other person authorized to call special meetings by the certificate of formation or bylaws of the corporation. A special meeting may also be called by the percentage of shares specified in the certificate of formation, not to exceed 50% of the shares entitled to vote, or if no percentage is specified, at least 10% of all of the shares of the corporation entitled to vote at the proposed special meeting. Under FBLB's bylaws, special meetings of the shareholders may be called by the president, the board of directors or by the president at the request of the holders of at least 10% of all of the shares of the corporation entitled to vote at the proposed special meeting, unless otherwise prescribed by law.
Submission of Shareholder Proposals
Heartland. Heartland's bylaws provide that a stockholder must give notice to the secretary of Heartland not less than 30 days nor more than 75 days prior to the date of the originally scheduled meeting in order to bring business before an annual meeting. The notice must set forth as to each matter the stockholder proposes to bring before the meeting: (1) a description of the proposal and the reasons for the proposal; (2) the name and address of the proposing stockholder; (3) the number of shares of Heartland's common stock beneficially owned by the stockholder; and (4) any interest of the stockholder in the proposal.

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FBLB. FBLB's bylaws do not specify procedures with respect to business that may be brought by a shareholder at a meeting of shareholders. 
Notice of Shareholder Meetings
Heartland. Heartland's bylaws provide that it will notify stockholders of the place, date, and time of a meeting not less than 10 nor more than 60 days before the date of the meeting or in the case of a merger or consolidation of Heartland requiring stockholder approval or a sale, lease or exchange of all or substantially all of Heartland's property and assets, not less than 20 nor more than 60 days before the date of meeting. If the notice is for a meeting other than the annual meeting, the notice will also specify the purpose or purposes for which the meeting is called.
FBLB. FBLB's bylaws provide that the corporation will notify those shareholders entitled to vote of the date, time and place of each shareholders meeting not less than 10 nor more than 50 days before the meeting date. Notice of special shareholders' meeting must include the purpose or purposes of the meeting, and the business transacted at all special meetings will be confined to the purpose or purposes stated in the notice (except for procedural matters). However, under the TBOC, notice of a meeting at which a fundamental business transaction is to be considered will be mailed to all shareholders of record, whether or not entitled to vote at such meeting, not less than 21 days prior to the meeting. If the fundamental business transaction to be considered is a merger, conversion or interest exchange, such notice will include a copy or summary of such plan of merger, conversion or interest exchange, as appropriate, and a notice of the right of dissent and appraisal.
Shareholder Vote Required for Mergers and Sales
Heartland. The DGCL generally requires that a merger or consolidation or sale, lease or exchange of all or substantially all of a corporation's property and assets be approved by the directors and by a majority of the outstanding stock entitled to vote thereon. Under the DGCL, a surviving bank need not obtain stockholder approval for a merger if: (1) the merger agreement does not amend the certificate of incorporation of the surviving bank; (2) each share of the surviving bank's stock outstanding prior to the merger remains outstanding in identical form after the merger; or (3) either no shares of common stock of the surviving bank are to be issued in the merger, or, if common stock will be issued, it will not increase the number of shares of common stock outstanding prior to the merger by more than 20%.
In addition, the DGCL permits the merger of one corporation, of which at least 90% of the outstanding shares of each class is owned by another corporation, with or into the other corporation, without shareholder approval of either corporation.
Heartland's certificate of incorporation provides that a merger or consolidation or a sale, lease or exchange of all or substantially all of Heartland's property and assets requires the affirmative vote of 70% of Heartland's voting shares unless such transaction (1) is approved by resolution adopted by not less than two-thirds of Heartland's board of directors, (2) is with a corporation of which the majority of the outstanding shares are owned by Heartland, or (3) does not require stockholder approval under the DGCL.  
FBLB. The TBOC generally requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of the corporation entitled to vote to approve a fundamental business transaction, unless a different vote, but not less than a majority of the shares entitled to vote on the matter, is specified in the certificate of formation. Under the TBOC, fundamental business transactions include mergers, conversions, exchanges and sales of all or substantially all of assets.
FBLB's articles of incorporation do not provide for any lesser voting requirements for fundamental business transactions, and its bylaws expressly defer to the voting requirements provided in the TBOC.
Distributions
Heartland. The DGCL allows the board of directors to declare and pay dividends and other distributions to stockholders either out of surplus, or out of net profits for the current or preceding fiscal year in which the dividend is declared. A distribution out of net profits is not permitted if a corporation’s capital is less than the accumulated preference of preference shares, until the deficiency has been repaired.
In addition to the restrictions discussed above, Heartland's ability to pay dividends to its stockholders may be affected by rules, regulations and policies of the Federal Reserve applicable to bank holding companies.
Under the Certificate of Designation of its Series D Preferred Stock, Heartland is prohibited from paying dividends on any shares of parity stock or junior stock (other than a dividend payable solely in shares of junior stock) or redeeming shares of parity stock or junior stock if it has failed to pay dividends on such Series D Preferred Stock.

