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Section 1: DEF 14A (DEF 14A)

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
oPreliminary Proxy Statement
oConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
xDefinitive Proxy Statement
oDefinitive Additional Materials
oSoliciting Material Pursuant to Section 240.14a-12

HEARTLAND FINANCIAL USA, INC.
(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):
x
No fee required
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1.
Title of each class of securities to which transaction applies:
2.
Aggregate number of securities to which transaction applies:
3.
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
4.
Proposed maximum aggregate value of transaction:
5.
Total fee paid:
o
Fee paid previously with preliminary materials.
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
1.
Amount Previously Paid:
2.
Form, Schedule, or Registration Statement No.:
3.
Filing Party:
4.
Date Filed:







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April 6, 2020

Dear Fellow Stockholder:
 
You are cordially invited to attend the Annual Meeting of Stockholders of Heartland Financial USA, Inc. (the “Company”.) The Annual Meeting will be a virtual meeting of stockholders conducted exclusively online via webcast, on Wednesday, May 20, 2020, at 1:00 p.m. Central Daylight Time. You will be able to attend the Annual Meeting online by visiting: www.virtualshareholdermeeting.com/HTLF2020. To participate in the Annual Meeting, you will need the 16-digit control number included in your proxy materials or Notice of Internet Availability of Proxy Materials (the "Notice").
 
At our Annual Meeting, we will discuss and vote on the matters described in the proxy materials. Your vote is important, regardless of the number of shares you own.

If you are sent a Notice but would prefer to receive the traditional printed proxy materials free of charge, please follow the instructions on the Notice to request the printed materials via U.S. mail. If you received the traditional printed proxy materials in lieu of the Notice, you may vote your shares online, by telephone, or by mail by following the instructions on the proxy card.

Sincerely,
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Lynn B. Fuller
Executive Operating Chairman

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Bruce K. Lee
President and CEO





1398 Central Avenue · Dubuque, Iowa 52001 · (563) 589-2100







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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO THE STOCKHOLDERS OF HEARTLAND FINANCIAL:
DATE AND TIME
Wednesday, May 20, 2020 at 1:00 p.m. Central Daylight Time
LOCATIONThe Annual Meeting will be a virtual meeting of stockholders conducted exclusively online via webcast. You will be able to attend the Annual Meeting online by visiting: www.virtualshareholdermeeting.com/HTLF2020. To participate in the Annual Meeting, you will need the 16-digit control number included in your proxy materials or Notice of Internet Availability of Proxy Materials.
ITEMS OF BUSINESS
(1)
Elect four individuals to serve as Class III directors for a three-year term expiring in 2023
(2)
Approve the Heartland Financial USA, Inc. 2020 Long-Term Incentive Plan
(3) Ratify the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2020
(4) Take a non-binding, advisory vote on executive compensation
(5) Transact such other business as may properly be presented at the Annual Meeting
RECORD DATEStockholders of record at the close of business on March 23, 2020, are the stockholders entitled to vote at the Annual Meeting and any adjournments or postponements of the meeting.
VOTING BY PROXYWhether or not you plan to attend the Annual Meeting, please vote your shares promptly to ensure they are represented. In the event there are an insufficient number of votes for a quorum, or to approve or ratify any of the foregoing proposals, the Annual Meeting may be adjourned or postponed in order to permit further solicitation of proxies.
þ The Board of Directors recommends a vote “FOR” the four Class III nominees for election as directors for three-year terms ending 2023, as listed in the proxy statement, and a vote “FOR” Proposals 2, 3 and 4.
By Order of the Board of Directors:
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Michael J. Coyle, Corporate Secretary
Dubuque, Iowa
April 6, 2020

The prompt return of proxies will save us the expense of further requests for proxies to ensure a quorum at the Annual Meeting. You may access our proxy materials and vote your shares online by following the instructions on the Notice. If you receive a proxy card, you may vote your shares online, by telephone, or by mail by following the instructions on your proxy card. If you hold shares through a broker or other nominee, please follow the voting instructions provided to you by that broker or other nominee.

Important notice regarding the availability of proxy materials for the Annual Meeting of Stockholders to be held on Wednesday, May 20, 2020. The proxy statement and Annual Report to Stockholders are available through the Investor Relations section of Heartland’s website at ir.htlf.com.





TABLE OF CONTENTSPage #





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PROXY HIGHLIGHTS

Business
Results
Our Company enjoyed a year of solid financial performance.
*We recorded annual net income of $149.1 million, an increase of 28% over 2018.
*Net interest margin declined to 4.00%, compared to 4.26% during 2018, as a result of the competitive interest rate environment.
*Total assets increased to $13.21 billion, an increase of 16% from year-end 2018.
Strategic
Developments
We increased our presence in key markets, and we continued our focus on strategic priorities by completing the sale of certain assets.
*We expanded our market area and asset base with our 2nd quarter acquisition of Blue Valley Ban Corp. in the Kansas City metropolitan area.
*We increased our presence in Illinois by purchasing substantially all of the assets and substantially all of the deposits and other liabilities of Rockford Bank and Trust Company in the 4th quarter.
*We sold substantially all of our mortgage servicing rights and seven bank branches across our footprint.
*We completed the purchase of our new corporate office in Dubuque, Iowa.
CompensationOur executive compensation program is designed to provide a competitive compensation package that rewards executive officers for sustained financial and operating performance that creates long-term value for our stockholders. In 2019, shareholders supported our executive compensation program by over 95% of the votes cast on the annual advisory vote on executive compensation. We transitioned to a three-year performance period for all performance-based equity awards, beginning with the 2019-2021 awards. We adopted a clawback policy, which provides for the recoupment of performance-based cash and equity incentive compensation from our executive officers and certain other employees under certain circumstances.
Corporate
Governance
Our Board of Directors carefully considers the qualifications of each director candidate and the overall composition of the Board. In 2019, our stockholders approved an amendment to our Certificate of Incorporation, increasing the size of the Board from 11 to 13 directors, primarily to increase the skill sets and the breadth and depth of experience available on the Board. Subsequently, the Board appointed two new directors. Barry H. Orr, Chairman and Chief Executive Officer of our subsidiary First Bank & Trust in West Texas, joined the Board in July 2019. Robert B. Engel, Former President and Chief Executive Officer of CoBank, ACB in the Denver metropolitan area, joined the Board in November 2019.






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PROXY STATEMENT

This proxy statement is furnished in connection with the solicitation by the Board of Directors (the "Board") of Heartland Financial USA, Inc. (“Heartland,” the “Company” or “we”) of proxies to be voted at the Annual Meeting of Stockholders. The Annual Meeting will be a virtual meeting of stockholders conducted exclusively online via webcast. You will be able to attend the Annual Meeting online by visiting www.virtualshareholdermeeting.com/HTLF2020 on Wednesday, May 20, 2020, at 1:00 p.m. Central Daylight Time, or at any adjournments or postponements of the meeting. We first mailed this proxy statement and proxy card on or about April 6, 2020.

Please read this proxy statement carefully. You should consider the information contained in this proxy statement when deciding how to vote your shares at the Annual Meeting. The following information regarding the meeting and the voting process is presented in a question and answer format.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

WHY AM I RECEIVING THIS NOTICE OR PROXY STATEMENT AND PROXY CARD?

You are receiving proxy materials from us because on March 23, 2020, which is the record date for the Annual Meeting, you owned shares of our common stock. This proxy statement describes the matters that will be presented for a vote by the stockholders at the Annual Meeting.

When you submit a proxy, you appoint the designated proxy holder as your representative at the Annual Meeting. The proxy holder will vote your shares as you have instructed whether or not you attend the Annual Meeting. Even if you plan to attend, you should vote your shares in advance of the Annual Meeting in case your plans change.

HOW CAN I ATTEND THE ANNUAL MEETING?

You will be able to attend the Annual Meeting online by visiting: www.virtualshareholdermeeting.com/HTLF2020 and following the instructions provided in your proxy materials or Notice of Internet Availability of Proxy Materials (the "Notice"). To participate in the Annual Meeting, you will need the 16-digit control number included in your proxy materials or Notice. If you do not have this control number at the time of the meeting, you will still be able to attend as a guest, but you will not be able to vote or ask questions.

WHY IS THE COMPANY HOLDING A VIRTUAL ANNUAL MEETING?

We decided to hold a virtual meeting this year because of the public health and business risks associated with gathering our management, directors and stockholders for an in-person meeting during the coronavirus pandemic. We made this determination based on our current understanding of the situation, which will continue to evolve, and with consideration for guidance from the Centers for Disease Control and Prevention to cancel mass gatherings. In addition to protecting the health of our management, directors and stockholders for this year, hosting a virtual meeting generally provides ease of access, real-time communication and cost savings for our stockholders and the Company and facilitates stockholder attendance and participation from any location.

HOW WILL THE MEETING BE CONDUCTED?

The Annual Meeting will be conducted online, in a fashion similar to an in-person meeting. You will be able to attend the meeting online, vote your shares electronically, and submit your questions during the meeting.

The meeting will begin promptly at 1:00 p.m., Central Daylight Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 12:45 p.m. Central Daylight Time, and you should allow ample time for the check-in procedures.

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HOW CAN I ASK QUESTIONS DURING THE MEETING?

You may submit typewritten questions in real time during the virtual meeting. We are committed to acknowledging each appropriate question we receive in the order that it was received, with a limit of one question per shareholder until we have allowed each shareholder to ask a question. We will allot approximately 15 minutes for questions during the Annual Meeting. Submitted questions should follow our Rules of Conduct in order to be addressed during the Annual Meeting. Our Rules of Conduct will be posted at www.virtualshareholdermeeting.com/HTLF2020 during the Annual Meeting.
WHAT CAN I DO IF I NEED TECHNICAL ASSISTANCE BEFORE OR DURING THE MEETING?

If you have any technical difficulties or any questions regarding the virtual meeting format, we are ready to assist you. Please call 800-586-1548 (US) or 303-562-9288 (International).

IF I CAN'T ATTEND THE MEETING, HOW DO I VOTE OR LISTEN TO IT LATER?

You do not need to attend the virtual meeting to vote if you submitted your vote via proxy in advance of the meeting. A replay of the meeting, including the questions answered during the meeting, will be available at ir.htlf.com.

WHAT MATTERS WILL BE VOTED ON AT THE ANNUAL MEETING?

You are being asked to vote on the following matters proposed by our Board of Directors:
(1) Elect four individuals to serve as Class III directors for a three-year term expiring in 2023
(2) Approve the Heartland Financial USA, Inc. 2020 Long-Term Incentive Plan
(3) Ratify the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2020
(4) Take a non-binding, advisory vote on executive compensation
(5) Transact such other business as may properly be presented at the Annual Meeting

þ The Board of Directors recommends a vote “FOR” the four Class III nominees for election as directors for three-year terms ending 2023, as listed in the proxy statement, and a vote “FOR” Proposals 2, 3 and 4.

These matters are more fully described in this proxy statement. We are not aware of any other matters that will be voted on at the Annual Meeting. However, if you have voted your shares and a proposal is properly presented at the Annual Meeting that is not identified in the proxy materials, the proxy holder will vote your shares, pursuant to your proxy, in accordance with his or her judgment.

HOW MANY VOTES DO OUR STOCKHOLDERS HAVE?

Holders of common stock have one vote for each share of common stock owned at the close of business on March 23, 2020, the record date for the Annual Meeting.

HOW DO I VOTE?

Stockholders of Record

In addition to voting your shares online at the Annual Meeting, you can also vote your shares of common stock in advance of the Annual Meeting by submitting a proxy using one of the following options:
*online using the instructions for Internet voting shown on the Notice or proxy card;
*by telephone using the instructions for telephone voting shown on the proxy card; or
*by mail by marking the proxy card with your instructions and then signing, dating and returning the proxy   card in the enclosed return addressed envelope.

“Street Name” Holders

In addition to voting your shares online at the Annual Meeting, you can also vote your shares of common stock in advance of the Annual Meeting by following the voting instructions provided by your broker or other nominee. Under Nasdaq
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Stock Market (“Nasdaq”) listing standards, brokers who hold your shares in “street name” have the authority to vote shares for which they do not receive instructions on all routine matters submitted for approval at the Annual Meeting. In the absence of your specific instructions as to how to vote, your broker will not have authority to vote on the matters considered non-routine, which includes all actions other than Proposal 3, the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.

WHAT IF I CHANGE MY MIND AFTER I RETURN MY PROXY?

