FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2024

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

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 Value		Level 1		Level 2		Level 3
June 30, 2024
Assets

Securities available for sale
U.S. treasuries	$	15,847	$	15,847	$	—	$	—
U.S. agencies	12,600		—		12,600		—
Obligations of states and political subdivisions	724,465		—		724,465		—
Mortgage-backed securities - agency	1,329,288		—		1,329,288		—
Mortgage-backed securities - non-agency	1,336,140		—		1,336,140		—
Commercial mortgage-backed securities - agency	60,501		—		60,501		—
Commercial mortgage-backed securities - non-agency	387,939		—		387,939		—
Asset-backed securities	176,382		—		176,382		—
Corporate bonds	120,306		—		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. 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		—


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.

Fair Value Measurements, Nonrecurring

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
	Total		Quoted 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 estate	12,579		—		—		12,579		—
Non-owner occupied commercial real estate	—		—		—		—		—
Real estate construction	675		—		—		675		—
Agricultural and agricultural real estate	24,711		—		—		24,711		—
Residential real estate	727		—		—		727		—

Total collateral dependent individually assessed loans	$	58,630	$	—	$	—	$	58,630	$	3,351
Loans held for sale	$	348,761	$	—	$	348,761	$	—	$	—
Other real estate owned	7,533		—		—		7,533		696
Premises, furniture and equipment held for sale	16,181		—		—		16,181		89


	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)		Year-to- Date (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

Fair Value Inputs, Assets, Quantitative Information

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 value

Third party appraisal

(1)

Appraisal discount

0-10%(2)

Premises, furniture and equipment held for sale

16,181

Modified appraised value

Third party appraisal

(1)

Appraisal discount

0-10%(2)

Collateral dependent individually assessed loans:

Commercial

19,938

Modified appraised value

Third party appraisal

(1)

Appraisal discount

0-14%(2)

Owner occupied commercial real estate

12,579

Modified appraised value

Third party appraisal

(1)

Appraisal discount

0-10%(2)

Non-owner occupied commercial real estate

—

Modified appraised value

Third party appraisal

(1)

Appraisal discount

0-10%(2)

Real estate construction

675

Modified appraised value

Third party appraisal

(1)

Appraisal discount

0-10%(2)

Agricultural and agricultural real estate

24,711

Modified appraised value

Third party appraisal

(1)

Appraisal discount

0-15%(2)

Residential real estate

727

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 12/31/2023

Valuation
Technique

Unobservable
Input

Range (Weighted Average)

Other real estate owned

12,548

Modified appraised value

Third party appraisal

(1)

Appraisal discount

0-10%(2)

Premises, furniture and equipment held for sale

4,069

Modified appraised value

Third party appraisal

(1)

Appraisal discount

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.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

Fair Value, by Balance Sheet Grouping

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 institutions	1,340		1,340		1,340		—		—
Securities:

Carried at fair value	4,185,054		4,185,054		15,847		4,169,207		—
Held to maturity	842,980		809,516		—		809,516		—
Other investments	70,684		70,684		—		70,684		—
Loans held for sale	348,761		348,761		—		348,761		—
Loans, net:
Commercial and industrial	3,496,439		3,305,473		—		3,285,535		19,938
PPP	1,864		1,864		—		1,864		—
Owner occupied commercial real estate	2,541,250		2,375,272		—		2,362,693		12,579
Non-owner occupied commercial real estate	2,420,561		2,297,208		—		2,297,208		—
Real estate construction	1,050,516		1,043,263		—		1,042,588		675
Agricultural and agricultural real estate	794,053		730,953		—		706,242		24,711
Residential real estate	728,365		636,845		—		636,118		727
Consumer	448,400		430,909		—		430,909		—
Total Loans, net	11,481,448		10,821,787		—		10,763,157		58,630
Cash surrender value on life insurance	199,036		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 sale	538,308		569,298		—		569,298		—
Borrowings	694,909		694,909		—		694,909		—
Term Debt	372,988		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 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 and industrial	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.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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