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FAIR VALUE
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE FAIR VALUE
HTLF utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities carried at fair value, which include available for sale, trading securities and equity securities with a readily determinable fair value, and derivatives are recorded in the consolidated balance sheets at fair value on a recurring basis. Additionally, from time to time, HTLF may be required to record at fair value other assets on a nonrecurring basis such as loans held for sale, loans held to maturity and certain other assets including, but not limited to, commercial servicing rights and other real estate owned. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.

Fair Value Hierarchy

Under ASC 820, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 — Valuation is based upon quoted prices for identical instruments in active markets.

Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, or similar instruments in markets that are not active, and model-based valuation techniques for all significant assumptions are observable in the market.

Level 3 — Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring or non-recurring basis.

Securities Available for Sale and Held to Maturity
Securities available for sale are recorded at fair value on a recurring basis. Securities held to maturity are generally recorded at cost. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level
1 securities include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury securities. Level 2 securities include U.S. government and agency securities, mortgage and asset-backed securities and private collateralized mortgage obligations, municipal bonds and corporate debt securities. On a quarterly basis, a secondary independent pricing service is used for the securities portfolio to validate the pricing from HTLF's primary pricing service.

Equity Securities with a Readily Determinable Fair Value
Equity securities with a readily determinable fair value generally include Community Reinvestment Act mutual funds and are classified as Level 2 due to the infrequent trading of these securities. The fair value is based on the price per share.

Loans Held for Sale
Loans held for sale are carried at the lower of cost or fair value on an aggregate basis. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, HTLF classifies loans held for sale subjected to nonrecurring fair value adjustments as Level 2. As of June 30, 2024, loans held for sale includes $348.8 million related to the Rocky Mountain Bank division. HTLF Bank signed definitive agreements in February 2024 to sell all nine Rocky Mountain Bank branches in Montana.

Loans Held to Maturity
HTLF does not record loans held to maturity at fair value on a recurring basis. However, from time to time, certain loans are considered collateral dependent and an allowance for credit losses is established. The fair value of individually assessed loans is measured using the fair value of the collateral. In accordance with ASC 820, individually assessed loans measured at fair value are classified as nonrecurring Level 3 in the fair value hierarchy.

Premises, Furniture and Equipment Held for Sale
HTLF considers third party appraisals less estimated disposal costs, as well as independent fair value assessments from realtors or persons involved in selling bank premises, furniture and equipment, in determining the fair value of particular properties held for sale. Accordingly, the valuation of premises, furniture and equipment held for sale is subject to significant external and internal judgment. HTLF periodically reviews premises, furniture and equipment held for sale to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. Premises, furniture and equipment held for sale are classified as nonrecurring Level 3 in the fair value hierarchy. As of June 30, 2024, premises, furniture and equipment held for sale includes $13.2 million related to the Rocky Mountain Bank division. HTLF Bank signed definitive agreements in February 2024 to sell all nine Rocky Mountain Bank branches in Montana. The properties will transfer upon completion of the sales transactions.