If you hold your shares in your own name, you may revoke your proxy and change your vote at any time before the polls close at the Annual Meeting. You may do this by:
*signing another proxy with a later date and returning that proxy to Mr. Michael J. Coyle, Secretary, Heartland Financial USA, Inc., 1398 Central Avenue, Dubuque, Iowa 52001;
*sending notice to us that you are revoking your proxy; or
*voting online at the Annual Meeting.

If you hold your shares in the name of your broker and desire to revoke your proxy in advance of the Annual Meeting, you will need to contact your broker. You may also change your vote by voting online at the Annual Meeting.

HOW MANY VOTES DO WE NEED TO HOLD THE ANNUAL MEETING?

A majority of the shares of common stock that are outstanding as of the record date must be present at the Annual Meeting in order to hold the Meeting and conduct business.

Shares are counted as present at the Annual Meeting if the stockholder either:
*is present online at the Annual Meeting; or
*has properly voted via Internet, phone, or proxy card prior to the Annual Meeting.

On March 23, 2020, there were 36,807,217 shares of common stock outstanding. Therefore, shares of common stock with at least 18,403,609 votes need to be present to constitute a quorum to hold the Annual Meeting and conduct business.

WHERE CAN STOCKHOLDERS GET COPIES OF OUR ANNUAL REPORT?

Stockholders may receive a free copy of our 2019 Annual Report on Form 10-K, including financial statements, by sending a written request to Mr. Michael J. Coyle, Secretary, Heartland Financial USA, Inc., 1398 Central Avenue, Dubuque, Iowa 52001.

WHAT HAPPENS IF A NOMINEE FOR DIRECTOR IS UNABLE TO STAND FOR ELECTION?

The Board may, by resolution, provide for a lesser number of directors or designate a substitute nominee. In the latter case, shares represented by proxy may be voted for a substitute nominee. You cannot vote for more than four nominees. The Board has no reason to believe any nominee will be unable to stand for election.

WHAT OPTIONS DO I HAVE IN VOTING ON EACH OF THE PROPOSALS?

You may vote “FOR” or “WITHHOLD” authority to vote for each nominee for director. You may vote “FOR,” “AGAINST” or “ABSTAIN” on any other proposal that may properly be brought before the meeting.

HOW MANY VOTES ARE NEEDED FOR EACH PROPOSAL?

The directors are elected by a plurality of the outstanding shares of our common stock represented at the Annual Meeting and entitled to vote, meaning that the four individuals receiving the highest number of votes cast “FOR” their election will be elected as directors of Heartland.  

The affirmative vote of a majority of the outstanding shares of our common stock represented at the Annual Meeting and entitled to vote is required to approve the other proposals.

The vote on executive compensation is advisory and will not be binding upon Heartland or the Board of Directors. However, the Compensation/Nominating Committee of the Board will consider the voting results in establishing our executive compensation plan for subsequent years.

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Broker non-votes will not be counted as entitled to vote, but will count for purposes of determining whether or not a quorum is present. So long as a quorum is present, broker non-votes will have no effect on the outcome of the matters to be taken up at the meeting. Abstentions and withhold votes will have the same effect as negative votes.

WHERE DO I FIND THE VOTING RESULTS OF THE MEETING?

We will announce preliminary voting results at the Annual Meeting. The voting results will also be disclosed in a Current Report on Form 8-K that we will file with the Securities and Exchange Commission (the “SEC”) by the close of business on the fourth business day after the Annual Meeting.

WHO BEARS THE COST OF SOLICITING PROXIES?

We bear the cost of soliciting proxies. In addition to solicitations by mail, officers, directors and employees of Heartland, or its subsidiaries, may solicit proxies in person or by telephone. These persons will not receive any special or additional compensation for soliciting proxies. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to stockholders.

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PROPOSAL 1ELECTION OF DIRECTORS
Elect four individuals to serve as Class III directors for a three-year term expiring in 2023
þ
The Board of Directors recommends that you vote your shares FOR each of the nominees.

Our Board of Directors carefully considers the qualifications of each director candidate and the overall composition of the Board. In 2019, our stockholders approved an amendment to our Certificate of Incorporation, increasing the size of the Board from 11 to 13 directors, primarily to increase the skill sets and the breadth and depth of experience available on the Board. Based on their balance of tenure, the current Board members are able to contribute experienced as well as fresh perspectives to Board discussions.
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At the Annual Meeting, you will be entitled to vote for four Class III Directors to serve for terms expiring in 2023. The Board of Directors is divided into three classes of directors having staggered terms of three years. Each of the nominees has agreed to serve as a director, if elected. If for any reason any of the nominees becomes unable to serve before the election, the holders of proxies reserve the right to substitute another person of their choice as a nominee when voting at the meeting.

Set forth below is information concerning the nominees for election and concerning the other directors whose terms of office will continue after the meeting. Included in the information is each director's age, year first elected and business experience during the previous five years. Kurt M. Saylor is retiring from the Board effective as of the Annual Meeting, and he will not be standing for re-election. Two new directors joined the Board in 2019 and will be standing for re-election for the first time. Barry H. Orr, Chairman and Chief Executive Officer of our subsidiary First Bank & Trust in West Texas, joined the Board on July 22, 2019, in accordance with the Agreement and Plan of Merger with First Bank Lubbock Bancshares, Inc. Robert B. Engel, Former President and Chief Executive Officer of CoBank, ACB in the Denver metropolitan area, joined the Board on November 12, 2019. Mr. Engel was recommended to the Board by a non-employee director.

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DIRECTOR NOMINEES
CLASS III (Term Expires 2023)

Robert B. EngelDirector Since 2019Age 66
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Professional and Educational Background:
Mr. Engel has served as Managing Director and Chief Executive Officer of BLT Advisory Services, LLC, a boutique advisory firm, since 2017. Prior to that, he served as President and Chief Executive Officer of CoBank, ACB from 2006 to 2017, presiding over its transformation into a high growth institution in the Denver metropolitan area. He has over 40 years of business and leadership experience, including over 30 years of experience in the banking industry. Mr. Engel brings to our Board considerable financial services expertise and insights on strategic growth, collaborative relationships and talent development. Mr. Engel earned a BBA in accounting and an honorary doctorate, both from Niagara University.
Other Boards and Appointments:
Director of Heartland subsidiary Citywide Banks since 2018; Director of Alaska Power & Telephone since 2017; Chairman of the Board of Trustees of Regis University since 2007.

Thomas L. FlynnDirector Since 2002Age 64
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Professional and Educational Background:
Mr. Flynn, who has served as Vice Chairman of the Board of Heartland since 2005 and Chairman of the Compensation/Nominating Committee of Heartland since 2015, was President of Aggregate Materials Company located in East Dubuque, Illinois from 1999 until his retirement in 2014. Mr. Flynn was President and Chief Executive Officer of Flynn Ready-Mix Concrete Co. from 1999 until his retirement in 2012. He was Chief Financial Officer of Flynn Ready-Mix from 1977 until 1999. He is a past Chairman of the Board of Directors of the National Ready-Mix Concrete Association. Mr. Flynn is a former member of the Iowa Legislature, having served for eight years as a State Senator. He also served for ten years as an adjunct faculty member in the Business Department of a local liberal arts college teaching courses in finance and business research methods. Mr. Flynn brings to our Board considerable small business expertise, business contacts in one of our principal markets and skill in governance. He holds an MBA from the University of Dubuque and a BA in Accounting and Finance from Loras College.

Other Boards and Appointments:
Director and Vice Chairman of the Board of Heartland subsidiaries Dubuque Bank and Trust Company, Citizens Finance Co., Citizens Finance of Illinois Co. and Citizens Finance Parent Co. for more than five years.

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Jennifer K. HopkinsDirector Since 2018Age 59
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Professional and Educational Background:
Ms. Hopkins has been a managing partner at Crescendo Capital, a private investment firm for early stage companies, since 2007, and has served as CEO of one of Crescendo’s portfolio companies, American Medical - The Oxygen Concentrator Store, since 2009. Prior to joining Crescendo Capital, Ms. Hopkins had a twenty-year career with Hewlett Packard and Agilent Technologies, leading teams in research and development, marketing, and operations. Her career with Agilent culminated in the role of Vice President of the Global Solutions business unit. Ms. Hopkins brings to our Board a technology background and operational expertise. In addition, she has small business and executive management experience, as well as contacts in our largest market, the Denver metropolitan area. She holds a Masters in Industrial Engineering from Stanford University and a BS in Industrial Engineering from North Dakota State University.
Other Boards and Appointments:
Director of Heartland subsidiary Citywide Banks since 2018. Board member of Spectralogic Corporation since 2012; Board of Advisors for Sartori Cheese Corporation since 2013; Alumni Association and Board of Trustees, North Dakota State University since 2005; and Director of Craig Hospital Foundation Board since 2015.

Bruce K. LeeDirector Since 2017Age 59
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Professional and Educational Background:
Mr. Lee is the President and Chief Executive Officer of Heartland. He was named Chief Executive Officer effective June 1, 2018, and he has served as President since 2015. He has over 30 years of experience in the banking industry. Prior to joining Heartland, Lee spent twelve years at Fifth Third, a $130 billion regional bank holding company headquartered in Cincinnati, Ohio. At Fifth Third, he held numerous leadership positions, including the following: Executive Vice President and Chief Credit Officer; Executive Vice President and Director of the company’s special assets group; and Executive Vice President, Commercial Banking Division Head and Affiliate Senior Commercial Banker. Prior to that, he served as President and CEO of a Fifth Third affiliate bank in northwestern Ohio, where he managed sales and service functions for retail, commercial, residential mortgage and investments, along with the staff functions of finance, human resources and marketing. Mr. Lee has wide-ranging banking experience and perspective as Heartland expands its size and geographic reach. He earned his BA in Business Administration and Management from Siena Heights University.
Other Boards and Appointments:
Director of Heartland subsidiary Citywide Banks since 2017; and Director of Heartland subsidiary First Bank & Trust since 2018.



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CONTINUING DIRECTORS
CLASS I (Term Expires 2021)

Lynn B. FullerDirector Since 1987Age 70
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Professional and Educational Background:
Mr. Fuller has served as the Executive Operating Chairman of Heartland since June 1, 2018. Previously, he had been Chief Executive Officer of Heartland since 1999, Chairman of the Board of Heartland since 2000 and was President of Heartland from 1990 until 2015. He began his banking career with Dubuque Bank and Trust Company in 1971. He then worked as an officer at First National Bank of St. Paul from 1976 until returning to Dubuque Bank and Trust Company in 1978. Mr. Fuller has the deepest knowledge and understanding of Heartland and has extensive experience in the banking business, with hands-on operational experience and decades of experience in all aspects of commercial banking. He earned an MBA from the University of Iowa and a BS from the University of Dubuque.
Other Boards and Appointments:
Director of Heartland subsidiaries Dubuque Bank and Trust Company, Wisconsin Bank & Trust, New Mexico Bank & Trust, Arizona Bank & Trust, Rocky Mountain Bank, Minnesota Bank & Trust, Bank of Blue Valley, Citizens Finance Co., Citizens Finance of Illinois Co. and Citizens Finance Parent Co. for more than five years; Director of Premier Valley Bank since its acquisition by Heartland in 2015; Director of Citywide Banks since its acquisition by Heartland in 2017; Director of First Bank & Trust since its acquisition by Heartland in 2018.

R. Michael McCoyDirector Since 2014Age 71
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Professional and Educational Background:
Mr. McCoy was the President and CEO of the McCoy Group, Inc. from 1998 to 2012. Parent company to seven subsidiaries, including Midwest-based Freightliner dealerships Truck Country and Stoops, and transportation-focused companies, Foodliner, Quest Liner and McCoy NationaLease, the McCoy Group is a diversified, national transportation enterprise of more than 2,600 employees. Mr. McCoy brings Heartland not only significant experience in the operation of a business headquartered in Dubuque, Iowa, but significant business contacts in the central Iowa and Wisconsin markets from which a significant portion of small business loans we originate are sourced.
Other Boards and Appointments:
Director of Heartland subsidiary Dubuque Bank and Trust Company for more than five years.

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Susan G. MurphyDirector Since 2018Age 63
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Professional and Educational Background:
Ms. Murphy has been a Principal at The Grace Alliance, LLC in Denver, which assists individuals and families in developing and maintaining financial strategies for the future, since 2005. She has also served as Trustee of the Colorado Public Employees’ Retirement Association since 2007, providing oversight to a public pension fund managing $48 billion in assets for 606,000 beneficiaries. She started her career at Ernst and Young. She is a Certified Public Accountant and is a member of the American Institute of Certified Public Accountants. Ms. Murphy brings Heartland significant public accounting, investment advisory and public policy expertise along with knowledge of the Denver metropolitan area. She graduated with a BA in Accounting from the University of Notre Dame.
Other Boards and Appointments:
Director of Heartland subsidiary Citywide Banks since 2017; Board Member of Arrupe Jesuit High School 2010-16 and 2017-Present, currently Chair Elect; Trustee for the Colorado Public Employees’ Retirement Association since 2007.

