Exhibit 99.1

HEARTLAND FINANCIAL USA, INC.

Consolidated Financial Statements

December 31, 2024 and 2023

(With Independent Auditors’ Report Thereon)

HEARTLAND FINANCIAL USA, INC.

Table of Contents

 

		Page(s)
Independent Auditors’ Report			3-4
Consolidated Balance Sheets			5
Consolidated Statements of Income			6
Consolidated Statements of Comprehensive Income			7
Consolidated Statements of Changes in Equity			8
Consolidated Statements of Cash Flows			9-10
Notes to the Financial Statements			11-57

		KPMG LLP 2500 Ruan Center 666 Grand Avenue Des Moines, IA 50309

Independent Auditors’ Report

Board of Directors

UMB Financial Corporation:

Opinion

We have audited the consolidated financial statements of Heartland Financial USA, Inc. and subsidiaries (the Company), which comprise the consolidated balance sheets as of December 31, 2024 and December 31, 2023, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in accordance with U.S. generally accepted accounting principles.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, subsequent to the date of the consolidated financial statements, on January 31, 2025, UMB Financial Corporation (UMB) acquired all of the outstanding stock of the Company. At that time, the Company merged with and into UMB, with UMB continuing as the surviving corporation. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the consolidated financial statements are issued.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and

 

		KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

 

therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with GAAS, we:

 

•

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

 

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

 

•

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

 

•

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

/s/ KPMG LLP

Des Moines, Iowa

February 27, 2025

 

4

HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

 

						As of December 31,
		Notes				2024				2023
ASSETS:
Cash and due from banks						$	174,686			$	275,554
Interest bearing deposits with other banks and other short-term investments							206,138				47,459
Cash and cash equivalents							380,824				323,013
Time deposits in other financial institutions							800				1,240
Securities:
Carried at fair value (cost of $3,979,633 at December 31, 2024, and cost of $5,100,344 at December 31, 2023)			2				3,560,358				4,646,891
Held to maturity, net of allowance for credit losses of $0 at both December 31, 2024, and December 31, 2023 (fair value of $797,324 at December 31, 2024, and $816,399 at December 31, 2023)			2				837,390				838,241
Other investments, at cost			2				67,890				91,277
Loans held for sale							—				5,071
Loans receivable:			3
Held to maturity							11,155,866				12,068,645
Allowance for credit losses			3, 4				(96,500	)			(122,566	)
Loans receivable, net							11,059,366				11,946,079
Premises, furniture and equipment, net			5				143,930				177,001
Premises, furniture and equipment held for sale							8,952				4,069
Other real estate, net							4,291				12,548
Goodwill			6				576,005				576,005
Core deposit intangibles, net			6				12,823				18,415
Servicing rights, net			6				—				—
Cash surrender value on life insurance							201,298				197,085
Other assets							436,490				574,772
TOTAL ASSETS						$	17,290,417			$	19,411,707
LIABILITIES AND EQUITY
LIABILITIES:
Deposits:			7
Demand						$	3,773,753			$	4,500,304
Savings							9,249,071				8,805,597
Time							1,613,792				2,895,813
Total deposits							14,636,616				16,201,714
Borrowings			8				73,819				622,255
Term debt			9				298,661				372,396
Accrued expenses and other liabilities							203,526				282,225
TOTAL LIABILITIES						$	15,212,622				17,478,590
STOCKHOLDERS’ EQUITY:			14, 15
Preferred stock (par value $1 per share; authorized 188,500 shares at both December 31, 2024 and December 31, 2023; none issued or outstanding at both December 31, 2024, and December 31, 2023)							—				—
Series E Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock (par value $1 per share; 11,500 shares authorized at both December 31, 2024, and December 31, 2023; 11,500 shares issued and outstanding at both December 31, 2024, and December 31, 2023)							110,705				110,705
Common stock (par value $1 per share; 60,000,000 shares authorized at both December 31, 2024 and December 31, 2023; issued 42,901,273 shares at December 31, 2024, and 42,688,008 shares at December 31, 2023)							42,901				42,688
Capital surplus							1,102,084				1,090,740
Retained earnings							1,253,255				1,141,501
Accumulated other comprehensive loss							(431,150	)			(452,517	)
TOTAL STOCKHOLDERS’ EQUITY							2,077,795				1,933,117
TOTAL LIABILITIES AND EQUITY						$	17,290,417			$	19,411,707

See accompanying notes to consolidated financial statements.

