LEASES

12 Months Ended

Dec. 31, 2023

HTLF, as lessee, leases certain assets for use in its operations. Leased assets primarily include real estate property for retail branches, ATM locations and operations centers with terms extending through 2031. All HTLF's leases are classified as operating leases. HTLF excludes leases with an original term of twelve months or less and equipment leases (deemed immaterial) on the consolidated balance sheets. HTLF leases some of its facilities to third parties and receives rental income from such lease agreements which is not significant.

The table below presents HTLF's right-of-use ("ROU") assets and lease liabilities as of December 31, 2023 and December 31, 2022, in thousands:


		As of December 31,
	Classification	2023		2022
Operating lease right-of-use assets	Other assets	$	25,859	$	29,429
Operating lease liabilities	Accrued expenses and other liabilities	$	29,333	$	31,681

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. HTLF’s lease agreements often include one or more options to renew at HTLF’s discretion. If at lease inception, HTLF considers the exercising of a renewal option to be reasonably certain, HTLF will include the extended term in the calculation of the ROU asset and lease liability. HTLF utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. The variable lease cost primarily represents variable payments such as common area maintenance and utilities.

The table below presents the lease costs and supplemental information as of December 31, 2023, 2022, and 2021, in thousands:


	Income Statement Category	As of December 31,
Lease Cost		2023		2022		2021
Operating lease cost	Occupancy expense	$	7,768	$	7,256	$	8,013
Variable lease cost	Occupancy expense	11		16		47

Total lease cost		$	7,779	$	7,272	$	8,060
Supplemental Information
Noncash reduction of ROU assets	Occupancy expense	$	1,164	$	32	$	1,244
Noncash reduction lease liabilities	Occupancy expense	—		10		—

Supplemental balance sheet information		As of December 31, 2023
Weighted-average remaining operating lease term (in years)		5.53
Weighted-average discount rate for operating leases		3.08						%

Included in the noncash reduction of ROU assets in 2023 and 2022 are expenses related to lease modifications and ROU acceleration related to lease abandonments.

HTLF recorded $63,000 of impairment on one lease in 2023, which was recorded in gain (loss) on sales/valuations of assets, net. HTLF recorded $360,000 of impairment on two leases in 2022, and no impairment on leases in 2021.

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities as of December 31, 2023 is as follows, in thousands:


Year ending December 31,
2024	$	6,386
2025	6,221
2026	5,535
2027	4,581
2028	3,997
Thereafter	5,219
Total lease payments	$	31,939
Less interest	(2,606)
Present value of lease liabilities	$	29,333