Martin J. SchmitzDirector Since 2018
Age 62
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Professional and Educational Background:
Mr. Schmitz is the Chairman of Citywide Banks, Heartland’s subsidiary bank in Colorado. Prior to Heartland’s acquisition of Citywide, he was Chairman of the Board along with overseeing business development and commercial banking. In addition, he was involved in the administration of credit management, audit and regulatory functions. He was with the organization for 21 years. Prior to his time at Citywide, Mr. Schmitz spent 18 years in the Denver commercial real estate business as Vice President with a commercial real estate group specializing in investment. Mr. Schmitz brings to our Board community bank leadership experience and knowledge of the Denver metropolitan area. He holds a BA in Accounting, Business Administration and Economics from Regis University.
Other Boards and Appointments:
Director of Citywide Banks, which became a Heartland subsidiary in 2017, for more than five years; Trustee of Regis University, Denver, Colorado, since 2004; and Director of Boys and Girls Clubs of Metro Denver since 2008.



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CONTINUING DIRECTORS
CLASS II (Term Expires 2022)

Mark C. FalbDirector Since 1995Age 72
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Professional and Educational Background:
Mr. Falb has served as Vice Chairman of the Board of Heartland and Chairman of the Audit/Corporate Governance Committee of Heartland since 2001 and served as Chairman of the Compensation/Nominating Committee of Heartland from 2001 to 2015. He has been Chairman of the Board and Chief Executive Officer of Kendall/Hunt Publishing Company, a publisher of textbooks for the Pre-Kindergarten through 12th grade market and the higher education market, since 1992. He has been Chairman of the Board and Chief Executive Officer of Westmark Enterprises, Inc., a real estate development company, since 1993. A Certified Public Accountant (inactive), Mr. Falb brings to our Board considerable experience in executive management of nationally-based organizations and experience in finance and financial accounting. Mr. Falb has significant community contacts and is considered a leader in one of our principal markets in Dubuque, Iowa and the Tri-State area of Iowa, Illinois and Wisconsin. He holds a BBA in Accounting from the University of Iowa.
Other Boards and Appointments:
President of Board of Directors, Iowa Scholarship Fund, since 1997; Vice President of the Grand Opera House Foundation since 2006; Lifetime Member on the Board of Trustees for the University of Dubuque since 2015.

Barry H. OrrDirector Since 2019Age 64
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Professional and Educational Background:
Mr. Orr has served as Chairman and Chief Executive Officer of First Bank & Trust, and Chief Executive Officer of its wholly owned subsidiary, PrimeWest Mortgage Corporation, since 1996. Heartland acquired Lubbock-based First Bank & Trust as a subsidiary bank in 2018. Mr. Orr has over 30 years of banking leadership experience. He brings to our Board considerable knowledge and expertise in commercial and industrial lending, as well as residential construction and development lending, mortgage services, and mergers and acquisitions. Mr. Orr holds a BBA in finance from Texas Tech University and is also a graduate of the ABA Stonier Graduate School of Banking.
Other Boards and Appointments:
Director of Heartland subsidiary First Bank & Trust since 1993; Chairman of Lubbock Economic Development Alliance from 2018 to 2019.
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John K. SchmidtDirector Since 2001Age 60
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Professional and Educational Background:
Mr. Schmidt has been the Senior Vice President and Chief Financial Officer of A.Y. McDonald Industries since 2013 and was named Corporate Secretary in 2014. Mr. Schmidt was the Chief Operating Officer (from 2004) and Chief Financial Officer (from 1991) of Heartland until joining A.Y. McDonald Industries. Mr. Schmidt was also an officer of Dubuque Bank and Trust Company from 1984 to 2004 and President from 1999 to 2004. Prior to joining Dubuque Bank and Trust Company in 1984, Mr. Schmidt was employed by the Office of the Comptroller of the Currency (the “OCC”) and Peat Marwick Mitchell, currently known as KPMG LLP. A Certified Public Accountant (inactive), Mr. Schmidt brings to our Board extensive knowledge in operational bank management and accounting. He graduated with a BA from the University of Northern Iowa.
Other Boards and Appointments:
Director of Heartland subsidiaries Dubuque Bank and Trust Company, Citizens Finance Co., Citizens Finance of Illinois Co. and Citizens Finance Parent Co. for more than five years; Member of the Loras College Board of Regents, Dubuque, Iowa, since 2011; Vice President of Steeple Square, Dubuque, Iowa; and Director of A.Y. McDonald Industries since 2013.


Duane E. WhiteDirector Since 2013Age 64
403530886_a2019whitea021.jpg
Professional and Educational Background:
Mr. White is the retired Executive Vice President and Chief Product Officer of Medecision, a healthcare IT provider. He served in that role from May 2018 until December 2019. Mr. White was a Partner at Aveus, a management consulting firm in St. Paul, Minnesota from 2013 until the firm was acquired by Medecision in 2018. Prior to joining Aveus, he was an independent consultant for six years. Mr. White has 15 years of financial services experience, including nine years with U.S. Bancorp. Positions at U.S. Bancorp included President of the mortgage division, SVP of Mergers and Acquisitions and SVP of Marketing Support and Product Management. He began his career as an examiner for the OCC and was also involved with the regulatory supervision of problem banks in his role as the Assistant to the Regional Director of Special Projects. Mr. White bring considerable expertise in financial services to our Board, including merger and acquisition activity, public company board experience and knowledge and perspective with respect to the Minneapolis and St. Paul metropolitan area. He holds an MBA from Harvard Business School and a BBA in Business Economics from the University of Wisconsin – Eau Claire.
Other Boards and Appointments:
Director of Heartland subsidiary Minnesota Bank and Trust from 2008 to 2019; and Director of Fair Isaac Corporation from 2009 to 2016.

All of our directors will hold office for the terms indicated, and until their respective successors are duly elected and qualified. Other than Mr. Schmitz, who was appointed to the Board on July 1, 2018 in accordance with the Agreement and Plan of Merger with Citywide Banks of Colorado, Inc., and Mr. Orr, who was appointed to the Board on July 22, 2019 in accordance with the Agreement and Plan of Merger with First Bank Lubbock Bancshares, Inc., no director has been nominated or is serving pursuant to any arrangement that requires that they be selected as a director.



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CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS

Our Board of Directors

There are currently thirteen members on the Board of Directors of Heartland. Although it is the responsibility of Heartland's officers to manage day-to-day operations, the Board oversees our business and monitors the performance of our management.

Director Independence.  Our Board has determined that each of Messrs. Engel, Falb, Flynn, McCoy, Saylor, Schmidt and White and Mmes. Hopkins and Murphy are “independent” directors as defined in the listing standards of Nasdaq and the rules and regulations of the SEC. The Board has also determined that Mr. Fuller, as Executive Operating Chairman, and Mr. Lee, as President and Chief Executive Officer, of Heartland, are not independent. Mr. Orr is not an independent director because he is the Chairman and Chief Executive Officer of Heartland subsidiary First Bank & Trust. Mr. Schmitz is not an independent director because he served as the Chairman of the Board of Citywide Banks, in an executive capacity, until July 7, 2017, when Citywide was acquired and became a Heartland subsidiary bank. In considering the independence of the directors, our Board reviewed questionnaires prepared by each director, reviewed its own records of transactions with directors and their family members, and inquired of directors whether they, or any member of their immediate families, had engaged in any transaction with us, other than transactions made in the ordinary course of business.

Meetings. Our directors meet on at least a quarterly basis, or as needed at special meetings held periodically throughout the year. During 2019, the Board of Directors held four regular meetings and eight special meetings. All directors attended at least 75% of the meetings of the Board of Directors and its Committees on which they served.

The independent directors are offered the opportunity at each meeting of the Board of Directors to meet separately in executive session. During 2019, the independent directors met in such capacity five times. Each of our Audit/Corporate Governance Committee and our Compensation/Nominating Committee consists solely of independent directors, and these committees meet in conjunction with most regular board meetings.

It is Heartland's practice that all directors be in attendance at the Annual Meeting unless excused by the Chairman of the Board. In 2019, all directors attended the Annual Meeting in person.

Board Leadership.  Under our Bylaws, the Chairman of the Board presides at meetings of the Board at which he is in attendance. Mr. Fuller, our Executive Operating Chairman, has been Chairman of our Board of Directors since 2000. As the director with the most knowledge of Heartland’s business, the Board has determined that Mr. Fuller is the director most capable of leading discussions on important matters affecting Heartland, including formulation and implementation of corporate strategy. In addition, our Board believes that Mr. Fuller’s role as Chairman creates a firm link with management, a clear indication of management authority, and causes the Board to function more effectively and efficiently. Our Board believes that our performance during Mr. Fuller’s tenure reflects the effectiveness of his leadership and his goal of advancing Heartland’s interests over personal gain.

Mr. Falb and Mr. Flynn, in their capacities as Vice Chairmen of the Board, assist in setting the agendas for Board meetings and executive sessions of the Board, as well as regularly interacting with Messrs. Fuller and Lee to convey concerns of the independent directors.

Mr. Flynn is the Board's Independent Lead Director. In this role, Mr. Flynn serves as the liaison between the directors and management, promoting open and constructive conversation. He also works closely with our Executive Operating Chairman, Mr. Fuller, and our President and Chief Executive Officer, Mr. Lee, to ensure Heartland is building a healthy governance culture. As the Independent Lead Director, Mr. Flynn chairs the executive sessions of the Board, facilitates the Board evaluation process, and works with Messrs. Fuller and Lee to monitor progress on the strategic plan and succession planning.

Risk Management - Background.  Heartland applies three lines of defense to risk management. Under this structure, the first line of defense is management at Heartland’s subsidiaries, together with managers of centralized operations units at Heartland assigned to support them. Collectively, they are responsible for managing the risks appurtenant to their areas of responsibility. This responsibility includes developing policies, procedures and controls, and executing them. At the second line of defense, Heartland applies enterprise risk management concepts, under the leadership of the Chief Risk Officer, to
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coordinate, monitor and report on the adequacy and effectiveness of risk management processes. Within the centralized risk management function at Heartland are enterprise risk, consumer compliance, loan review and Bank Secrecy Act functions. Finally, Heartland maintains at the holding company level an internal audit function, providing third line of defense oversight of the entire risk management framework.

Risk Management - The Board. The Board of Directors is involved in overseeing all risks across the enterprise and actively participates by establishing risk policies, limits and tolerances, and reviewing reports provided by management and the Chief Risk Officer for monitoring those activities. The Audit/Corporate Governance Committee oversees risks associated with financial reporting, including internal control over financial reporting, and identifies and oversees compliance with changing laws and regulations. The Compensation/Nominating Committee identifies, reviews and oversees risks created by Heartland’s executive benefit programs and employee compensation plans. The Compensation/Nominating Committee also consults with the Chief Risk Officer for risk input pertaining to compensation.

Risk Management - Senior Management. Senior Managers, having leadership and managerial responsibility for the first line of defense, ensure the formation of a risk-appropriate plan, and the effectiveness of the first line of defense in executing it. This includes coordination of product and service activities that are largely the domain of our member banks, with operational support activities that are largely the domain of Heartland business units, and ensuring that all aspects of it are aligned with our strategic plan. They receive information about risks from the Risk Management System, and also report information about their risks and how they are managed into that system. Top-level management is also responsible to the Board of Directors for ensuring that the Chief Risk Officer position is adequately staffed, and for providing administrative oversight to the Chief Risk Officer, as he functionally reports to the Board of Directors.

Committees of the Board

Audit/Corporate Governance Committee. The members of the Audit/Corporate Governance Committee are Messrs. Falb, Flynn, McCoy, Schmidt and White and Mmes. Hopkins and Murphy. Each of Messrs. Falb, Flynn, McCoy, Schmidt and White and Mmes. Hopkins and Murphy is an “independent” director under the listing standards of Nasdaq and the rules and regulations of the SEC. The Board of Directors has determined that each of Messrs. Falb, Flynn and Schmidt and Ms. Murphy qualify as, and should be named as, an “audit committee financial expert” as set forth in the rules and regulations of the SEC. Each member of the Audit/Corporate Governance Committee also meets the financial literacy and independence requirements for audit committee membership under the listing standards of Nasdaq and the rules and regulations of the SEC.