 

5

HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

 

		Notes				For the Years Ended December 31,
						2024				2023				2022
INTEREST INCOME:
Interest and fees on loans			3			$	764,516			$	697,997			$	477,970
Interest on securities:
Taxable							187,877				223,521				169,544
Nontaxable							23,179				25,268				24,006
Interest on federal funds sold							—				3				11
Interest on interest bearing deposits in other financial institutions							16,136				7,007				3,125
TOTAL INTEREST INCOME							991,708				953,796				674,656
INTEREST EXPENSE:
Interest on deposits			7				327,353				319,688				56,880
Interest on borrowings							28,820				10,311				2,717
Interest on term debt (includes $(705), $575, and $246 of interest (income) expense related to derivatives reclassified from accumulated other comprehensive income (loss) for the years ended December 31, 2024, 2023, and 2022, respectively)			9, 10				22,328				22,560				16,823
TOTAL INTEREST EXPENSE							378,501				352,559				76,420
NET INTEREST INCOME							613,207				601,237				598,236
Provision for credit losses			3, 4				53,436				21,707				15,370
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES							559,771				579,530				582,866
NONINTEREST INCOME:
Service charges and fees			18				67,253				74,024				68,031
Loan servicing income			6				456				1,561				2,741
Trust fees			18				21,213				20,715				22,570
Brokerage and insurance commissions			18				3,318				2,794				2,986
Capital markets fees							6,887				10,007				11,543
Securities losses, net (includes $(25,298), $(141,377), and $(1,892) of net security losses reclassified from accumulated other comprehensive income (loss) for the years ended December 31, 2024, 2023, and 2022, respectively)			2				(21,144	)			(141,539	)			(425	)
Unrealized gain (loss) on equity securities, net			2				539				240				(622	)
Net gains on sale of loans held for sale							104				3,880				9,032
Valuation adjustment on servicing rights			6				—				—				1,658
Income on bank owned life insurance							4,837				3,771				2,341
Other noninterest income							9,490				3,621				8,409
TOTAL NONINTEREST INCOME (LOSS)							92,953				(20,926	)			128,264
NONINTEREST EXPENSES:
Salaries and employee benefits			12, 14				253,337				251,276				254,478
Occupancy			20				25,949				26,847				28,155
Furniture and equipment			5				8,674				11,599				12,499
Professional fees							67,457				58,667				58,606
FDIC insurance assessments							14,741				19,940				7,000
Advertising							7,050				8,347				6,221
Core deposit intangibles and customer relationship intangibles amortization			6				5,591				6,739				7,834
Other real estate and loan collection expenses							1,493				1,489				950
Gain on sales/valuations of assets, net							(25,171	)			(77	)			(1,047	)
Acquisition, integration and restructuring costs							10,227				10,359				7,586
Partnership investment in tax credit projects							6,148				5,401				5,040
Other noninterest expenses							57,260				61,240				56,055
TOTAL NONINTEREST EXPENSES							432,756				461,827				443,377
INCOME BEFORE INCOME TAXES							219,968				96,777				267,753
Income taxes (includes $(3,828), $(43,560), and $(355) of income tax benefit reclassified from accumulated other comprehensive income (loss) for the years ended December 31, 2024, 2023, and 2022, respectively)			11				48,367				16,857				55,573
NET INCOME							171,601				79,920				212,180
Preferred dividends							(8,050	)			(8,050	)			(8,050	)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS						$	163,551			$	71,870			$	204,130
EARNINGS PER COMMON SHARE - BASIC			1			$	3.81			$	1.68			$	4.80
EARNINGS PER COMMON SHARE - DILUTED			1			$	3.79			$	1.68			$	4.79
CASH DIVIDENDS DECLARED PER COMMON SHARE						$	1.20			$	1.20			$	1.09

See accompanying notes to consolidated financial statements.