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FBLB. The TBOC allows the board of directors to make a distribution if such distribution would not violate the corporation's certificate of formation, cause the corporation to be insolvent following such distribution or exceed the surplus of the corporation available for distributions. In addition, FBLB's bylaws provide the board of directors with authority to set aside funds of the corporation that would otherwise be available for distributions to reserve against contingencies. FBLB's articles of incorporation and bylaws do not provide any other special requirements for issuing dividends.
In addition to the restrictions discussed above, FBLB's ability to pay dividends to its shareholders may be affected by rules, regulations and policies of the Federal Reserve applicable to bank holding companies.
Preemptive Rights
Heartland. Under the DGCL, shareholders do not have preemptive rights unless expressly provided in the corporation's certificate of incorporation. Heartland's certificate of incorporation and bylaws do not provide for preemptive rights.
FBLB. Under the TBOC, shareholder do not have preemptive rights unless expressly provided in the corporation's certificate of formation. FBLB's articles of incorporation and bylaws do not provide for preemptive rights.
Shareholder Actions Without a Meeting
Heartland. Under the DGCL, unless otherwise provided in the certificate of incorporation, stockholders may act without a meeting if a written consent is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
Heartland's certificate of incorporation and bylaws provide that stockholders may act without a meeting if a written consent is signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on such action were present and voted.
FBLB. Under the TBOC, shareholders may act without a meeting if a written consent is signed by all of the shareholders entitled to vote on the matter, unless the corporation's certificate of formation allow less than unanimous consent (but not less that the number of votes necessary to take the action at the meeting).
FBLB's articles of incorporation provide that shareholders may act without a meeting if a written consent is signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on such action were present and voted.
Dissenters' Rights of Appraisal
Heartland. Under the DGCL, stockholders have appraisal rights in connection with mergers and consolidations, provided the stockholder complies with certain procedural requirements of the DGCL. However, this right to demand appraisal does not apply to shares of any class or series of stock if, at the record date fixed to determine the stockholders entitled to receive notice of and to vote:
the shares are listed on a national securities exchange; or
the shares are held of record by more than 2,000 stockholders.

Further, no appraisal rights are available for shares of stock of a constituent corporation surviving a merger if the merger does not require a vote of the stockholders of the surviving bank.
Regardless of the above, appraisal rights are available for the shares of any class or series of stock if the holders are required by the terms of an agreement of merger or consolidation to accept for their stock anything other than:
shares of stock of the corporation surviving or resulting from the merger or consolidation;
shares of stock of any other corporation which, at the effective date of the merger or consolidation, will be listed on a national securities exchange, or held of record by more than 2,000 stockholders;
cash in lieu of fractional shares of the corporations described in either of the above; or
any combination of the shares of stock and cash in lieu of fractional shares described in any of the three above.