The primary duties and functions of the Audit/Corporate Governance Committee are to:
*
monitor the integrity of the Company’s financial reporting process and systems of internal controls regarding finance, accounting, risk management, and legal compliance;
*
retain, oversee, review and terminate, if necessary, the Company’s independent registered public accounting firm and pre-approve all services performed by such firm;
*
provide an avenue of communication among the Company’s independent registered public accounting firm, management, the risk management function (i.e., Chief Risk Officer, Loan Review and Compliance), the internal audit function and the Board of Directors;
*
encourage adherence to, and continuous improvement of, the Company’s policies, procedures and practices at all levels;
*review areas of potential significant financial risk to the Company;
*monitor compliance with legal and regulatory requirements for the Company, and
*develop and establish corporate governance policies and procedures for the Company.

The Audit/Corporate Governance Committee's duties and functions are set forth in more detail in its Charter. In addition, the Board of Directors adopted Corporate Governance Guidelines to codify its governance practices. The Charter and the Corporate Governance Guidelines can be found under the Investor Relations section of our website, ir.htlf.com.

Mr. Falb has served as Chairman of the Audit/Corporate Governance Committee since 2001. During 2019, the Audit/Corporate Governance Committee met five times. To promote independence of the audit function, the Audit/Corporate Governance Committee consults both separately and jointly with our independent registered public accounting firm, internal auditors and management.

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The Report of the Audit/Corporate Governance Committee is contained later in this proxy statement, and the processes used by the Audit/Corporate Governance Committee to approve audit and non-audit services are described later in this proxy statement under the caption, “Relationship With Independent Registered Public Accounting Firm-Audit/Corporate Governance Committee Pre-Approval Policy.”

Compensation/Nominating Committee.  The Compensation/Nominating Committee is comprised of Messrs. Falb, Flynn, McCoy, Schmidt and White and Mmes. Hopkins and Murphy. Each of Messrs. Falb, Flynn, McCoy, Schmidt and White and Mmes. Hopkins and Murphy is an “independent” director as defined by listing requirements of the Nasdaq and a “non-employee” director under Section 16 of the Securities Exchange Act of 1934. Mr. Flynn has served as Chairman of the Compensation/Nominating Committee since 2015.

The primary duties and functions of the Compensation/Nominating Committee are to:
*
discharge the responsibilities of the Board relating to the compensation of the Company’s executive officers, including the Chief Executive Officer;
*
evaluate and make recommendations to the Board relating to the compensation of individuals serving as directors of the Company;
*
direct the preparation of and approve an Annual Report on Executive Compensation for inclusion in the Company’s proxy statement in accordance with all applicable rules and regulations; and
*
identify individuals qualified to become members of the Board of Directors and select such individuals as director nominees for the next Annual Meeting of Stockholders.

The Compensation/Nominating Committee duties and functions are set forth in more detail in its Charter, which can be found under the Investor Relations section of our website, ir.htlf.com. The Compensation/Nominating Committee held ten meetings in 2019.

The process used by the Compensation/Nominating Committee to evaluate and determine executive compensation is described in this proxy statement under “Compensation Discussion and Analysis - Administration of Our Compensation Program.” The Report of the Compensation/Nominating Committee is also contained later in this proxy statement.

Director Nominations and Qualifications

In carrying out its nominating function, the Compensation/Nominating Committee evaluates all potential nominees for election, including incumbent directors, Board nominees and stockholder nominees, in the same manner. We did not receive any stockholder recommendations for nominees for the 2020 Annual Meeting. The Compensation/Nominating Committee believes that, at a minimum, potential directors should have the highest personal and professional ethics, integrity and values, a sufficient educational and professional background that enables them to understand our business, exemplary management and communications skills, demonstrated leadership skills, sound judgment in his or her professional and personal life, a strong sense of service to the communities which we serve and an ability to meet the standards and duties set forth in our Code of Conduct. The Committee also believes that directors should share the Company’s philosophy, including the same sense of mission, vision and values. Additionally, the Committee would prefer experience with publicly held companies, growth businesses or sales.

No nominee is eligible for election or re-election as a director if, at the time of such election, such person is 72 or more years of age. Each nominee must also be willing to devote sufficient time to carrying out his or her Board duties and responsibilities effectively. Although our Compensation/Nominating Committee considers diversity, including diversity of experience, gender and ethnicity in nominations, it does not have a formal diversity policy.

The Compensation/Nominating Committee also evaluates potential nominees to determine if they have any conflicts of interest that may interfere with their ability to serve as effective Board members and whether they are “independent” in accordance with Nasdaq listing standards (to ensure that at least a majority of the directors will, at all times, be independent). In the past, the Compensation/Nominating Committee has not retained any third party to assist it in identifying candidates, but it has the authority to retain a third-party firm or professional for purposes of identifying candidates.

Stockholder Communications with the Board, Nomination and Proposal Procedures

General Communications with the Board.  As set forth on our website, ir.htlf.com, our Board of Directors can be contacted at our corporate headquarters at 1398 Central Avenue, P.O. Box 778, Dubuque, Iowa 52004-0778, Attn: Michael J.
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Coyle, Corporate Secretary, or by telephone at our administrative offices at (563) 589-2100 or toll free at (888) 739-2100. Each communication will be forwarded to the Board or the specific directors identified in the communication as soon as reasonably possible.

Nominations of Directors.  In order for a stockholder nominee to be considered by the Compensation/Nominating Committee as a nominee and be included in our proxy statement, the nominating stockholder must file a written notice of the proposed director nomination with our Corporate Secretary, at the above address, at least 120 days prior to the anniversary of the date the previous year’s proxy statement was mailed to stockholders. For our 2021 Annual Meeting, such notice would need to be received on or before December 7, 2020. Nominations must include the full name and address of the proposed nominee and a brief description of the proposed nominee’s business experience for at least the previous five years. All submissions must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected. The Compensation/Nominating Committee may request additional information in order to make a determination as to whether to nominate the person for director.

In accordance with our Bylaws, a stockholder may nominate a director for election at an Annual Meeting of Stockholders only if such stockholder delivers written notice of the nomination to our Corporate Secretary, at the above address, not less than 30 days nor more than 75 days prior to the date of the Annual Meeting. The stockholder's notice of intention to nominate a director must include (i) the name and address of record of the stockholder who intends to make the nomination; (ii) a representation that the stockholder is a holder of record of shares of the corporation entitled to vote at such meeting, and intends to appear at the meeting to nominate the person or persons specified in the notice; (iii) the name, age, business and residence address and principal occupation or employment of each nominee; (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (v) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC, as then in effect; and (vi) the consent of each nominee to serve as a director of the corporation if so elected. We may request additional information after receiving the notification for the purpose of determining the proposed nominee's eligibility to serve as a director. Persons nominated for election to the Board, in accordance with the above requirements, will not be included in our proxy statement.

Other Stockholder Proposals. To be considered for inclusion in our proxy statement for the 2021 Annual Meeting of Stockholders, stockholder proposals must be received by our Corporate Secretary, at the above address, no later than December 7, 2020, and must otherwise comply with the notice and other provisions of our Bylaws, as well as SEC rules and regulations.

For proposals to be made by a stockholder from the floor and voted upon at an Annual Meeting, the stockholder must file written notice of the proposal with our Corporate Secretary not less than 30 days nor more than 75 days prior to the scheduled date of the Annual Meeting.

The stockholder proposal must include a brief description of the proposal and the reasons for making the proposal; the name and address, as they appear with our Transfer Agent, of the stockholder proposing such business; the number of shares of common stock held by the stockholder; and any other financial or other interests of such stockholder in the proposal.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all directors and employees. The Code sets forth the standard of ethics we expect all of our directors and employees to follow, including our Chief Executive Officer and Chief Financial Officer. All directors have received, and acknowledged in writing, the Code of Business Conduct and Ethics Policy, along with the Code of Business Conduct and Ethics Violation Reporting Procedure. The Code of Business Conduct is posted on our website, ir.htlf.com. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding any amendment to, or waiver of, the Code of Business Conduct with respect to our Chief Executive Officer and Chief Financial Officer and persons performing similar functions, by posting such information on our website.

Director Compensation

Our Board of Directors believes that compensation received by a non-employee director should be tied directly to the success of Heartland and, by extension, the success of all Heartland stockholders. Non-employee directors are compensated for service on the Heartland Board of Directors by an annual retainer, which they may receive in cash or restricted stock units ("RSUs") that vest in June of the following year; committee meeting fees; and annual equity awards of RSUs granted under the Amended and Restated 2012 Long-Term Incentive Plan in an amount determined by the Compensation/Nominating Committee at its Annual Meeting. The RSUs are awarded as of the date of the Annual Meeting and vest in June of the following year. In
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the event a director leaves the Board for any reason prior to any vesting date (other than due to death or change of control), the director forfeits all right to the respective RSUs. In the event of the death of the non-employee director or a change in control, the RSUs vest immediately and completely.

The following table highlights the material elements of our director compensation program:
Compensation Element
Annual Independent Lead Director Retainer$25,000  
(1)
Annual Retainer
$25,000  
(1)
Annual Equity Award
$60,000  
(2)
Annual Audit/Corporate Governance Committee Chair Equity Award
$15,000  
(2)
Annual Compensation/Nominating Committee Chair Equity Award
$10,000  
(2)
Committee Meeting Fees
$1,000  
(3)
(1) Directors may elect to receive the retainer in RSUs or cash
(2) Represents grant date fair value, payable in RSUs
(3) Paid per meeting attended

To further reinforce the tie between directors and stockholders, our directors are subject to stock ownership guidelines that require them to hold common stock with a value of at least three times annual total director compensation. Directors must achieve this holding within five years of being named a director, and all directors are in compliance with this requirement.

Messrs. Fuller, Lee and Orr, who were Heartland or Heartland subsidiary officers in 2019, did not receive any compensation for serving on the Board of Heartland or any of its subsidiary banks.

Messrs. Engel, Flynn, McCoy, Saylor, Schmidt, Schmitz and Mmes. Hopkins and Murphy also serve on the Board of one of our subsidiary banks and receive cash compensation and/or Heartland common stock for such service. Our subsidiary banks compensate directors by granting RSUs for Heartland common stock, though the directors are paid in cash for committee work on the Boards of our subsidiary banks. Heartland directors who served as directors of subsidiary banks received 150 RSUs during 2019 for their services on the boards of subsidiary banks.

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The following table shows non-employee director compensation during 2019 for service on the Heartland Board of Directors and the Boards of our subsidiary banks:
DIRECTOR COMPENSATION
Name
Fees Earned or
Paid in Cash(1)
Stock
Awards(2)
Total
Robert B. Engel(3)
$17,700  $6,423  $24,123  
Mark C. Falb
$35,000  $70,246  $105,246  
Thomas L. Flynn
$64,400  $72,184  $136,584  
Jennifer K. Hopkins$38,600  $62,661  $101,261  
R. Michael McCoy
$37,600  $62,708  $100,308  
Susan J. Murphy$39,000  $62,661  $101,661  
Kurt M. Saylor
$29,800  $62,418  $92,218  
John K. Schmidt
$38,950  $62,708  $101,658  
Martin J. Schmitz
$29,300  $62,661  $91,961  
Duane E. White
$35,000  $56,238  $91,238  
(1) The amounts in this column include the annual retainer and fees paid for service on a committee at Heartland or one of Heartland’s subsidiaries. For the retainer portion of director compensation, Messrs. Engel, Schmidt, Schmitz and White elected to receive $25,000 in cash. Messrs. McCoy, Falb, Flynn, Saylor, along with Mmes. Murphy and Hopkins, elected to receive equivalent-value RSUs, and were granted 607 RSUs. Mr. Flynn elected to receive equivalent-value RSUs for compensation as the Independent Lead Director and was granted 607 RSUs.
(2) The amounts in this column represent the fair value, determined based upon the market price of our common stock on the date of grant in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, of RSUs granted for service as directors of Heartland, as well as RSUs granted for service as directors of subsidiary banks. See the discussion of equity awards in Note 16 of our financial statements for the year ended December 31, 2019, contained in our Annual Report for all assumptions made in the valuation of the RSUs.
Each of Messrs. McCoy, Saylor, Schmidt, Schmitz and Mmes. Murphy and Hopkins were granted 1,365 RSUs on May 23, 2019, as compensation for service on the Board of Directors of Heartland for the period from the 2019 Annual Meeting to the 2020 Annual Meeting. Mr. Falb, who chairs the Audit/Corporate Governance Committee, was granted 1,705 RSUs. Mr. Flynn who chairs the Compensation/Nominating Committee, was granted 1,595 RSUs.
Messrs. Flynn, McCoy and Schmidt each received 150 RSUs for service as directors of Dubuque Bank and Trust Company on May 21, 2019, Mr. Saylor received 150 RSUs for service as director of Bank of Blue Valley on May 23, 2019, and Messrs. Engel and Schmitz as well as Mmes. Murphy and Hopkins received 150 RSUs for service as directors of Citywide Banks on May 24, 2019.
The aggregate number of RSUs outstanding for each director at December 31, 2019 was: 782 for Mr. Engel. 2,312 for Mr. Falb, 2,959 for Mr. Flynn, 2,122 for Ms. Hopkins, 2,122 for Mr. McCoy, 2,122 for Ms. Murphy, 2,122 for Mr. Saylor, 1,515 for Mr. Schmidt, 1,515 for Mr. Schmitz and 1,365 for Mr. White.
(3) Mr. Engel joined the Board effective November 12, 2019.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table lists the beneficial ownership of our common stock as of January 31, 2020, by each person we know to beneficially own more than 5% of our outstanding common stock, by each director or each executive officer named in the summary compensation table and by all directors and executive officers of Heartland as a group. Except as otherwise indicated below, each of the entities or persons named in the table has sole voting and investment power with respect to all common stock beneficially owned set forth opposite their name.
Name of Beneficial Owner
Amount and Nature
of Beneficial Ownership(1)
Percent
of Class(2)
5% Stockholders
BlackRock, Inc., 55 East 52nd Street, New York, NY 100552,487,848  
(3)
6.8%  
The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 193552,439,590  
(4)
6.6%  
Directors and Nominees
Robert B. Engel 2,125   
Mark C. Falb182,264  
(5)
 