 

6

HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

 

		For the Years Ended December 31,
		2024				2023				2022
NET INCOME		$	171,601			$	79,920			$	212,180
OTHER COMPREHENSIVE INCOME (LOSS)
Change in available for sale (“AFS”) securities:
Net change in unrealized gain (loss) on securities			8,880				46,755				(637,513	)
Reclassification adjustment for net losses realized in net income			25,298				141,377				1,892
Reclassification adjustment for net (gains) losses on hedged AFS securities			(20,913	)			20,913				—
Income tax (expense) benefit			(918	)			(52,096	)			158,049
Other comprehensive income (loss) on AFS securities			12,347				156,949				(477,572	)
Change in securities held to maturity
Adjustment for securities transferred from AFS			—				—				(186,286	)
Net amortization of unrealized losses on securities transferred from AFS			11,353				11,237				3,842
Income tax (expense) benefit			(1,809	)			(2,633	)			45,174
Other comprehensive income (loss) on held to maturity securities			9,544				8,604				(137,270	)
Change in cash flow hedges:
Net change in unrealized gain on derivatives			—				1,952				500
Reclassification adjustment for net (gains) losses on derivatives realized in net income			(705	)			575				246
Income tax benefit (expense)			181				(591	)			(158	)
Other comprehensive income on cash flow hedges			(524	)			1,936				588
Other comprehensive income (loss)			21,367				167,489				(614,254	)
TOTAL COMPREHENSIVE INCOME (LOSS)		$	192,968			$	247,409			$	(402,074	)

See accompanying notes to consolidated financial statements.

 

7

HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Dollars in thousands, except per share data)

 

		Heartland Financial USA, Inc. Stockholders’ Equity
		Preferred Stock				Common Stock				Capital Surplus				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total Equity
Balance at January 1, 2022		$	110,705			$	42,275			$	1,071,956			$	962,994			$	(5,752	)		$	2,182,178
Comprehensive income (loss)															212,180				(614,254	)			(402,074	)
Cash dividends declared:
Preferred, $700.00 per share															(8,050	)							(8,050	)
Common, $1.09 per share															(46,199	)							(46,199	)
Issuance of 192,130 shares of common stock							192				846												1,038
Stock-based compensation											8,162												8,162
Balance at December 31, 2022		$	110,705			$	42,467			$	1,080,964			$	1,120,925			$	(620,006	)		$	1,735,055
Balance at January 1, 2023		$	110,705			$	42,467			$	1,080,964			$	1,120,925			$	(620,006	)		$	1,735,055
Comprehensive income															79,920				167,489				247,409
Cash dividends declared:
Preferred, $700.00 per share															(8,050	)							(8,050	)
Common, $1.20 per share															(51,294	)							(51,294	)
Issuance of 220,614 shares of common stock							221				327												548
Stock-based compensation											9,449												9,449
Balance at December 31, 2023		$	110,705			$	42,688			$	1,090,740			$	1,141,501			$	(452,517	)		$	1,933,117
Balance at January 1, 2024		$	110,705			$	42,688			$	1,090,740			$	1,141,501			$	(452,517	)		$	1,933,117
Comprehensive income															171,601				21,367				192,968
Cash dividends declared:
Preferred, $700.00 per share															(8,050	)							(8,050	)
Common, $1.20 per share															(51,797	)							(51,797	)
Issuance of 213,265 shares of common stock							213				690												903
Stock-based compensation											10,654												10,654
Balance at December 31, 2024		$	110,705			$	42,901			$	1,102,084			$	1,253,255			$	(431,150	)		$	2,077,795

See accompanying notes to consolidated financial statements.

