XML 36 R11.htm IDEA: XBRL DOCUMENT v3.22.1
SECURITIES
 3 Months Ended
Mar. 31, 2022
Investments, Debt and Equity Securities [Abstract]  
SECURITIES SECURITIES
The amortized cost, gross unrealized gains and losses, and estimated fair values of debt securities available for sale and equity securities with a readily determinable fair value that are carried at fair value as of March 31, 2022, and December 31, 2021, are summarized in the table below, in thousands:
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value
March 31, 2022    
U.S. treasuries$998 $3 $— $1,001 
U.S. agencies89,827 24 (3,742)86,109 
Obligations of states and political subdivisions1,808,169 274 (170,526)1,637,917 
Mortgage-backed securities - agency2,264,657 1,510 (138,004)2,128,163 
Mortgage-backed securities - non-agency2,071,559 4,529 (62,152)2,013,936 
Commercial mortgage-backed securities - agency127,563 107 (9,115)118,555 
Commercial mortgage-backed securities - non-agency699,703 — (5,740)693,963 
Asset-backed securities321,155 320 (4,055)317,420 
Corporate bonds7,723 33 (108)7,648 
Total debt securities7,391,354 6,800 (393,442)7,004,712 
Equity securities with a readily determinable fair value20,531 — — 20,531 
Total$7,411,885 $6,800 $(393,442)$7,025,243 
December 31, 2021
U.S. treasuries$997 $11 $— $1,008 
U.S. agencies193,932 264 (812)193,384 
Obligations of states and political subdivisions2,045,386 56,263 (16,616)2,085,033 
Mortgage-backed securities - agency2,388,601 11,870 (51,182)2,349,289 
Mortgage-backed securities - non-agency1,749,838 4,570 (11,029)1,743,379 
Commercial mortgage-backed securities - agency125,397 1,429 (2,914)123,912 
Commercial mortgage-backed securities - non-agency600,253 998 (363)600,888 
Asset-backed securities408,167 2,803 (1,317)409,653 
Corporate bonds2,979 61 — 3,040 
Total debt securities7,515,550 78,269 (84,233)7,509,586 
Equity securities with a readily determinable fair value20,788 — — 20,788 
Total$7,536,338 $78,269 $(84,233)$7,530,374 

The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of March 31, 2022, and December 31, 2021, are summarized in the table below, in thousands:
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value		Allowance for Credit Losses
March 31, 2022    
Obligations of states and political subdivisions$81,785 $4,714 $(13)$86,486 $— 
Total$81,785 $4,714 $(13)$86,486 $— 
December 31, 2021
Obligations of states and political subdivisions$84,709 $9,430 $— $94,139 $— 
Total$84,709 $9,430 $— $94,139 $— 

As of March 31, 2022, and December 31, 2021, HTLF had $25.4 million and $29.4 million, respectively, of accrued interest receivable, which is included in other assets on the consolidated balance sheets. HTLF does not consider accrued interest receivable in the carrying amount of financial assets held at amortized cost basis or in the allowance for credit losses calculation.
The amortized cost and estimated fair value of investment securities carried at fair value at March 31, 2022, by contractual maturity, are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.
March 31, 2022
Amortized CostEstimated Fair Value
Due in 1 year or less$1,328 $1,333 
Due in 1 to 5 years10,563 10,440 
Due in 5 to 10 years142,958 132,583 
Due after 10 years1,751,868 1,588,319 
Total debt securities1,906,717 1,732,675 
Mortgage and asset-backed securities5,484,637 5,272,037 
Equity securities with a readily determinable fair value 20,531 20,531 
Total investment securities$7,411,885 $7,025,243 

The amortized cost and estimated fair value of debt securities held to maturity at March 31, 2022, by contractual maturity, are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.
March 31, 2022
Amortized CostEstimated Fair Value
Due in 1 year or less$4,095 $4,104 
Due in 1 to 5 years37,309 37,998 
Due in 5 to 10 years34,300 36,918 
Due after 10 years6,081 7,466 
Total debt securities81,785 86,486 

As of March 31, 2022, and December 31, 2021, securities with a carrying value of $1.22 billion and $1.66 billion, respectively, were pledged to secure public and trust deposits, short-term borrowings and for other purposes as required or permitted by law.

Gross gains and losses realized related to the sales of securities carried at fair value for the three months ended March 31, 2022 and 2021, are summarized as follows, in thousands:
Three Months Ended
March 31,
20222021
Proceeds from sales$824,071 $207,067 
Gross security gains6,941 445 
Gross security losses4,950 475 