Thomas L. Flynn82,219  
(6)
 
Lynn B. Fuller1,091,629  
(7)
3.0%  
Jennifer K. Hopkins890   
Bruce K. Lee29,224   
R. Michael McCoy50,205  
(8)
 
Susan J. Murphy3,973   
Barry H. Orr 233,632  
(9)
 
Kurt M. Saylor161,101  
(10)
 
John K. Schmidt125,393  
(11)
 
Martin J. Schmitz286,332  
(12)
 
Duane E. White21,619   
Other Named Executive Officers
Brian J. Fox18,849  
(13)
 
Bryan R. McKeag22,566  
(14)
 
David A. Prince 4,807   
All Directors and Executive Officers as a Group (20 persons)2,398,757  6.5%  
* Less than one percent
(1) The above beneficial owners have sole voting and investment power with respect to shares of common stock owned, except as set forth in the footnotes below. Share totals include restricted stock units that will vest within 60 days of January 31, 2020.
(2) Based upon 36,766,029 shares of common stock outstanding on January 31, 2020, plus any restricted stock units that will vest within 60 days of January 31, 2020 for that person.
(3) Based upon a Schedule 13G/A filed on February 5, 2020. BlackRock, Inc. has sole voting power with respect to 2,413,386 shares and sole dispositive power with respect to 2,487,848 shares.
(4) Based upon the Schedule 13G/A filed on February 12, 2020, The Vanguard Group has sole voting power with respect to 33,251 shares and sole dispositive power with respect to 2,404,575 shares. It has shared voting power with respect to 6,410 shares and shared dispositive power with respect to 35,015 shares.
(5) Includes 68,856 shares held in a trust for which Mr. Falb's spouse serves as trustee, 40,018 shares held in a trust for which Mr. Falb serves as trustee, and 72,000 shares held in a charitable foundation in which Mr. Falb has no pecuniary interest.
(6) Includes 3,127 shares held by Mr. Flynn's spouse in an individual retirement account (IRA) and 37,411 shares held by Mr. Flynn jointly with his spouse.
(7) Includes 5,000 shares held in a trust for which Mr. Fuller’s spouse serves as trustee, 92,669 shares held in a GST trust for which Mr. Fuller serves as sole trustee, and 313,180 shares held in a limited liability limited partnership, for which Mr. Fuller acts as a general partner and for which his spouse and two sons are limited partners. Of the shares of common stock disclosed in the table, Mr. Fuller has pledged 151,177 shares as collateral for a personal loan.
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(8) Includes 37,533 shares held by Mr. McCoy jointly with his spouse and 13,467 shares held in a trust for which Mr. McCoy's spouse serves as trustee.
(9) Includes 15,179 held in an IRA.
(10) Includes 46,311 shares held in a trust for which Mr. Saylor's spouse serves as trustee, and 114,790 shares held in a trust for which Mr. Saylor serves as trustee.
(11) Includes an aggregate of 12,677 shares held by Mr. Schmidt’s spouse and 3,506 shares held by Mr. Schmidt jointly with his spouse.
(12) Includes 221,460 shares held by Padekeky Investments, LLC, of which Mr. Schmitz is a controlling stockholder.
(13) Includes 2,000 shares held in an IRA, and 14,500 shares held in a revocable trust for which Mr. Fox serves as trustee.
(14) Includes 18,818 shares held in a living trust for which Mr. McKeag serves as trustee.


DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Securities Exchange Act of 1934 requires that our directors, executive officers and 10% stockholders file reports of ownership and changes in ownership with the SEC. Such persons are also required to furnish us with copies of all Section 16(a) forms they file. Due to our administrative oversight, executive officer Deborah Deters and director Barry Orr each filed one late report on Form 4, with each report covering one transaction, during the year ended December 31, 2019. Based upon information provided by officers and directors, except with respect to these late reports, we believe all our officers, directors and 10% stockholders filed all reports on a timely basis in 2019.


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EXECUTIVE OFFICER COMPENSATION
Compensation Discussion and Analysis

Overview

This Compensation Discussion and Analysis ("CD&A") addresses our total compensation philosophy and objectives with respect to our named executive officers. The CD&A also covers compensation factors, elements of compensation and the basis for compensation decisions for 2019.

We design our executive compensation program to be both competitive in the marketplace and to align the interests of our executive officers with the long-term interests of our stockholders. Our goal is to pay total direct compensation (base salary plus annual and long-term incentive compensation) that is competitive in our markets, and that attracts and retains talented executives. This generally means that we strive to pay total direct compensation near the median of our peer group for comparable positions for target performance. Base salaries of our executives are typically near the peer group median, and in conjunction with annual and long-term incentive compensation, are targeted at the median. Incentives can be earned at above-median rates, but generally only for outstanding performance relative to the performance standards established by the Compensation/Nominating Committee.

2019 Business Highlights. Our Company enjoyed a year of solid financial performance. We increased our presence in key markets, and we continued our focus on strategic priorities by completing the sale of certain assets.
*
Annual net income of $149.1 million, an increase of 28% over 2018
*
Total assets increased to $13.21 billion, an increase of 16% from year end 2018, including 11% of acquired asset growth
*
Loan growth of 13%, including 1% of organic loan growth(1)
*
Total deposit growth of 18%, including 9% of organic non-time deposit growth(1)
*
Net interest margin of 4.00%, compared to 4.26% during 2018, as a result of the competitive interest rate environment
*
Return on average common equity of 10.12% and return on average tangible common equity ("ROTCE")(1) of 15.73%
Efficiency ratio(1) for 2019 of 63.11%, compared to 63.54% for 2018
*
Increased our market presence and asset base with the acquisition of Blue Valley Ban Corp. in the Kansas City metropolitan area in the 2nd quarter of 2019 and with the acquisition of the operations of Rockford Bank and Trust Company in Rockford, Illinois in the 4th Quarter of 2019
*
Continued our focus on strategic priorities with completion of the sale of seven branch locations, the consumer finance loan portfolios of Citizens’ Finance Company, and substantially all of our mortgage servicing rights

2019 Compensation Highlights. Incentive payments to our named executive officers were commensurate with performance, and we implemented a number of design changes to our executive compensation program.
*
Above-target annual incentive payout for named executive officers, based on above-target organic loan and non-time deposit growth(1), acquired asset growth and ROTCE(1), partially offset by a below-target efficiency ratio(1)
*Payout of 2017-2019 performance-based awards at 60% of target, based on below-threshold performance on earnings per share growth and above-target performance on average ROTCE
*Transitioned to a three-year performance period for all performance-based awards, beginning with the 2019-2021 awards
*
Adopted a clawback policy, which provides for the recoupment of performance-based cash and equity incentive compensation from our executive officers and certain other employees under certain circumstances

*Adopted a Non-Qualified Deferred Compensation Plan, which provides executives with an additional retirement planning tool
(1) Refer to "Non-GAAP Measures for Annual Incentive Awards" for additional information on the usage and presentation of these non-GAAP measures, and reconciliations to the most directly comparable GAAP measures.

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Elements of Executive Compensation. Our executive compensation program includes a mix of base salary, annual incentive, and equity awards. Variable compensation based on performance is a significant component of total compensation. Our performance standards for annual incentive cash awards link to return on tangible common equity, efficiency ratio, organic loan growth, organic non-time deposit growth, and acquired asset growth. Target opportunities for executive officers range from 50% to 80% of base salary, with the amount that can be earned ranging from 0% to 150% of target, in order to enhance the sensitivity of awards to performance. Targets for our performance standards are determined with reference to median peer performance, Heartland’s historical performance and Heartland’s financial plan targets.

For long-term incentives, we use a balanced portfolio approach, whereby we grant a blend of time-based RSUs and performance-based RSUs. Historically, time-based RSUs vested ratably over three years, while the one-year performance-based RSUs vested two years after measurement of performance, and the three-year performance-based RSUs vested immediately upon measurement of performance. In 2019, we transitioned to three-year performance periods for all performance-based RSUs in order to further encourage long-term decision-making, align with prevailing practices among our primary peer group, and avoid duplication of performance measures from our annual incentive cash awards. Performance-based RSUs are based on three-year earnings per share growth in comparison to peers and three-year return on average tangible common equity in comparison to peers. Return on average tangible common equity, or ROTCE, is defined as the amount equal to (a) net income available to common stockholders plus core deposit and customer relationship intangibles and customer relationship intangibles, net, divided by (b) average common equity less goodwill and core deposit intangibles and customer relationship intangibles, net. This measure is not determined in accordance with generally accepted accounting principles ("GAAP"). Refer to "Non-GAAP Measures for Annual Incentive Awards" for additional information on the usage and presentation of this non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure.

We believe that our compensation program has, over the past five years, very closely aligned the value we have generated for stockholders with the compensation of our executives. The table below, which graphs CEO pay against total stockholder return ("TSR"), illustrates the alignment of CEO pay with Company performance:
403530886_chart-a8b9bd35c8f24aebb391.jpg
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(1) Indexed TSR assumes an initial investment of $100 at the start of year one (2015) and reflects the annual increase/(decrease) in such investment as a result of annual TSR.
(2) 2018-2019 represents Mr. Lee's Total Compensation as disclosed in the Summary Compensation Table. Years 2015-2017 represent Mr. Fuller's Total Compensation as disclosed in the Summary Compensation Table.
(3) Reflects the 50th percentile of Heartland's 2019 primary peer group, which is described later in this Compensation Discussion and Analysis.
(4) Reflects the 50th percentile of Heartland’s 2019 secondary peer group, which includes banks in our primary peer group and 20 additional banks with total assets ranging in size from $6.8 billion to $25.0 billion. For more information on our primary and secondary peer groups, refer to "Role of Advisors - Peer Comparison" in the Compensation Discussion and Analysis.

Administration of Our Executive Compensation Program

Role of the Compensation/Nominating Committee. The Compensation/Nominating Committee, which consists solely of independent directors, is primarily responsible for setting executive compensation for Heartland and then reporting its decisions to our Board of Directors. The Committee makes decisions on base salary adjustments, annual and long-term incentive awards, and performance standards and targets for the coming year.

In making compensation decisions, the Committee reviews and evaluates a broad range of material requested and received from management and its compensation consultant, including but not limited to, the following:
*
financial reports covering, among other things, historical and year-to-date financial performance vs. the financial plan and financial performance vs. the peer group;
*
individual performance information for the CEO and other executive officers;
*
reports on Heartland’s strategic objectives and future financial plans;
*
information on executive officers’ stock ownership;
*
agreements and other plan documents regarding compensation; and
*competitive market data from consultants retained by the Committee.

