FAIR VALUE (Tables)

12 Months Ended

Dec. 31, 2023

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The tables below present HTLF's assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2023, and December 31, 2022, in thousands, aggregated by the level in the fair value hierarchy within which those measurements fall:


	Total Fair Value		Level 1		Level 2		Level 3
December 31, 2023
Assets

Securities available for sale
U.S. treasuries	$	32,118	$	32,118	$	—	$	—
U.S. agencies	14,530		—		14,530		—
Obligations of states and political subdivisions	741,245		—		741,245		—
Mortgage-backed securities - agency	1,393,629		—		1,393,629		—
Mortgage-backed securities - non-agency	1,529,128		—		1,529,128		—
Commercial mortgage-backed securities - agency	64,788		—		64,788		—
Commercial mortgage-backed securities - non-agency	514,858		—		514,858		—
Asset-backed securities	217,370		—		217,370		—
Corporate bonds	118,169		—		118,169		—
Equity securities with a readily determinable fair value	21,056		—		21,056		—
Derivative financial instruments(1)	84,904		—		84,904		—
Interest rate lock commitments	—		—		—		—
Forward commitments	—		—		—		—
Total assets at fair value	$	4,731,795	$	32,118	$	4,699,677	$	—
Liabilities
Derivative financial instruments(2)	$	84,249	$	—	$	84,249	$	—
Forward commitments	—		—		—		—
Total liabilities at fair value	$	84,249	$	—	$	84,249	$	—

(1) Includes interest rate swaps, fair value hedges, embedded derivatives, and back-to-back loan swaps.
(2) Includes fair value hedges, back-to-back loan swaps and free-standing derivatives.


	Total Fair Value		Level 1		Level 2		Level 3

December 31, 2022
Assets

Securities available for sale
U.S. treasuries	$	31,699	$	31,699	$	—	$	—
U.S. agencies	43,135		—		43,135		—
Obligations of states and political subdivisions	879,437		—		879,437		—
Mortgage-backed securities - agency	1,772,105		—		1,772,105		—
Mortgage-backed securities - non-agency	2,181,876		—		2,181,876		—
Commercial mortgage-backed securities - agency	85,123		—		85,123		—
Commercial mortgage-backed securities - non-agency	659,459		—		659,459		—
Asset-backed securities	416,054		—		416,054		—
Corporate bonds	57,942		—		57,942		—
Equity securities	20,314		—		20,314		—
Derivative financial instruments(1)	46,293		—		46,293		—
Interest rate lock commitments	174		—		—		174
Forward commitments	47		—		47		—
Total assets at fair value	$	6,193,658	$	31,699	$	6,161,785	$	174
Liabilities
Derivative financial instruments(2)	$	46,226	$	—	$	46,226	$	—
Forward commitments	99		—		99		—
Total liabilities at fair value	$	46,325	$	—	$	46,325	$	—

(1) Includes embedded derivatives, back-to-back loan swaps and cash flow hedges.
(2) Includes cash flow hedges, fair value hedges, back-to-back loan swaps and free-standing derivative instruments.

Fair Value Measurements, Nonrecurring

The tables below present HTLF's assets that are measured at fair value on a nonrecurring basis, in thousands:


	Fair Value Measurements at December 31, 2023
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(Gains)/Losses
Collateral dependent individually assessed loans:
Commercial and industrial	$	23,422	$	—	$	—	$	23,422	$	554
Owner occupied commercial real estate	30,400		—		—		30,400		—
Non-owner occupied commercial real estate	—		—		—		—		—
Real estate construction	642		—		—		642		—
Agricultural and agricultural real estate	4,768		—		—		4,768		5,309
Residential real estate	741		—		—		741		—

Total collateral dependent individually assessed loans	$	59,973	$	—	$	—	$	59,973	$	5,863
Loans held for sale	$	5,071	$	—	$	5,071	$	—	$	—
Other real estate owned	12,548		—		—		12,548		2,967
Premises, furniture and equipment held for sale	4,069		—		—		4,069		2,786
Servicing rights	—		—		—		—		—


	Fair Value Measurements at December 31, 2022
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(Gains)/Losses
Collateral dependent individually assessed loans:
Commercial and industrial	$	12,042	$	—	$	—	$	12,042	$	4,186
Owner occupied commercial real estate	7,556		—		—		7,556		—
Non-owner occupied commercial real estate	11,371		—		—		11,371		—
Real estate construction	1,518		—		—		1,518		—
Agricultural and agricultural real estate	3,788		—		—		3,788		—
Residential real estate	1,607		—		—		1,607		—