 

8

HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 

		For the Years Ended December 31,
		2024				2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	171,601			$	79,920			$	212,180
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			17,586				20,385				24,479
Provision for credit losses			53,436				21,707				15,370
Net amortization of premium on securities			16,938				29,671				59,454
Provision (benefit) for deferred taxes			5,079				(9,196	)			(3,887	)
Securities losses, net			21,144				141,539				425
Unrealized (gain) loss on equity securities, net			(539	)			(240	)			622
Stock-based compensation			10,654				9,449				8,162
(Gain) loss on sales/valuations of assets, net			(25,171	)			(77	)			1,998
Loans originated for sale			—				(136,734	)			(284,324	)
Proceeds on sales of loans held for sale			5,175				160,705				308,294
Net gains on sales of loans held for sale			(104	)			(3,856	)			(7,607	)
Decrease (increase) in accrued interest receivable			11,511				(11,294	)			(17,530	)
Decrease (increase) in prepaid expenses			5,262				(1,183	)			(1,580	)
(Decrease) increase in accrued interest payable			(31,788	)			45,987				3,737
Capitalization of servicing rights			—				(24	)			(1,425	)
Valuation adjustment on servicing rights			—				—				(1,658	)
Net excess tax (expense) benefit from stock-based compensation			(178	)			(123	)			131
Income from fair value hedge activity			3,654				(4,021	)			—
Other, net			94,361				(62,303	)			71,167
NET CASH PROVIDED BY OPERATING ACTIVITIES			358,621				280,312				388,008
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of time deposits in other financial institutions			(100	)			—				—
Proceeds from the sale of securities available for sale			273,917				1,196,586				1,048,525
Proceeds from the sale of securities held to maturity			—				—				2,337
Proceeds from the sale, maturity of and principal paydowns on other investments			56,811				42,875				22,359
Proceeds from the maturity of and principal paydowns on securities available for sale			995,822				604,088				903,514
Proceeds from the maturity of and principal paydowns on securities held to maturity			12,406				2,427				6,082
Proceeds from the maturity of time deposits in other financial institutions			540				500				1,154
Purchase of securities available for sale			(208,240	)			(337,667	)			(2,226,881	)
Purchase of other investments			(29,270	)			(59,747	)			(12,992	)
Net decrease (increase) in loans			468,507				(661,445	)			(1,506,338	)
Purchase of bank owned life insurance policies			(324	)			(320	)			(283	)
Proceeds from bank owned life insurance policies			—				—				966
Proceeds from sale of mortgage servicing rights			—				6,714				—
Capital expenditures and investments			(3,550	)			(7,060	)			(14,804	)
Net cash expended in divestitures			(176,764	)			—				(50,616	)
Proceeds from sale of premises, furniture and equipment			3,274				9,254				10,872
Proceeds on sale of OREO and other repossessed assets			15,516				5,990				3,062
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES			1,408,545				802,195				(1,813,043	)

 