In formulating our performance-based compensation programs for executive officers, our Compensation/Nominating Committee considers the risk created by tying compensation to financial goals, including the risk of encouraging short-term behavior by tying a portion of compensation to annual goals, and the risks presented by encouraging higher earnings and asset and deposit growth. The Committee is guided by the Guidance on Sound Incentive Compensation Policies jointly issued by the financial institution regulatory agencies in 2010, which establishes a framework for assessing the soundness of incentive compensation plans, programs and arrangements maintained by financial institutions, and encourages balanced risk-taking incentives compatible with effective controls and risk management and with general principles of strong corporate governance. The Committee meets with Heartland’s Chief Risk Officer annually and discusses the management of any risks presented by its annual incentive program.

The Compensation/Nominating Committee believes that a sensible approach to balancing risk-taking and rewarding achievement of reasonable, but not necessarily easily attainable, goals has always been a component of the executive compensation program. The Committee has regularly revisited the joint agency guidance as an effective tool for conducting its own assessment of the balance between risk and reward built into Heartland’s executive compensation program.

The Compensation/Nominating Committee reviewed with the Chief Risk Officer of Heartland the incentive compensation arrangements for the named executive officers and has made reasonable efforts to ensure that such arrangements are appropriately balanced, do not create inappropriate risk-taking and do not impair the safety and soundness of Heartland and its subsidiary banks. We believe that tying a substantial portion of total direct compensation to long-term incentives keeps the named executive officers focused on the Company’s long-term performance. Other features in our executive compensation program discourage excessive risk-taking and encourage a focus on long-term performance. These features include performance standards that account for quality of growth, meaningful stock ownership guidelines and a clawback policy.

Role of Management. Our management evaluates employee performance, establishes business performance targets and objectives and recommends salaries, cash incentive and equity awards. Our Executive Operating Chairman, President and CEO, Corporate Secretary and Chief Human Resources Officer assist the Chairman of the Compensation/Nominating Committee with setting the agenda for the Committee’s meetings and coordinate the preparation of materials for all such
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meetings. At the request of the Committee, our Executive Operating Chairman, President and CEO, and Chief Human Resources Officer also provide information regarding our strategic objectives, evaluations of executive officers’ performance and compensation recommendations for executive officers other than themselves. Our Executive Operating Chairman, President and CEO, and Chief Human Resources Officer do not approve the compensation arrangements of any executive officers or participate in the formulation of their own compensation.

Role of Advisors - Peer Comparison. Grant Thornton LLP (“GT”) until September 2019, and then for the remainder of 2019, McLagan, which is part of the Rewards Solutions practice at Aon plc ("McLagan"), were retained by the Compensation/Nominating Committee to provide compensation consulting services. Their role included providing market information on compensation levels and practices, assisting in the design of compensation programs, providing input on related technical and regulatory matters and working with other advisors in developing peer groups. The Compensation/Nominating Committee determined that it was a best practice to review several firms that provide compensation consulting services including both GT and McLagan. McLagan was selected as the new compensation consultant, as they also serve in a similar role for many of Heartland's peers.

In considering the retention of GT and then McLagan, the Compensation/Nominating Committee assessed each advisor's independence in accordance with Nasdaq listing standards and considered that:
*
Neither consultant provided any other services to Heartland;
*
The fees paid to GT and McLagan by Heartland for their services as compensation consultant represented an insignificant portion of the total revenues of each consultant, respectively;
*
Each consultant maintained policies and procedures designed to prevent conflicts of interest between the consultant and the companies to which it provides services, as well as between its individual employees and such companies;
*
Neither Heartland nor any member of the Compensation, Nominating and Corporate Governance Committee had any other business or personal relationship with either consultant or its employees who provided services to the Committee;
*
Each consultant, and its employees who provided services to the Compensation, Nominating and Corporate Governance Committee, did not own any shares of Heartland common stock; and
*
No executive officer of Heartland had any business or personal relationship with either consultant or its employees who provided services to the Compensation, Nominating and Corporate Governance Committee.

Based upon these and other factors, the Compensation/Nominating Committee concluded that the retention of GT and McLagan did not present any conflicts of interest and that such retention was appropriate.

The Compensation/Nominating Committee annually reviews a competitive analysis generated by its compensation consultant as a benchmark for our executive compensation program. The Committee establishes appropriate and competitive ranges of annual and long-term compensation, with consideration for comparable benchmarks within the primary peer group. Various components of executive compensation (e.g., base salaries, equity compensation, retirement plan contributions and other benefits) are benchmarked against comparable positions within the primary peer group. In addition, the Compensation/ Nominating Committee reviews information prepared by the compensation consultant on the usage of shares and related dilution levels for equity incentive plans within the primary peer group. In 2019, GT assisted the Committee with the competitive and equity incentive plan analysis.

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The Compensation/Nominating Committee, with the assistance of its compensation consultant, annually reviews the primary peer group which it uses to analyze the competitiveness of our executive compensation program. The members of the primary peer group are selected based on comparable industry, amount of total assets, market cap, and growth and returns over the past three to five years. Based on the criteria above, the 2019 primary peer group added two companies, Bank of Hawaii Corporation and Trustmark Corporation and removed two companies 1st Source Corporation and Southside Bancshares from the 2018 primary peer group. The table below lists the 25 companies that comprise our 2019 primary peer group:
NAMECITY, STATETICKERNAMECITY, STATETICKER
Western Alliance Bancorporation
Phoenix, AZ
WAL
Atlantic Union Bankshares Corp.
Richmond, VA
AUB
Bank of Hawaii Corporation
Honolulu, HI
BOH
Banc of California, Inc.
Irvine, CA
BANC
Simmons First National Corporation
Pine Bluff, AR
SFNC
International Bancshares Corporation
Laredo, TX
IBOC
Trustmark Corporation
Jackson, MS
TRMK
NBT Bancorp Inc.
Norwich, NY
NBTB
Banner CorporationWalla Walla, WABANR
Columbia Banking System, Inc.
Tacoma, WA
COLB
Independent Bank Corp.
Rockland, MA
INDB
Eagle Bancorp, Inc.
Bethesda, MD
EGBN
First Interstate BancSystem, Inc.
Billings, MT
FIBK
Southside Bancshares, Inc.
Tyler, TX
SBSI
Great Western Bancorp, Inc.
Sioux Falls, SD
GWB
BancFirst Corporation
Oklahoma City, OK
BANF
First Merchants CorporationMuncie, INFRME
Park National Corporation
Newark, OH
PRK
Glacier Bancorp, Inc.
Kalispell, MT
GBCI
S&T Bancorp, Inc.
Indiana, PA
STBA
Ameris Bancorp
Moultrie, GA
ABCB
Tompkins Financial Corporation
Ithaca, NY
TMP
Customers Bancorp, Inc.
Wyomissing, PA
CUBI
Flushing Financial Corporation
Uniondale, NY
FFIC
Renasant CorporationTupelo, MSRNST

Our 2019 secondary peer group includes banks in our primary peer group and the additional 20 banks listed below. Our performance-based RSUs are earned based on our earnings per share growth and return on average tangible common equity in comparison to our secondary peer group.
NAMECITY, STATETICKERNAMECITY, STATETICKER
CenterState Bank CorporationWinter Haven, FLCSFLCommunity Bank System, Inc.Dewitt, NYCBU
CVB Financial Corp.Ontario, CACVBFFirst Commonwealth Financial CorporationIndiana, PAFCF
First BanCorp.San Juan, PRFBPFirst Midwest Bancorp, Inc.Chicago, ILFMBI
First Financial Bancorp.Cincinnati, OHFFBCHilltop Holdings Inc.Dallas, TXHTH
Fulton Financial CorporationLancaster, PAFULTOFG BancorpSan Juan, PROFG
Independent Bank Group, Inc.McKinney, TXIBTXPacific Premier Bancorp, Inc.Irvine, CAPPBI
Old National BancorpEvansville, INONBSandy Spring Bancorp, Inc.Olney, MDSASR
Pinnacle Financial Partners, Inc.Nashville, TNPNFPUMB Financial CorporationKansas City, MOUMBF
South State CorporationColumbia, SCSSBUnited Community Banks, Inc.Blairsville, GAUCBI
United Bankshares, Inc.Charleston, WVUBSIWesBanco, Inc.Wheeling WVWSBC
Because it recognizes the inherent limitations on benchmarked data, the Compensation/Nominating Committee does not establish compensation based on pre-established ratios of executive compensation to peer group data. Instead, peer group data is one factor in the Committee’s analysis, and it is used for a validation check of the final compensation package chosen for our executives.

Consideration of Advisory Vote. As determined by our stockholders in 2017, we annually submit our executive compensation arrangements to stockholders for a non-binding, advisory vote. The Compensation/Nominating Committee believes that an annual “say on pay” vote provides it with more direct and current input regarding the effectiveness of its compensation policies. At our last Annual Meeting, over 95% of the votes were cast in favor of our executive compensation program. The Compensation/Nominating Committee interprets this high level of approval as an indication of our stockholders’ endorsement of the program. The Committee recognizes that effective practices evolve, and the Committee will continue to consider changes as needed to keep our executive compensation program competitive and performance-based.


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Elements of Compensation

The compensation of our named executive officers is comprised of four primary components: (1) base salary, (2) annual incentive cash awards, and (3) long-term incentive equity compensation, which together constitute total direct compensation, and (4) additional benefits.

As illustrated by the following table, a substantial part of our CEO’s total direct compensation for 2019 was performance-based:
2019 CEO Total Direct Compensation Mix - Bruce K. Lee
Fixed Compensation
Amount
% of Total
Compensation
Base Salary
$719,000  37 %
Total Fixed Compensation
$719,000  37 %
Variable-Based Compensation
Amount
% of Total
Compensation
Long-Term Equity Incentive - Performance-Based RSUs
$243,863  13 %
Long-Term Equity Incentive - Time-Based RSUs
$243,863  13 %
Annual Incentive Cash Award
$732,293  37 %
Total Variable-Based Compensation
$1,220,019  63 %
Total Direct Compensation
$1,939,019  100 %
403530886_chart-eb51230727234948baa1.jpg
Base Salary. The Compensation/Nominating Committee regards base salary as an important component of executive compensation because it provides executives with the assurance of a regular income. Base salaries are intended to assist us in attracting executives and recognizing different levels of responsibility and contribution. The Committee targets base salaries for our named executive officers near the peer group median for comparable positions, with additional consideration given to the executive’s qualifications and experience, scope of responsibility and potential to achieve the goals and objectives established. Past performance and internal pay equity are also considered.

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The following table lists the base salaries for our named executive officers in 2019 in comparison to 2018 and 2017. These base salaries are used for calculating annual incentive targets, and they include any applicable pro-rata increases approved by the Compensation/Nominating Committee that would have been effective on April 1, 2019.
Officer201720182019
Bruce K. Lee
$485,417  $576,000  $719,000  
Lynn B. Fuller
$501,675  $512,963  $541,681  
Bryan R. McKeag
$316,913  $343,500  $388,000  
Brian J. Fox$275,025  $298,000  $312,250  
David A. Prince $—  $—  $350,000  

Mr. Lee, who was appointed to the role of CEO effective June 1, 2018, received a significant increase in base salary in conjunction with his promotion. Mr. Fuller, who moved from CEO to the position of Executive Operating Chairman in June 2018, received a modest base salary increase in line with market trends for his position. Messrs. Lee, Fuller, McKeag and Fox received base salary increases in April 2019 following our analysis of base salaries for comparable positions within the primary peer group. As a newly hired executive, Mr. Prince received no base salary increase in 2019.

Annual Incentive Cash Awards. Our Compensation/Nominating Committee administers an executive incentive program that allows our named executive officers to earn annual incentive cash awards. The performance standards for the awards are designed to encourage not only financial performance, but to ensure growth in quality assets, to limit excessive risk-taking and to reward adherence to our longer-term financial plan. For our named executive officers, targets for the performance standards are based on Heartland’s financial plan targets, with all of our named executive officers having a portion of their annual incentive tied to Heartland’s return on average tangible common equity ("ROTCE"); efficiency ratio; loan growth, exclusive of the residential mortgage segment, loans obtained through acquisitions, loans reclassified as held for sale, and specifically identified loans with high credit risk ("organic loan growth"); non-time deposit growth, excluding certificates of deposit, deposits obtained through acquisitions, and reclassification of deposits that are held for sale ("organic non-time deposit growth"); and acquired asset growth. As Head of Commercial, Mr. Prince has criteria specifically focused on commercial loan and deposit growth and has performance standards for non-performing assets.

The target annual incentive cash award for each named executive officer is based upon a percentage of his base salary. For 2019, the target annual incentive was 80% of base salary for Messrs. Lee and Fuller, 60% for Mr. McKeag, and 50% for Messrs. Fox and Prince.