Derivative Financial Instruments
HTLF's current interest rate risk strategy includes cash flow hedges and interest rate swaps. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. To comply with the provisions of ASC 820, HTLF incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, HTLF has considered the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although HTLF has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2024, and December 31, 2023, HTLF has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, HTLF has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Other Real Estate Owned
Other real estate owned ("OREO") represents property acquired through foreclosures and settlements of loans. Property acquired is carried at the fair value of the property at the time of acquisition (representing the property's cost basis), plus any acquisition costs, or the estimated fair value of the property, less disposal costs. HTLF considers third party appraisals, as well as independent fair value assessments from realtors or persons involved in selling OREO, in determining the fair value of particular properties. Accordingly, the valuation of OREO is subject to significant external and internal judgment. HTLF periodically reviews OREO to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. OREO is classified as nonrecurring Level 3 of the fair value hierarchy.
The table below presents HTLF's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024, and December 31, 2023, in thousands, aggregated by the level in the fair value hierarchy within which those measurements fall:
Total Fair ValueLevel 1Level 2Level 3
June 30, 2024
Assets
Securities available for sale
U.S. treasuries$15,847 $15,847 $— $— 
U.S. agencies12,600 — 12,600 — 
Obligations of states and political subdivisions724,465 — 724,465 — 
Mortgage-backed securities - agency1,329,288 — 1,329,288 — 
Mortgage-backed securities - non-agency1,336,140 — 1,336,140 — 
Commercial mortgage-backed securities - agency60,501 — 60,501 — 
Commercial mortgage-backed securities - non-agency387,939 — 387,939 — 
Asset-backed securities176,382 — 176,382 — 
Corporate bonds120,306 — 120,306 — 
Equity securities with a readily determinable fair value 21,586 — 21,586 — 
Derivative financial instruments(1)
128,849 — 128,849 — 
Total assets at fair value$4,313,903 $15,847 $4,298,056 $— 
Liabilities
Derivative financial instruments(2)
$64,905 $— $64,905 $— 
Total liabilities at fair value$64,905 $— $64,905 $— 
December 31, 2023
Assets
Securities available for sale
U.S. treasuries$32,118 $32,118 $— $— 
U.S. agencies14,530 — 14,530 — 
Obligations of states and political subdivisions741,245 — 741,245 — 
Mortgage-backed securities - agency1,393,629 — 1,393,629 — 
Mortgage-backed securities - non-agency1,529,128 — 1,529,128 — 
Commercial mortgage-backed securities - agency64,788 — 64,788 — 
Commercial mortgage-backed securities - non-agency514,858 — 514,858 — 
Asset-backed securities217,370 — 217,370 — 
Corporate bonds118,169 — 118,169 — 
Equity securities with a readily determinable fair value21,056 — 21,056 — 
Derivative financial instruments(1)
84,904 — 84,904 — 
Total assets at fair value$4,731,795 $32,118 $4,699,677 $— 
Liabilities
Derivative financial instruments(2)
$84,249 $— $84,249 $— 
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.
The tables below present HTLF's assets that are measured at fair value on a nonrecurring basis as of June 30, 2024, and December 31, 2023, in thousands:
Fair Value Measurements at
June 30, 2024
TotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
 Inputs
(Level 3)		Year-to-
Date (Gains)
Losses
Collateral dependent individually assessed loans:
Commercial and industrial$19,938 $— $— $19,938 $3,351 
Owner occupied commercial real estate12,579 — — 12,579 — 
Non-owner occupied commercial real estate— — — — — 
Real estate construction675 — — 675 — 
Agricultural and agricultural real estate24,711 — — 24,711 — 
Residential real estate727 — — 727 — 
Total collateral dependent individually assessed loans$58,630 $— $— $58,630 $3,351 
Loans held for sale$348,761 $— $348,761 $— $— 
Other real estate owned7,533 — — 7,533 696 
Premises, furniture and equipment held for sale16,181 — — 16,181 89 

Fair Value Measurements at
December 31, 2023
TotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
 Inputs
(Level 3)		Year-to-
Date (Gains)
Losses
Collateral dependent individually assessed loans:
Commercial and industrial$23,422 $— $— $23,422 $554 
Owner occupied commercial real estate30,400 — — 30,400 — 
Non-owner occupied commercial real estate— — — — — 
Real estate construction642 — — 642 — 
Agricultural and agricultural real estate4,768 — — 4,768 5,309 
Residential real estate741 — — 741 — 
Total collateral dependent individually assessed loans$59,973 $— $— $59,973 $5,863 
Loans held for sale$5,071 $— $5,071 $— $— 
Other real estate owned12,548 — — 12,548 2,967 
Premises, furniture and equipment held for sale4,069 — — 4,069 2,786 
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
6/30/2024		Valuation
Technique		Unobservable
Input		Range (Weighted
Average)
Other real estate owned$7,533 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Premises, furniture and equipment held for sale16,181 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Collateral dependent individually assessed loans:
Commercial19,938 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-14%(2)
Owner occupied commercial real estate12,579 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Non-owner occupied commercial real estate— Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Real estate construction 675 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Agricultural and agricultural real estate24,711 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-15%(2)
Residential real estate727 Modified appraised valueThird 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 12/31/2023Valuation
Technique		Unobservable
Input		Range (Weighted Average)
Other real estate owned$12,548 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Premises, furniture and equipment held for sale4,069 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Collateral dependent individually assessed loans:
Commercial and industrial23,422 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-12%(2)
Owner occupied commercial real estate30,400 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-20%(2)
Non-owner occupied commercial real estate— Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Real estate construction 642 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Agricultural and agricultural real estate4,768 Modified appraised valueThird party appraisal(1)
Appraisal discount
0-10%(2)
Residential real estate741 Modified appraised valueThird 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.
The table below is a summary of the estimated fair value of HTLF's financial instruments (as defined by ASC 825) as of June 30, 2024, and December 31, 2023, in thousands. The carrying amounts in the following tables are recorded in the consolidated balance sheets under the indicated captions. In accordance with ASC 825, the assets and liabilities that are not financial instruments are not included in the disclosure, including the value of premises, furniture and equipment, premises, furniture and equipment held for sale, OREO, goodwill, and other intangibles and other liabilities.