The following table summarizes, in thousands, the amount of unrealized losses, defined as the amount by which cost or amortized cost exceeds fair value, and the related fair value of investments with unrealized losses in the securities portfolio as of March 31, 2022, and December 31, 2021. The investments were segregated into two categories: those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for
12 months or more. The reference point for determining how long an investment was in an unrealized loss position was March 31, 2021, and December 31, 2020, respectively.
Debt securities available for saleLess than 12 months12 months or longerTotal
 Fair
Value		Unrealized
Losses		CountFair
Value		Unrealized
Losses		CountFair
Value		Unrealized
Losses		Count
March 31, 2022
U.S. agencies$66,819 $(1,701)8 $17,475 $(2,041)1 $84,294 $(3,742)9 
Obligations of states and political subdivisions1,321,666 (124,133)305 297,576 (46,393)69 1,619,242 (170,526)374 
Mortgage-backed securities - agency1,439,275 (82,994)311 617,833 (55,010)40 2,057,108 (138,004)351 
Mortgage-backed securities - non-agency1,288,511 (58,783)154 93,072 (3,369)7 1,381,583 (62,152)161 
Commercial mortgage-backed securities - agency47,449 (2,204)18 57,260 (6,911)7 104,709 (9,115)25 
Commercial mortgage-backed securities - non-agency621,766 (5,526)61 14,030 (214)2 635,796 (5,740)63 
Asset-backed securities98,835 (3,882)18 9,299 (173)4 108,134 (4,055)22 
Corporate bonds5,613 (108)3 — — — 5,613 (108)3 
Total temporarily impaired securities$4,889,934 $(279,331)878 $1,106,545 $(114,111)130 $5,996,479 $(393,442)1,008 
December 31, 2021
U.S. agencies$100,839 $(812)2 $— $— — $100,839 $(812)2 
Obligations of states and political subdivisions596,866 (10,115)113 236,329 (6,501)49 833,195 (16,616)162 
Mortgage-backed securities - agency1,383,808 (33,291)83 474,724 (17,891)19 1,858,532 (51,182)102 
Mortgage-backed securities - non-agency929,515 (10,870)27 23,821 (159)5 953,336 (11,029)32 
Commercial mortgage-backed securities - agency26,999 (689)8 53,025 (2,225)5 80,024 (2,914)13 
Commercial mortgage-backed securities - non-agency74,450 (145)3 14,124 (218)2 88,574 (363)5 
Asset-backed securities113,945 (1,201)6 13,799 (116)6 127,744 (1,317)12 
Total temporarily impaired securities$3,226,422 $(57,123)242 $815,822 $(27,110)86 $4,042,244 $(84,233)328 

Securities held to maturityLess than 12 months12 months or longerTotal
Fair
Value		Unrealized
Losses		CountFair
Value		Unrealized
Losses		CountFair
Value		Unrealized
Losses		Count
March 31, 2022
Obligations of states and political subdivisions$1,590 $(13)2 $— $— — $1,590 $(13)2 
Total temporarily impaired securities$1,590 (13)2 2$— $— — $1,590 (13)2 

HTLF had no securities held to maturity with unrealized losses at December 31, 2021.

HTLF reviews the investment securities portfolio at the security level on a quarterly basis for potential credit losses, which takes into consideration numerous factors, and the relative significance of any single factor can vary by security. Some factors HTLF may consider include changes in security ratings, financial condition of the issuer, as well as security and industry specific economic conditions. In addition, with regard to debt securities, HTLF may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral. For certain debt securities in unrealized loss positions, HTLF prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

The unrealized losses on HTLF's mortgage and asset-backed securities are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities. The losses are not related to concerns regarding
the underlying credit of the issuers or the underlying collateral. It is expected that the securities will not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates or widening market spreads and not credit quality, and because HTLF has the intent and ability to hold these investments until a market price recovery or to maturity and does not believe it will be required to sell the securities before maturity, no credit losses were recognized on these securities during the three months ended March 31, 2022 and 2021.

The unrealized losses on HTLF's obligations of states and political subdivisions are the result of changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities. Management monitors the published credit ratings of these securities and the stability of the underlying municipalities. Because the decline in fair value is attributable to changes in interest rates or widening market spreads due to insurance company downgrades and not underlying credit quality, and because HTLF has the intent and ability to hold these investments until a market price recovery or to maturity and does not believe it will be required to sell the securities before maturity, no credit losses were recognized on these securities during the three months ended March 31, 2022 and 2021.

In the first quarter of 2022, HTLF sold two obligations of states and political subdivisions securities from the held to maturity portfolio. Because the underlying credit quality of the individual securities showed significant deterioration, it was unlikely HTLF would recover the remaining basis of the securities prior to maturity and therefore inconsistent with HTLF's original intent upon purchase and classification of these held to maturity securities. The carrying value of these securities was $2.2 million, and the associated gross gains were $100,000.

The credit loss model under ASC 326-30, applicable to held to maturity debt securities, requires the recognition of lifetime expected credit losses through an allowance account at the time when the security is purchased. The following tables present, in thousands, the activity in the allowance for credit losses for securities held to maturity by obligations of states and political subdivisions securities for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31,
20222021
Beginning balance$— $51 
Provision (benefit) for credit losses— (3)
Balance at period end$— $48 

Based on HTLF's credit loss model applicable to held to maturity debt securities, no allowance for credit losses was required at both March 31, 2022 and December 31, 2021.

The following table summarizes, in thousands, the carrying amount of HTLF's held to maturity debt securities by investment rating as of March 31, 2022 and December 31, 2021, which are updated quarterly and used to monitor the credit quality of the securities:
March 31, 2022December 31, 2021
Rating
AAA$3,294 $3,265 
AA, AA+, AA-54,944 61,471 
A+, A, A-18,626 15,034 
BBB4,921 4,939 
Not Rated— — 
Total $81,785 $84,709 

Included in other securities were shares of stock in each Federal Home Loan Bank (the "FHLB") of Des Moines, Chicago, Dallas, San Francisco and Topeka at an amortized cost of $23.0 million at March 31, 2022 and $22.6 million at December 31, 2021.

The HTLF banks are required by federal law to maintain FHLB stock as members of the various FHLBs. These equity securities are "restricted" in that they can only be sold back to the respective institutions from which they were acquired or another member institution at par. Therefore, the FHLB stock is less liquid than other marketable equity securities, and the fair value approximates amortized cost. HTLF considers its FHLB stock as a long-term investment that provides access to
competitive products and liquidity. HTLF evaluates impairment in these investments based on the ultimate recoverability of the par value and, at March 31, 2022, and December 31, 2021, did not consider the investments to be impaired.