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FBLB. Under the TBOC, a shareholder of a corporation is entitled to (1) dissent from a fundamental business transaction and (2) subject to compliance with the procedures set forth in the TBOC, obtain the fair value of the shareholder's ownership interest through an appraisal. The TBOC further provides that there is no right of dissent in favor of the holders of shares listed on a national securities exchange under certain circumstances depending on the consideration to be received pursuant to the terms of the plan of merger, conversion or exchange. The procedures for exercising dissenters' rights in Texas are more fully described in the section entitled "Dissenters' Rights of FBLB Shareholders."
Shareholder Class Voting Rights
Heartland. The DGCL provides that unless otherwise provided in a corporation's certificate of incorporation, each stockholder is entitled to one vote for each share of capital stock held by such stockholder.
Holders of the Series D Preferred Stock have the right to vote with the common stockholders, on a converted basis and as a single class, upon any amendment to the certificate of incorporation that would adversely affect their powers, preferences or special rights.
FBLB. The TBOC provides that unless otherwise provided in a corporation's certificate of formation, each shareholder is entitled to one vote for each share held.
Indemnification
Heartland. A Delaware corporation is required to indemnify a present or former director or officer against expenses actually and reasonably incurred in an action that such person successfully defends on the merits or otherwise.
A corporation may indemnify any director, officer, employee or agent who is or is threatened to be made a party to a non-derivative proceeding against expenses, judgments and settlements incurred in connection with the proceeding, provided the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful. A director, officer, employee or agent made or threatened to be made a party to a derivative action can be indemnified to the same extent, except that indemnification is not permitted with respect to claims in which the person has been adjudged liable to the corporation unless the court determines to allow indemnity for expenses.
Any permissive indemnification of a present or former director, officer, employee or agent, unless ordered by a court, will be made by the corporation upon a determination by: (2) a majority vote of the disinterested directors even though less than a quorum; (2) a committee of disinterested directors, designated by a majority vote of such directors even though less than a quorum; (3) independent legal counsel in a written opinion; or (4) the stockholders. The statutory rights regarding indemnification are not exclusive.
Heartland's bylaws provide that Heartland will indemnify a director or officer made party to a proceeding by reason of the fact that he or she is or was a director or officer of the corporation against expenses, judgments, fines and settlements in the circumstances that the Delaware statute allows, and under the authority of one of the groups specified above, excluding independent legal counsel.
FBLB. Generally, Chapter 8 of the TBOC permits a corporation to indemnify a person who was, is, or is threatened to be made a named defendant or respondent in a proceeding because the person was or is a director or officer if it is determined that such person (1) conducted himself in good faith, (2) reasonably believed (i) in the case of conduct in his official capacity as a director or officer of the corporation, that his conduct was in the corporation’s best interest, or (ii) in other cases, that his conduct was not opposed to the corporation’s best interests, and (3) in the case of any criminal proceeding, did not have reasonable cause to believe that his conduct was unlawful. In addition, the TBOC requires a corporation to indemnify a director or officer for any action that such director or officer is wholly successful, on the merits or otherwise, in the defense of the proceeding.
FBLB's articles of incorporation and bylaws provide for indemnification of directors and officers to the fullest extent allowed by Texas law. Such indemnification may include expenses incurred in defending a proceeding in advance of its final disposition upon receipt of a written undertaking by such director or officer to repay such amounts if it is determined by final disposition of such proceeding that he or she is not entitled to indemnification by FBLB.

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Limitations on Directors' Liability
Heartland. Under the DGCL, a Delaware corporation's certificate of incorporation may eliminate director liability for all acts except: (1) an act or omission not in good faith or that involves intentional misconduct or knowing violation of the law; (2) a breach of the duty of loyalty; (3) improper personal benefits; or (4) certain unlawful distributions. Heartland’s certificate of incorporation contains such an exculpatory provision.
FBLB. Under the TBOC, the certificate of formation of a corporation may provide that directors and officers of the corporation are not liable to the corporation or its owners for monetary damages for an act or omission by such persons in their capacities as directors and officers. FBLB's articles of incorporation provide that a director of FBLB will not be liable to the corporation or its shareholders for monetary damages for an act or omission in the director's capacity as a director to the fullest extent permitted by law, except it does not eliminate or limit the liability of a director for: (1) a breach of the director’s duty of loyalty; (2) acts or omissions not in good faith that (i) constitute a breach of the director’s duty to the corporation or (ii) involve intentional misconduct or a knowing violation of law; (3) any transaction from which the director derived an improper personal benefit; or (4) acts or omissions for which the liability of a director is expressly provided by an applicable statute.
Amendment of Certificate or Articles of Incorporation
Heartland. Under the DGCL and unless the certificate requires a greater value, an amendment to the certificate of incorporation may be adopted by holders of a majority of the voting shares at a meeting at which a quorum is present, provided that, a class of stockholders has the right to vote separately on an amendment if it would: (1) increase or decrease the aggregate number of authorized shares of the class; (2) increase or decrease the par value of the shares of the class; or (3) adversely change the powers, preferences, or special rights of the shares of the class.
The Heartland certificate of incorporation provides that the provisions regarding (1) amendment to bylaws and certificate of incorporation, (2) the size, qualifications and classes of the board of directors, (3) additional voting requirements, (4) business combinations with interested stockholders, and (5) stockholder action by written consent, will not be amended, changed or repealed unless approved by the affirmative vote of the holders of shares having at least 70% of the voting power of all outstanding stock entitled to vote thereon, unless such amendment, change or repeal was approved by at least two-thirds of the directors.
FBLB. Under the TBOC, a corporation’s certificate of formation may be amended by the affirmative vote of the holders of two-thirds of the outstanding shares entitled to vote on the amendment, and, if entitled to vote by class or series of shares, by the holders of two-thirds of the outstanding shares of each class or series entitled to vote on the amendment, unless a different number, not less than a majority of shares entitled to vote on the matter or class or series entitled to vote on the matter, is specified in the corporation’s certificate of formation. An amendment that merely restates the existing certificate, as amended, may be authorized by a resolution approved by the board and may, but need not, be submitted to and approved by the shareholders.
FBLB's articles of incorporation do not provide for any special requirements for amendment of the articles of incorporation.
Amendment of Bylaws
Heartland. Under the DGCL, stockholders entitled to vote have the power to adopt, amend or repeal bylaws. In addition, a corporation may, in its certificate of incorporation, confer such power upon the board of directors. However, the stockholders always retain the power to adopt, amend or repeal the bylaws, even though the board of directors may also be delegated such power.
Heartland's certificate of incorporation and bylaws provide that the bylaws also may be amended, altered or repealed by (1) the stockholders, provided such amendment, alteration or repeal is approved by the affirmative vote of holders of not less than 70% of the outstanding shares of stock entitled to vote at an election of directors, or (2) the affirmative vote of not less than two-thirds of the directors.
FBLB. Under the TBOC, unless a corporation's certificate of formation or a bylaw adopted by the shareholders provides otherwise, a corporation's shareholders may amend the bylaws regardless of whether they may also be amended by the board of directors.
FBLB's articles of incorporation and bylaws provide that the board of directors may alter, amend or repeal the bylaws. These documents do not expressly restrict the shareholders from altering, amending or repealing the bylaws.