HTLF does not believe that the estimated information presented herein is representative of the earnings power or value of HTLF. 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, deposit gathering or fee generating activities. Many of the estimates presented herein 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
June 30, 2024
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$373,946 $373,946 $373,946 $— $— 
Time deposits in other financial institutions1,340 1,340 1,340 — — 
Securities:
Carried at fair value4,185,054 4,185,054 15,847 4,169,207 — 
Held to maturity842,980 809,516 — 809,516 — 
Other investments
70,684 70,684 — 70,684 — 
Loans held for sale348,761 348,761 — 348,761 — 
Loans, net:
Commercial and industrial3,496,439 3,305,473 — 3,285,535 19,938 
PPP 1,864 1,864 — 1,864 — 
Owner occupied commercial real estate2,541,250 2,375,272 — 2,362,693 12,579 
Non-owner occupied commercial real estate2,420,561 2,297,208 — 2,297,208 — 
Real estate construction 1,050,516 1,043,263 — 1,042,588 675 
Agricultural and agricultural real estate794,053 730,953 — 706,242 24,711 
Residential real estate728,365 636,845 — 636,118 727 
Consumer448,400 430,909 — 430,909 — 
Total Loans, net
11,481,448 10,821,787 — 10,763,157 58,630 
Cash surrender value on life insurance199,036 199,036 — 199,036 — 
Derivative financial instruments(1)
128,849 128,849 — 128,849 — 
Financial liabilities:
Deposits
Demand deposits
4,244,169 4,244,169 — 4,244,169 — 
Savings deposits
8,470,416 8,470,416 — 8,470,416 — 
Time deposits
2,242,005 2,242,005 — 2,242,005 — 
Deposits held for sale538,308 569,298 — 569,298 — 
Borrowings694,909 694,909 — 694,909 — 
Term Debt372,988 374,830 — 374,830 — 
Derivative financial instruments(2)
64,905 64,905 — 64,905 — 
(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, 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 institutions1,240 1,240 1,240 — — 
Securities:
Carried at fair value4,646,891 4,646,891 32,118 4,614,773 — 
Held to maturity838,241 816,399 — 816,399 — 
Other investments
91,277 91,277 — 91,277 — 
Loans held for sale5,071 5,071 — 5,071 — 
Loans, net:
Commercial and industrial3,611,368 3,396,628 — 3,373,206 23,422 
PPP2,777 2,777 — 2,777 — 
Owner occupied commercial real estate2,621,019 2,444,540 — 2,414,140 30,400 
Non-owner occupied commercial real estate2,536,462 2,393,931 — 2,393,931 — 
Real estate construction982,943 979,105 — 978,463 642 
Agricultural and agricultural real estate914,892 839,572 — 834,804 4,768 
Residential real estate791,984 687,428 — 686,687 741 
Consumer484,634 465,686 — 465,686 — 
Total Loans, net
11,946,079 11,209,667 — 11,149,694 59,973 
Cash surrender value on life insurance197,085 197,085 — 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 — 
Borrowings622,255 622,255 — 622,255 — 
Term Debt372,396 374,017 — 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.

Cash and Cash Equivalents — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Time Deposits in Other Financial Institutions — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments.

Securities — For equity securities with a readily determinable fair value and debt securities either held to maturity, available for sale or trading, fair value equals quoted market price if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Other Investments — Fair value measurement of other investments, which consists primarily of FHLB stock, are based on their redeemable value, which is at cost due to the restrictions placed on their transferability. The market for these securities is restricted to the issuer of the stock and subject to impairment evaluation.

Loans — The fair value of loans is determined using an exit price methodology. The exit price estimation of fair value is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and a discount rate based on the relative risk of the cash flows. Other considerations include the loan type, remaining life of the loan and credit risk.
The fair value of individually assessed or impaired loans is measured using the fair value of the underlying collateral. The fair value of loans held for sale is estimated using quoted market prices.

Cash surrender value on life insurance — Life insurance policies are held on certain officers. The carrying value of these policies approximates fair value as it is based on the cash surrender value adjusted for other charges or amounts due that are probable at settlement. As such, HTLF classifies the estimated fair value of the cash surrender value on life insurance as Level 2.

Derivative Financial Instruments — The fair value of all derivatives is estimated based on the amount that HTLF would pay or would be paid to terminate the contract or agreement, using current rates and prices, and, when appropriate, the current creditworthiness of the counterparty.

Deposits — The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. If the fair value of the fixed maturity certificates of deposit is calculated at less than the carrying amount, the carrying value of these deposits is reported as the fair value. The fair value of deposits held for sale is estimated using quoted market prices.

Borrowings and Term Debt — Rates currently available to HTLF for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Commitments to Extend Credit, Unused Lines of Credit and Standby Letters of Credit — Based upon management's analysis of the off balance sheet financial instruments, there are no significant unrealized gains or losses associated with these financial instruments based upon review of the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.