The total annual incentive cash award for each named executive officer is the sum of the amounts earned for each of the performance standards described above. Each portion of the award is calculated using the following formula:
Award Based on
Each Performance
Standard
=
Executive
Officer’s
Salary
x
Target
Annual
Incentive
x
Weighting of
Performance
Standard
x
(2019 Result ÷ 2019 Target)

Named executive officers may receive a maximum payout of 150% of target for outstanding performance. There is no payout on a performance measure if performance is at or below 50% of target performance, which we refer to as "threshold" performance.

Because we believe earnings per share and ROTCE are the most important indicators of market performance, and therefore best align the interests of our named executive officers with our stockholders, one of the most heavily weighted annual incentive performance measures is ROTCE. To encourage superior performance, our ROTCE target is set at 15% or greater, which we believe is strong performance in relation to our peers based on competitive analysis.

As a growth-oriented bank holding company, it is also our objective to encourage acquired and organic growth in loans and deposits. Accordingly, acquired asset growth, which is a GAAP measure of assets acquired at fair value in an acquisition, is an annual incentive performance measure for each of our named executive officers. This performance measure consolidates two measures that we have used separately the past: acquired loan growth and acquired deposit growth.

Organic loan growth is another annual incentive performance measure for each of our named executive officers. We define organic loan growth as growth in all portfolios, excluding the residential mortgage segment, acquired loans and loans reclassified as held for sale. Additionally, we excluded the reduction of specifically identified loans with high credit risk from the organic growth calculation. These credits were credits identified by management at the end of 2018 as no longer fitting our
26



risk profile, and management was encouraged to help the customers seek other financing options. Mr. Prince's organic loan growth measure excludes changes in the consumer portfolio. Furthermore, because Mr. Prince is in a particularly important position to influence the quality of loan growth, we base a portion of his annual incentive cash award on the ratio of nonperforming assets to total assets.

Growth of non-time deposits is important to maintain liquidity and healthy reserves and to uphold a strong net interest margin. Our Compensation, Nominating and Corporate Governance Committee also bases a portion of the annual incentive cash award on organic non-time deposit growth for all named executive officers other than Mr. Prince. Mr. Prince's annual incentive cash award includes a portion of organic non-time commercial deposit growth. Organic non-time deposit growth excludes certificates of deposit, deposits acquired in acquisition and deposits reclassified as held for sale.

The efficiency ratio is another important annual incentive performance measure for the named executive officers. This performance standard focuses attention on organizational efficiency. We believe the efficiency ratio, which measures productivity, is another important indicator of returning value to our stockholders.

The remaining component upon which a portion of a named executive officer’s annual incentive cash award may be earned is a discretionary standard. This allows the Compensation/Nominating Committee to take a broader view of the prior year’s performance and allows the Committee to consider additional qualitative and quantitative factors, including risk management, merger and acquisition activity, credit quality, talent management, leadership, regulatory relations, special projects and unplanned/unexpected circumstances. Because of the strong strategic and financial leadership of Messrs. Lee and McKeag, the Committee awarded a payout of 125% to each in the discretionary category. Mr. Lee has confidently pursued his visionary approach toward taking Heartland to the $20 billion asset level, utilizing a strong team of senior management and encouraging others to maintain integrity with values leading to Heartland's continued success. Mr. McKeag led the sale of the loans of our consumer finance company, the sale of the Dubuque Bank and Trust Company mortgage servicing rights as well as the sale of seven branches in 2019. The Committee awarded Mr. Prince a payout of 120% in the discretionary category for his leadership in the commercial area as evidenced by the organic commercial loan growth, the transition to Salesforce as our customer relationship management system and the implementation of nCino as our commercial loan origination system. Mr. Fox was awarded a payout of 110% in the discretionary category for his leadership in the operations area including the deconversions associated with seven branch sales and the technical installation of Salesforce and nCino. The Committee awarded Mr. Fuller a 100% payout within the discretionary category for his leadership related to mergers and acquisitions and risk management. Mr. Fuller led us through two acquisitions, both in market - one in Illinois and the other in Kansas - with a total size of $1.2 billion.

The tables below show business plan targets and 2019 results that were used to calculate the annual incentive cash award for each of our named executive officers, dollars in thousands. Payouts can be found in the column "Non-Equity Incentive Plan Compensation" in the Summary Compensation Table.

Mr. Lee
Performance StandardWeighting2019 Target2019 Result2019 Score
Return on Average Tangible Common Equity (non-GAAP)(1)
40.00 %15.10 %15.73 %132 %
Efficiency Ratio (non-GAAP)(2)
10.00 %62.00 %63.11 %72 %
Loan Growth, Organic (non-GAAP)(3)
7.50 %$269,941  $334,459  148 %
Asset Growth, Acquired15.00 %$750,000  $1,261,922  134 %
Non-Time Deposit Growth, Organic (non-GAAP)(4)
7.50 %$331,848  $758,213  150 %
Board Discretionary 20.00 %100 %125 %125 %

Mr. Fuller
Performance StandardWeighting2019 Target2019 Result2019 Score
Return on Average Tangible Common Equity (non-GAAP)(1)
40.00 %15.10 %15.73 %132 %
Efficiency Ratio (non-GAAP)(2)
10.00 %62.00 %63.11 %72 %
Loan Growth, Organic (non-GAAP)(3)
7.50 %$269,941  $334,459  148 %
Asset Growth, Acquired 15.00 %$750,000  $1,261,922  134 %
Non-Time Deposit Growth, Organic (non-GAAP)(4)
7.50 %$331,848  $758,213  150 %
Board Discretionary 20.00 %100 %100 %100 %

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Mr. McKeag
Performance StandardWeighting2019 Target2019 Result2019 Score
Return on Average Tangible Common Equity (non-GAAP)(1)
40.00 %15.10 %15.73 %132 %
Efficiency Ratio (non-GAAP)(2)
10.00 %62.00 %63.11 %72 %
Loan Growth, Organic (non-GAAP)(3)
7.50 %$269,941  $334,459  148 %
Asset Growth, Acquired15.00 %$750,000  $1,261,922  134 %
Non-Time Deposit Growth, Organic (non-GAAP)(4)
7.50 %$331,848  $758,213  150 %
Board Discretionary 20.00 %100 %125 %125 %

Mr. Fox
Performance StandardWeighting2019 Target2019 Result2019 Score
Return on Average Tangible Common Equity (non-GAAP)(1)
40.00 %15.10 %15.73 %132 %
Efficiency Ratio (non-GAAP)(2)
10.00 %62.00 %63.11 %72 %
Loan Growth, Organic (non-GAAP)(3)
7.50 %$269,941  $334,459  148 %
Asset Growth, Acquired15.00 %$750,000  $1,261,922  134 %
Non-Time Deposit Growth, Organic (non-GAAP)(4)7.50 %$331,848  $758,213  150 %
Board Discretionary 20.00 %100 %110 %110 %

Mr. Prince
Performance StandardWeighting2019 Target2019 Result2019 Score
Return on Average Tangible Common Equity (non-GAAP)(1)
20.00 %15.10 %15.73 %132 %
Efficiency Ratio (non-GAAP)(2)
10.00 %62.00 %63.11 %72 %
Commercial and Ag Loan Growth, Organic (non-GAAP)(3)
20.00 %$251,885  $368,408  150 %
Asset Growth, Acquired5.00 %$750,000  $1,261,922  134 %
Non-Time Commercial Deposit Growth, Organic(4)
20.00 %$172,661  $297,694  150 %
Treasury Management and Commercial Credit Card Fee Growth(5)
10.00 %$27,412  $26,083  58 %
Non-Performing Assets to Total Assets 5.00 %0.60 %0.66 %85 %
Board Discretionary 10.00 %100 %120 %120 %
(1) Refer to the table, "Reconciliation of Non-GAAP Measure - Return on Average Tangible Common Equity."
(2) Refer to the table "Reconciliation of Non-GAAP Measure - Efficiency Ratio."
(3) Refer to the table "Reconciliation of Non-GAAP Measure - Loan Growth, Organic."
(4) Refer to the table "Reconciliation of Non-GAAP Measure - Non-Time Deposit Growth, Organic."
(5) Refer to the table "Reconciliation of Non-GAAP Measure - Treasury Management and Commercial Credit Card Fee Growth."

Non-GAAP Measures for Annual Incentive Awards

This document contains references to financial measures which are not defined by generally accepted accounting principles ("GAAP"). Management believes the non-GAAP measures are helpful to analyze and evaluate Heartland's financial condition and operating results. However, these non-GAAP measures have inherent limitations and should not be considered a substitute for operating results determined in accordance with GAAP. Additionally, because non-GAAP measures are not standardized, it may not be possible to compare the non-GAAP measures in this document with other companies' non-GAAP measures. Reconciliations of each non-GAAP measure to the most directly comparable GAAP measure may be found in the following financial tables.

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Return on average tangible common equity is net income available to common stockholders plus core deposit and customer relationship intangibles amortization, net of tax, divided by average common stockholders' equity less goodwill and core deposit intangibles and customer deposit intangibles, net. This financial measure is included as it is considered to be a critical metric to analyze and evaluate use of equity, financial condition and capital strength. Below are the components of the return on tangible common stockholders’ equity calculation that reconcile to the most directly comparable GAAP measures, dollars in thousands:
Reconciliation of Non-GAAP Measure - Return on Average Tangible Common Equity
For the Year Ended
December 31, 2019
Net income available to common stockholders (GAAP)
$149,129  
Plus core deposit and customer relationship intangibles amortization, net of tax(1)
9,458  
$158,587  
Average common stockholders’ equity (GAAP)
$1,473,396  
Less average goodwill
415,841  
Less average core deposit intangibles and customer relationship intangibles, net
49,377  
$1,008,178  
Return on average common equity (GAAP)
10.12 %
Return on average tangible common equity (non-GAAP)(1)
15.73 %
(1) Computed on a tax-equivalent basis using an effective tax rate of 21%.

Efficiency ratio, fully tax-equivalent, expresses adjusted noninterest expenses as a percentage of fully tax-equivalent net interest income and noninterest income. This efficiency ratio is presented on a tax-equivalent basis, which adjusts net interest income and noninterest income expenses for the tax favored status of certain loans, securities, and tax credit projects. Management believes the presentation of this non-GAAP measure enhances the comparability of income and expenses arising from taxable and nontaxable sources and excludes specific items, as noted in the table. Below are the components of the efficiency ratio that reconcile to the most directly comparable GAAP measures, dollars in thousands:
Reconciliation of Non-GAAP Measure - Efficiency Ratio
For the Year Ended
December 31, 2019
Net interest income (GAAP)
$433,729  
Tax-equivalent adjustment(1)
4,929  
Net interest income - tax equivalent (non-GAAP)
438,658  
Noninterest income
116,208  
Securities gains, net
(7,659) 
Unrealized gain on equity securities, net
(525) 
Gain on extinguishment of debt(375) 
Valuation adjustment on servicing rights911  
Adjusted income (non-GAAP)
$547,218  
Total noninterest income expenses (GAAP)
$349,161  
Less:
Core deposit intangibles and customer relationship intangibles amortization
11,972  
Partnership investment in historic rehabilitation tax credits
8,030  
(Gain)/loss on sales/valuations of assets, net(19,422) 
Restructuring expenses
3,227  
Adjusted noninterest income expenses (non-GAAP)
$345,354  
Efficiency ratio, fully tax-equivalent (non-GAAP)
63.11 %
(1) Computed on a tax equivalent basis using an effective tax rate of 21%.


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Organic loan growth for incentive compensation purposes is exclusive of the residential mortgage segment, loans obtained through acquisitions, loans reclassified as held for sale, and specifically identified loans with high credit risk. Management believes this measure provides a more complete understanding of underlying trends in loan growth notwithstanding dispositions and acquisitions. Below are the components of the organic loan growth calculation that reconciles to the most directly comparable GAAP measure, dollars in thousands:
Reconciliation of Non-GAAP Measure - Loan Growth, Organic
Loan Portfolio SegmentBalance as of 12/31/19 (GAAP)Acquired
in
2019
Reclassified
to Held
For Sale
Reduction
of Specific
Credits
Balance as
of 12/31/18
(GAAP)
Change Exclusive of
Acquisitions and
Dispositions
(Non-GAAP)
Commercial and Commercial Real Estate$6,790,458  $780,251  $14,908  $85,233  $5,731,712  $378,636  
Agricultural and Agricultural Real Estate533,064  1,7906,60117,305565,408(10,228) 
Total Commercial and Commercial Real Estate and Agricultural and Agricultural Real Estate7,323,522  782,041  21,509  102,538  6,297,120  368,408  (1)
Consumer452,233  54,6558,631—  440,158$(33,949) 
Total Commercial and Commercial Real Estate, Agricultural and Agricultural Real Estate and Consumer7,775,755  836,696  30,140  102,538  6,737,278  334,459  (2)
Residential Mortgage597,742  59,3211,970—  673,603(133,212) 
Unearned Discount and Deferred Loan Fees(5,580) —  —  —  (3,184) (2,396) 
Total Loans Held to Maturity $8,367,917  $896,017  $32,110  $102,538  $7,407,697  $96,313  $198,851  (3) 
(1) The sum of the change in these loan portfolio segments totals $368.4 million, which was the organic loan growth metric for Mr. Prince.
(2) The sum of the change in these loan portfolio segments totals $334.5 million, which was the organic loan growth metric for Messrs. Lee, Fuller, McKeag and Fox.
(3) Total loan growth was 13% on a GAAP basis: a $960.2 million increase over $7.41 billion of total loans held at maturity at December 31, 2018. Total organic loan growth was 1%, which is calculated as $198.9 million, less $102.5 million of reduction of specific credits, over $7.41 billion of total loans held at maturity at December 31, 2018.