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Shareholder Inspection Rights
Heartland. Under the DGCL, every stockholder of record has the right to inspect, upon written demand under oath stating the stockholder's purpose for inspection, in person or by agent or attorney, the corporation's stock ledger, stockholder list, its other books and records and, subject to certain restrictions, the books and records of a subsidiary of the corporation.
FBLB. Under the TBOC, a shareholder of a Texas corporation has the right to examine the books and records of the corporation at any reasonable time upon written notice stating a proper purpose if it (1) has been a shareholder for six months or (2) holds at least five percent of its outstanding shares.
CERTAIN OPINIONS

The validity of the Heartland common stock offered by this proxy statement/prospectus has been passed upon for Heartland by Dorsey & Whitney LLP.
Fenimore, Kay, Harrison & Ford, LLP has delivered an opinion concerning material federal income tax consequences of the merger. See the section titled "Regulatory Matters and Tax Consequences and Accounting Treatment of the Merger—Material U.S. Federal Income Tax Consequences of the Merger" on pages 29 to 32.
EXPERTS

The consolidated financial statements of Heartland Financial USA, Inc. as of December 31, 2017 and 2016, and for each of the years in the three-year period ended December 31, 2017, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2017, have been incorporated by reference herein and in the registration statement in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION

Heartland files annual, quarterly and current reports, proxy statements and other information with the SEC. Heartland’s SEC filings are available to the public through the Internet at the SEC web site at http://www.sec.gov. You may also read and copy any document Heartland files with the SEC at the SEC's public reference room at 100 F Street, N.E., Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference facilities and their copy charges. You may also obtain copies of Heartland's SEC filings at the office of The Nasdaq Stock Market located at One Liberty Plaza, 165 Broadway, New York, NY 10006. For further information on obtaining copies of Heartland's public filings at The Nasdaq Stock Market, you should call 1-212-401-8700.
The SEC allows Heartland to incorporate by reference into this proxy statement/prospectus the information it files with the SEC. This allows Heartland to disclose important information to you by referencing those filed documents. Heartland has previously filed the following documents with the SEC and is incorporating them by reference into this proxy statement/prospectus:

Heartland's Annual Report on Form 10-K for the year ended December 31, 2017;
Heartland's definitive Proxy Statement for its annual meeting of shareholders to be held on May 16, 2018; and
the description of Heartland's common stock and preferred share purchase rights included in its registration statements on Form 8-A filed with the SEC, including any amendment or reports filed for the purpose of updating such description, and in any other registration statement or report filed by us under the Exchange Act, including any amendment or report filed for the purpose of updating such description.

Heartland is also incorporating by reference any future filings made by it with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial filing of the registration statement of which this proxy statement/prospectus is a part and prior to the date of the FBLB special meeting on May 15, 2018. The most recent information that Heartland files with the SEC automatically updates and supersedes more dated information.
    

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You can obtain a copy of any documents which are incorporated by reference in this proxy statement/prospectus or any supplement at no cost by writing or telephoning Heartland at:

Investor Relations
Heartland Financial USA, Inc.
1398 Central Avenue
Dubuque, Iowa 52001
(563) 589-2100
You should rely only on the information contained or incorporated by reference in this proxy statement/prospectus or any supplement hereto relating to the Heartland common stock. Heartland has not authorized anyone to provide you with different information. You should not assume that the information in this proxy statement/prospectus or any supplement is accurate as of any date other than the date on the front cover of those documents. The business, financial condition, results of operations and prospects of Heartland may have changed since those dates.

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APPENDIX A






AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 12, 2017
BY AND BETWEEN
HEARTLAND FINANCIAL USA, INC.
AND
FIRST BANK LUBBOCK BANCSHARES, INC.



A-1


TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
ARTICLE 1 DEFINITIONS
A-5
 
 
 
 
ARTICLE 2 MERGER
A-14