Total collateral dependent impaired loans	$	37,882	$	—	$	—	$	37,882	$	4,186
Loans held for sale	$	5,277	$	—	$	5,277	$	—	$	(116)
Other real estate owned	8,401		—		—		8,401		180
Premises, furniture and equipment held for sale	6,851		—		—		6,851		1,562
Servicing rights	7,840		—		—		7,840		516

Quantitative Information on Assets Measured at Fair Value on Recurring and Nonrecurring Basis Using Level 3

The following tables present additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis and for which HTLF has utilized Level 3 inputs to determine fair value, in thousands:

Fair Value at 12/31/23

Valuation Technique

Unobservable Input

Range (Weighted Average)

Premises, furniture and equipment held for sale

4,069

Modified appraised value

Third-party appraisal

(1)

Appraisal discount

0-10%(2)

Other real estate owned

12,548

Modified appraised value

Third-party appraisal

(1)

Appraisal discounts

0-10%(2)

Collateral dependent individually assessed loans:

Commercial and industrial

23,422

Modified appraised value

Third-party appraisal

(1)

Appraisal discount

0-12%(2)

Owner occupied commercial real estate

30,400

Modified appraised value

Third-party appraisal

(1)

Appraisal discount

0-20%(2)

Non-owner occupied commercial real estate

—

Modified appraised value

Third-party appraisal

(1)

Appraisal discount

0-10%(2)

Real estate construction

642

Modified appraised value

Third-party appraisal

(1)

Appraisal discount

0-10%(2)

Agricultural and agricultural real estate

4,768

Modified appraised value

Third-party appraisal

(1)

Appraisal discount

0%-10%(2)

Residential real estate

741

Modified appraised value

Third-party appraisal

(1)

Appraisal discount

0-10%(2)

(1) Third-party appraisals are obtained and updated at least annually to establish the value of the underlying asset, but the disclosure of the unobservable inputs used by the appraisers would not be meaningful because the range will vary widely from appraisal to appraisal.

(2) Discounts applied to the appraised values primarily include estimated sales costs, but also consider the age of the appraisal, changes in local market conditions and changes in the current condition of the collateral.

Fair Value at 12/31/22

Valuation Technique

Unobservable Input

Range (Weighted Average)

Interest rate lock commitments

174

Discounted cash flows

Closing ratio

0 - 99% (88%)(1)

Premises, furniture and equipment held for sale

6,851

Modified appraised value

Third-party appraisal

(2)

Appraisal discount

0-10%(3)

Other real estate owned

8,401

Modified appraised value

Third-party appraisal

(2)

Appraisal discounts

0-10%(3)

Servicing rights

7,840

Discounted cash flows

Discount rate

9.98 - 11.72% (10.02%)(4)

Constant prepayment rate

7.8 - 14.2% (7.9%)(4)

Collateral dependent individually assessed loans:

Commercial and industrial

12,042

Modified appraised value

Third-party appraisal

(2)

Appraisal discount

0-10%(3)

Owner occupied commercial real estate

7,556

Modified appraised value

Third-party appraisal

(2)

Appraisal discounts

0-10%(3)

Non-owner occupied commercial real estate

11,371

Modified appraised value

Third-party appraisal

(2)

Appraisal discounts

0-10%(3)

Real estate construction

1,518

Modified appraised value

Third-party appraisal

(2)

Appraisal discount

0-10%(3)

Agricultural and agricultural real estate

3,788

Modified appraised value

Third-party appraisal

(2)

Appraisal discount

0-15%(3)

Residential real estate

1,607

Modified appraised value

Third-party appraisal

(2)

Appraisal discount

0-10%(3)

(1) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data.

(2) Third-party appraisals are obtained and updated at least annually to establish the value of the underlying asset, but the disclosure of the unobservable inputs used by the appraisers would not be meaningful because the range will vary widely from appraisal to appraisal.

(3) Discounts applied to the appraised values primarily include estimated sales costs, but also consider the age of the appraisal, changes in local market conditions and changes in the current condition of the collateral.

(4) The significant unobservable inputs used in the discounted cash flow analysis are the discount rate and constant prepayment rate.

