BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The interim unaudited consolidated financial statements contained herein should be read in conjunction with the audited consolidated financial statements and accompanying notes to the consolidated financial statements for the fiscal year ended December 31, 2022, included in the Annual Report on Form 10-K of Heartland Financial USA, Inc. ("HTLF") filed with the Securities and Exchange Commission ("SEC") on February 23, 2023. Footnote disclosures to the interim unaudited consolidated financial statements which would substantially duplicate the disclosure contained in the footnotes to the audited consolidated financial statements have been omitted.

The financial information included herein has been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting and has been prepared pursuant to the rules and regulations for reporting on Form 10-Q and Rule 10-01 of Regulation S-X. Such information reflects all adjustments (consisting of normal recurring adjustments), that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of the interim period ended June 30, 2023, are not necessarily indicative of the results expected for the year ending December 31, 2023.

During the first quarter of 2023, HTLF reclassified swap and loan syndication income (collectively, "capital markets fees") to capital markets fees from other noninterest income on the consolidated statements of income, and all prior periods have been adjusted.

During the second quarter of 2023, HTLF reclassified Federal Deposit Insurance Corporation ("FDIC") insurance premiums to FDIC insurance assessments from professional fees on the consolidated statements of income, and all prior periods have been adjusted.

In the second quarter of 2023, HTLF amended and restated its Certificate of Incorporation and filed Certificates of Elimination with the state of Delaware with respect to Series A, B, C, and D preferred stock issuances, which returned these previously designated shares to authorized but unissued. The following shows the details of Series A, B, C and D preferred stock at December 31, 2022:

•Series A Junior Participating preferred stock-par value $1 per share; authorized 16,000 shares; none issued or outstanding at December 31, 2022

•Series B Fixed Rate Cumulative Perpetual Preferred Stock-par value $1 per share; 81,698 shares authorized at December 31, 2022; none issued or outstanding at December 31, 2022

•Series C Senior Non-Cumulative Perpetual Preferred Stock-par value $1 per share; 81,698 shares authorized at December 31, 2022; none issued or outstanding at December 31, 2022

•Series D Senior Non-Cumulative Perpetual Convertible Preferred Stock-par value $1 per share; 3,000 shares authorized at December 31, 2022; none issued or outstanding at December 31, 2022

After the cancellation of Series A, B, C and D preferred shares, total preferred shares authorized increased to 188,500 from 6,104 at December 31, 2022, of which none were issued or outstanding at both June 30, 2023 and December 31, 2022.

Earnings Per Share

Basic earnings per share is determined using net income available to common stockholders and weighted average common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average common shares and assumed incremental common shares issued. Amounts used in the determination of basic and diluted earnings per share for the three- and six- months ended June 30, 2023 and 2022, are shown in the table below, dollars and number of shares in thousands, except per share data:


	Three Months Ended June 30,
	2023		2022
Net income	$	49,416	$	51,873
Preferred dividends	(2,012)		(2,012)


Net income available to common stockholders	$	47,404	$	49,861

Weighted average common shares outstanding for basic earnings per share	42,696		42,475
Assumed incremental common shares issued upon vesting of outstanding restricted stock units	62		91
Weighted average common shares for diluted earnings per share	42,758		42,566
Earnings per common share — basic	$	1.11	$	1.17
Earnings per common share — diluted	$	1.11	$	1.17
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	59		172
Number of antidilutive stock options excluded from diluted earnings per share computation	221		—

	Six Months Ended June 30,
	2023		2022
Net income	$	102,192	$	94,962
Preferred dividends	(4,025)		(4,025)

Net income available to stockholders	$	98,167	$	90,937

Weighted average common shares outstanding for basic earnings per share	42,655		42,418
Assumed incremental common shares issued upon vesting of outstanding restricted stock units	98		145
Weighted average common shares for diluted earnings per share	42,753		42,563
Earnings per common share — basic	$	2.30	$	2.14
Earnings per common share — diluted	$	2.30	$	2.14
Number of antidilutive common stock equivalents excluded from diluted earnings per share computation	95		76
Number of antidilutive stock options excluded from diluted earnings per share computation	62		—

Subsequent Events - HTLF has evaluated subsequent events that may require recognition or disclosure through the filing date of this Quarterly Report on Form 10-Q with the SEC.

Effect of New Financial Accounting Standards

ASU 2022-01

In March 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method," which expands the current last-of-layer method by allowing multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. HTLF adopted this ASU on January 1, 2023, and these amendments were applied prospectively.

ASU 2022-02

In March 2022, the FASB issued ASU 2022-02, "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." These amendments eliminate the troubled debt restructurings ("TDR") recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made

to borrowers experiencing financial difficulty. Additionally, these amendments require that an entity disclose current-period gross charge-offs by year of origination for loans receivable within the scope of Subtopic 326-20. The guidance was effective for entities that have adopted ASU 2016-13 for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. HTLF adopted this ASU on January 1, 2023, as required, and these amendments were applied prospectively.

ASU 2023-02

In March 2023, the FASB issued ASU 2023-02 "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)." ASU 2023-02 expands the permitted use of the proportional amortization method, which is currently only available to low-income housing tax credit investments, to other tax equity investments if certain conditions are met. Under the proportional amortization method, the initial cost of an investment is amortized in proportion to the income tax benefits received and both the amortization of the investment and the income tax benefits received are recognized as a component of income tax expense. This ASU is effective on January 1, 2024 and may be applied on either a modified retrospective or retrospective basis or, for certain changes, on a prospective basis, and early adoption is permitted. The amendments in this ASU are not expected to have a material impact on the results of operations or financial position.