Organic non-time deposit growth for incentive compensation purposes is exclusive of certificates of deposit, deposits obtained through acquisitions, and the reclassification of deposits that are held for sale. Management believes this measure provides a more complete understanding of underlying trends in deposit growth notwithstanding dispositions and acquisitions. Below are the components of the organic non-time deposit growth calculation that reconciles to the most directly comparable GAAP measure, dollars in thousands:
Reconciliation of Non-GAAP Measure - Non-Time Deposit Growth, Organic
Deposit TypeBalance as
of 12/31/19
(GAAP)
Acquired in 2019Reclassified
to Held
For Sale
Balance as
of 12/31/18
(GAAP)
Change Exclusive of
Acquisitions and
Dispositions
(Non-GAAP)
Commercial Demand Deposits $2,683,150  $232,295  $3,899  $2,401,792  $52,962  (1)
Retail and Other Demand Deposits 860,713  3,216  13,372  862,945  7,924  
Total Demand Deposits 3,543,863  235,511  17,271  3,264,737  60,886  
Commercial Savings Deposits 2,311,791  179,120  7,710  1,895,649  244,732  (1)
Retail and Other Savings Deposits3,995,634  370,848  40,122  3,212,313  452,595  
Total Savings Deposits 6,307,425  549,968  47,832  5,107,962  697,327  
Total Non-Time Deposits $9,851,288  $785,479  $65,103  $8,372,699  $758,213  (2)(3)
(1) The sum of the commercial demand and savings deposits exclusive of acquisitions and dispositions was $297.7 million, which was the organic non-time deposit growth metric for Mr. Prince.
(2) The total non-time deposit growth excluding acquisitions and dispositions was $758.2 million, which was the organic non-time deposit growth metric for Messrs. Lee, Fuller, McKeag and Fox.
(3) Total non-time deposit growth was 18% on a GAAP basis: a $1.48 billion increase over $8.37 billion of total non-time deposits at December 31, 2018. Total organic non-time deposit growth was 9%, a $758.2 million increase over $8.37 billion of total non-time deposits at December 31, 2018.

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Treasury management and commercial credit card fee growth is exclusive of retail and other service charges and fees and inclusive of the commercial earnings credit. The commercial earnings credit is used by banks to reduce fees for customers by the imputed interest rate on noninterest bearing deposits. This metric provides a more complete understanding of the sources of revenue by business line. Below are the components of the treasury management and commercial credit card fee growth calculation that reconciles to the most directly comparable GAAP measure, dollars in thousands:
Reconciliation of Non-GAAP Measure - Treasury Management and Commercial Credit Card Fee Growth
For the Year Ended
December 31, 2019
Treasury Management-Commercial Service Charges$9,631  
(1)
Treasury Management-Retail and Other Service Charges3,159  
Total Service Charges (GAAP)$12,790  
Commercial Credit Card Fees$12,755  
(1)
Retail Credit Card Fees2,839  
Total Credit Card Fees (GAAP)(2)
$15,594  
Commercial Earnings Credit$3,697  
(1)
(1) The sum of treasury management-commercial service charges, commercial credit card fees and commercial earnings credit (non-GAAP) was $26.1 million, which was the treasury management and commercial credit card fee growth metric for Mr. Prince.
(2) See the discussion of all noninterest income revenue sources in Note 21 of our financial statements for the year ended December 31, 2019, contained in our Annual Report to Stockholders.

Long-Term Incentive Equity Compensation. The Compensation/Nominating Committee believes that equity compensation can be an effective tool for aligning the long-term interests of management with those of stockholders. Since 2012, the Committee has granted our named executive officers a combination of RSUs that vest based on time and continued employment, and RSUs that must be earned based upon performance. In addition to our time-based RSUs and one-year performance-based RSUs, in 2016, the Committee added three-year performance-based RSUs to the long-term equity compensation pool to encourage long-term decision-making. We transitioned to three-year performance periods for all performance-based RSUs in 2019 in order to further encourage long-term decision-making, align with prevailing practices among our primary peer group, and avoid duplication of performance measures from our annual incentive cash awards. All forms of equity incentive are intended to enhance our ability to retain and attract senior leadership talent, provide compensation opportunities tied to long-term service and stockholder value, and reinforce our pay-for-performance and stockholder-alignment philosophy. The equity compensation is administered through our Amended and Restated 2012 Long-Term Incentive Plan.

The time-based RSUs that we have granted under this program vest in three equal installments, starting on the first anniversary of the date of grant, and become fully vested on the third anniversary of the grant date. All outstanding time-based RSUs with a grant date in 2015 or earlier vest in three equal installments, starting on the third anniversary of the grant date, and become fully vested on the fifth anniversary of the grant.

The three-year performance-based RSUs that we granted in 2019 have a three-year performance period, and are earned (1) 50% based upon Heartland’s earnings per share growth in comparison to its secondary peer group, and (2) 50% based upon Heartland’s return on average tangible common equity in comparison to its secondary peer group. The three-year performance-based RSUs granted in 2019 will vest on a measurement date in 2022, upon a review of aggregate performance from fiscal year 2019 through fiscal year 2021. Named executive officers may receive a maximum payout of 150% of target for outstanding performance. There is no payout on a performance measure if performance is at or below 50% of target performance, which we refer to as "threshold" performance.

In granting performance-based RSUs to the named executive officers, the Compensation, Nominating and Corporate Governance Committee considers the overall allocation of RSUs to ensure that the target number of performance-based RSUs granted is equal to or greater than the number of time-based RSUs granted. In 2019, the RSU awards to the named executive officers were roughly 50% time-based RSUs and 50% three-year performance-based RSUs. The Committee strives to grant RSUs with an aggregate grant date fair value that is competitive in the context of an executive’s performance and position.

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The performance period for our three-year performance-based RSU awards granted in 2017 ended as of December 31, 2019. These awards vested on the measurement date of March 17, 2020. Based on below-threshold performance on earnings per share growth and above-target performance on average ROTCE, the three-year performance based RSU's paid out at a blended payout of 60% of target. All metrics for these performance-based RSUs were provided by S&P Global Market Intelligence.

Other Compensation and Benefits. We have historically limited perquisites and other types of non-cash benefits to reinforce a pay-for-performance orientation and to minimize expenses. Such non-cash benefits, when provided, can include use of a Company-owned vehicle or a vehicle allowance, payment of 50% of country club or social club dues, and an allowance for moving expenses.

Heartland is a majority owner of a Cessna business jet. The aircraft is used to transport personnel to meetings at various Heartland locations. The jet also provides transportation for Heartland executives to business meetings and transports Heartland executives, directors, major stockholders and customers for business development purposes. It is our policy that the aircraft is not to be utilized for personal benefit; however, on occasion, and subject to applicable regulations, an executive officer's or a director's family member may board a flight if an empty seat is available on a regularly-scheduled business flight. We believe such usage does not create any incremental cost to Heartland.

Heartland does provide additional life insurance benefits to certain officers of Heartland under a number of different executive life insurance programs.

Executive officers also participate in our other broad-based employee benefit programs on the same terms as similarly situated employees, including our 2016 Employee Stock Purchase Plan, health insurance plans and a defined contribution retirement savings plan.

We provide severance and change in control arrangements to our named executive officers that are described under “Potential Payments upon Termination or Change in Control.”

Key Policies

Prohibition on Hedging. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forward contracts, equity swaps, collars and exchange funds. Such hedging transactions may permit a director or executive officer to continue to own securities of the Company, but without the full risks and rewards of ownership. When this situation occurs, the director or executive officer may no longer have the same objectives as the Company’s other stockholders. Therefore, directors and executive officers are prohibited from engaging in any such hedging transactions with regard to the equity securities of the Company or its subsidiaries.

Clawback Policy. It is in the best interests of the Company and its stockholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. Accordingly, our Compensation/Nominating Committee adopted a clawback policy which provides for the recoupment of performance-based cash and equity incentive compensation from certain employees, including our executive officers, in the event of an accounting restatement or ethical violation resulting from material noncompliance with financial reporting requirements under U.S. federal securities laws and/or as a result of a wrongful act. Both the time-based and performance-based RSU agreements contain clawback provisions that allow any amount or benefit received to be canceled, recouped, rescinded, or otherwise reduced.

Tax Deductible Compensation.  Section 162(m) of the Internal Revenue Code, as in effect prior to the enactment of the Tax Cuts and Jobs Act of 2017 (the “TCJA”), generally disallowed a tax deduction to public companies for compensation of more than $1 million paid in any taxable year to each “covered employee,” consisting of the CEO and the three other highest paid executive officers employed at the end of the year (other than the CFO).  Performance-based compensation was exempt from this deduction limitation if the Company met specified requirements set forth in the Internal Revenue Code and applicable Treasury Regulations.  The TCJA retained the $1 million deduction limit, but repealed the performance-based compensation exemption from the deduction limit and expanded the definition of “covered employees,” effective for taxable years beginning after December 31, 2017.  Consequently, compensation paid in 2018 and later years to our named executive officers in excess of $1 million will not be deductible unless it qualifies for transitional relief applicable to certain binding, written performance-based compensation arrangements that were in place as of November 2, 2017. The Committee believes it is important to maintain cash and equity incentive compensation at the levels needed to attract and retain the named executive officers essential to our success, even if all or part of that compensation may not be deductible.

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Compensation/Nominating Committee Report

We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that this Compensation Discussion and Analysis be included in the proxy statement for the year ended December 31, 2019.

Members of the Compensation/Nominating Committee,
Mark C. Falb
Thomas L. Flynn
Jennifer K. Hopkins
R. Michael McCoy
Susan G. Murphy
John K. Schmidt
Duane E. White

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Summary Compensation Table

The following table sets forth information concerning the compensation of our Chief Executive Officer, our Chief Financial Officer and our other three most highly compensated executive officers (collectively, the “named executive officers”) for the fiscal years ended December 31, 2019, 2018 and 2017. Effective June 1, 2018, our President, Bruce K. Lee, was promoted to the additional office of Chief Executive Officer, and Lynn B. Fuller transitioned to Executive Operating Chairman:
Name & Principal Position
Year
Salary(1)
Stock
Awards(2)(3)
Non-Equity
Incentive Plan
Compensation
All Other Compensation(4)
Total
Bruce K. Lee
2019$719,000  $487,726  $732,293  $40,922  $1,979,941  
President &
2018$576,000  $420,618  $455,263  $40,164  $1,492,045  
Chief Executive Officer
2017$485,417  $395,684  $341,345  $18,900  $1,241,346  
Lynn B. Fuller
2019$541,681  $402,592  $530,028  $24,939  $1,499,240  
Executive Operating Chairman
2018$512,963  $422,110  $413,647  $21,256  $1,369,976  
2017$501,675  $417,944  $352,778  $20,833  $1,293,230  
Bryan R. McKeag
2019$388,000  $205,690  $296,380  $21,424  $911,494  
Executive Vice President
2018$343,500  $200,612  $218,051  $20,904  $783,067  
Chief Financial Officer
2017$316,913  $195,980  $167,713  $19,025  $699,631  
Brian J. Fox2019$312,250  $148,020  $194,081  $19,600  $673,951  
Executive Vice President
2018$298,000  $147,187  $157,640  $19,250  $622,077  
Operations
2017$275,025  $108,394  $123,060  $18,900  $525,379  
David A. Prince2019$350,000  $170,447  $213,993  $9,567  $744,007  
Executive Vice President
2018$—  $—  $—  $—  $—  
Head of Commercial2017$—  $—  $—  $—  $—