Summary of Changes in Fair Value of Level 3 Assets Measured at Fair Value on Recurring Basis

The changes in fair value of the interest rate lock commitments, which are Level 3 financial instruments and are measured on a recurring basis, are summarized in the following table, in thousands:


	For the Years Ended
	December 31, 2023		December 31, 2022
Balance at January 1,	$	174	$	1,306

Total gains (losses), net, included in earnings	(290)		(1,828)
Issuances	1,864		3,683
Settlements	(1,748)		(2,987)
Balance at period end	$	—	$	174

Fair Value, by Balance Sheet Grouping

The following analysis, which is inherently limited in depicting fair value, also does not consider any value associated with either existing customer relationships or the ability of HTLF to create value through loan origination, obtaining deposits or fee generating activities. Many of the estimates presented below are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.


					Fair Value Measurements at December 31, 2023
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	323,013	$	323,013	$	323,013	$	—	$	—
Time deposits in other financial institutions	1,240		1,240		1,240		—		—
Securities:

Carried at fair value	4,646,891		4,646,891		32,118		4,614,773		—




Held to maturity	838,241		816,399		—		816,399		—
Other investments	91,277		91,277		—		91,277		—

Loans held for sale	5,071		5,071		—		5,071		—
Loans, net:
Commercial	3,611,368		3,396,628		—		3,373,206		23,422
PPP	2,777		2,777		—		2,777		—
Owner occupied commercial real estate	2,621,019		2,444,540		—		2,414,140		30,400
Non-owner occupied commercial real estate	2,536,462		2,393,931		—		2,393,931		—
Real estate construction	982,943		979,105		—		978,463		642
Agricultural and agricultural real estate	914,892		839,572		—		834,804		4,768
Residential real estate	791,984		687,428		—		686,687		741
Consumer	484,634		465,686		—		465,686		—
Total Loans, net	11,946,079		11,209,667		—		11,149,694		59,973

Cash surrender value on life insurance	197,085		197,085		—		197,085		—
Derivative financial instruments(1)	84,904		84,904		—		84,904		—
Financial liabilities:
Deposits
Demand deposits	$	4,500,304	$	4,500,304	$	—	$	4,500,304	$	—
Savings deposits	8,805,597		8,805,597		—		8,805,597		—
Time deposits	2,895,813		2,895,813		—		2,895,813		—
Borrowings	622,255		622,255		—		622,255		—
Term debt	372,396		374,017		—		374,017		—
Derivative financial instruments(2)	84,249		84,249		—		84,249		—

(1) Includes interest rate swaps, fair value hedges, embedded derivatives, and back-to-back loan swaps.
(2) Includes fair value hedges, back-to-back loan swaps and undesignated interest rate swaps.


					Fair Value Measurements at December 31, 2022
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	363,087	$	363,087	$	363,087	$	—	$	—
Time deposits in other financial institutions	1,740		1,740		1,740		—		—
Securities:

Carried at fair value	6,147,144		6,147,144		31,699		6,115,445		—




Held to maturity	829,403		776,557		—		776,557		—
Other investments	74,567		74,567		—		74,567		—

Loans held for sale	5,277		5,277		—		5,277		—
Loans, net:
Commercial and industrial	3,435,343		3,270,127		—		3,258,085		12,042
PPP	11,025		11,025		—		11,025		—
Owner occupied commercial real estate	2,251,359		2,084,665		—		2,077,109		7,556
Non-owner occupied commercial real estate	2,314,401		2,184,796		—		2,173,425		11,371
Real estate construction	1,046,084		1,039,244		—		1,037,726		1,518
Agricultural and agricultural real estate	917,876		842,637		—		838,849		3,788
Residential real estate	845,650		741,325		—		739,718		1,607
Consumer	497,131		480,018		—		480,018		—
Total Loans, net	11,318,869		10,653,837		—		10,615,955		37,882
Financial assets
Cash surrender value on life insurance	$	193,403	$	193,403	$	—	$	193,403	$	—
Derivative financial instruments(1)	46,293		46,293		—		46,293		—
Interest rate lock commitments	174		174		—		—		174
Forward commitments	47		47		—		47		—
Financial liabilities:
Deposits
Demand deposits	5,701,340		5,701,340		—		5,701,340		—
Savings deposits	9,994,391		9,994,391		—		9,994,391		—
Time deposits	1,817,278		1,817,278		—		1,817,278		—

Borrowings	376,117		376,117		—		376,117		—
Term debt	371,753		372,473		—		372,473		—
Derivative financial instruments(2)	46,226		46,226		—		46,226		—
Forward commitments	99		99		—		99		—

(1) Includes interest rate swaps, fair value hedges, embedded derivatives and back-to-back loan swaps.
(2) Includes fair value hedges, back-to-back loan swaps and undesignated interest rate swaps.