9

HEARTLAND FINANCIAL USA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 

		For the Years Ended December 31,
		2024				2023				2022
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits			(594,814	)			(1,201,036	)			(206,366	)
Net increase (decrease) in savings accounts			727,818				(1,188,794	)			566,033
Net (decrease) increase in time deposit accounts			(1,166,229	)			1,078,535				799,938
Net (decrease) increase in borrowings			(22,945	)			(225,048	)			194,520
Proceeds from Bank Term Funding Program advances			500,000				—				—
Repayment of Bank Term Funding Program advances			(500,000	)			—				—
Proceeds from short term FHLB advances			643,309				1,295,488				286,000
Repayments of short term FHLB advances			(1,164,495	)			(824,302	)			(236,000	)
Repayments of other borrowings			—				(740	)			(228	)
Repayment of subordinated notes			(75,000	)			—				—
Proceeds from issuance of common stock			2,502				2,467				2,875
Dividends paid			(59,501	)			(59,151	)			(54,249	)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES			(1,709,355	)			(1,122,581	)			1,352,523
Net increase (decrease) in cash and cash equivalents			57,811				(40,074	)			(72,512	)
Cash and cash equivalents at beginning of year			323,013				363,087				435,599
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	380,824			$	323,013			$	363,087
Supplemental disclosures:
Cash paid for income/franchise taxes		$	34,479			$	48,624			$	37,782
Cash paid for interest			411,334				306,572				72,683
Loans transferred to OREO			7,994				13,181				9,423
Transfer of premises from premises, furniture and equipment held for sale to premises, furniture and equipment, net			350				5,824				—
Transfer of premises from premises, furniture and equipment, net to premises, furniture and equipment held for sale			8,666				6,786				5,188
Securities transferred from available for sale to held to maturity			—				—				934,538
Dividends declared, not paid			2,551				2,205				2,013

See accompanying notes to consolidated financial statements.

 

10

HEARTLAND FINANCIAL USA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ONE

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - Heartland Financial USA, Inc. (“HTLF”) is a bank holding company with locations in the West, Southwest and Midwest regions. The principal services of HTLF, which are provided through HTLF Bank, are FDIC-insured deposit accounts and related services, and loans to businesses and consumers. The loans consist primarily of commercial and industrial, owner-occupied commercial real estate, non-owner occupied commercial real estate, real estate construction, agricultural and agricultural real estate, residential real estate and consumer loans.

Principles of Presentation - The consolidated financial statements include the accounts of HTLF and its subsidiaries: HTLF Bank; DB&T Community Development Corp.; Heartland Community Development, Inc.; Heartland Financial USA, Inc. Insurance Services; Heartland Financial Statutory Trust IV; Heartland Financial Statutory Trust V; Heartland Financial Statutory Trust VI; Heartland Financial Statutory Trust VII; Morrill Statutory Trust I; Morrill Statutory Trust II; Sheboygan Statutory Trust I, CBNM Capital Trust I, Citywide Capital Trust III, Citywide Capital Trust IV, Citywide Capital Trust V, OCGI Statutory Trust III, OCGI Capital Trust IV, BVBC Capital Trust II, and BVBC Capital Trust III. All HTLF’s subsidiaries are wholly-owned as of December 31, 2024.

As of December 31, 2024, HTLF Bank and its respective bank brands listed below operated as divisions of HTLF Bank:

 

•

Arizona Bank & Trust

 

•

Bank of Blue Valley

 

•

Citywide Banks

 

•

Dubuque Bank & Trust

 

•

First Bank & Trust

 

•

Illinois Bank & Trust

 

•

Minnesota Bank & Trust

 

•

New Mexico Bank & Trust

 

•

Premier Valley Bank

 

•

Wisconsin Bank & Trust

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and prevailing practices within the banking industry. In preparing such financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the balance sheets and revenues and expenses for the years then ended. Actual results could differ significantly from those estimates. A material estimate that is particularly susceptible to significant change relates to the determination of the allowance for credit losses.

Business Combinations - HTLF applies the acquisition method of accounting in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Under the acquisition method, HTLF recognizes assets acquired, including identified intangible assets, and the liabilities assumed in acquisitions at fair value as of the acquisition date, with the acquisition-related transaction costs expensed in the period incurred. Determining the fair value of assets acquired and liabilities assumed often involves estimates based on third-party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques that may include estimates of attrition, inflation, asset growth rates, discount rates, multiples of earnings or other relevant factors. In addition, the determination of the useful lives over which an intangible asset will be amortized is subjective.

Cash and Cash Equivalents - For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest bearing deposits held at the Federal Reserve Bank, federal funds sold to other banks and other short-term investments. Generally, federal funds are purchased and sold for one-day periods.

Trading Securities - Trading securities represent those securities HTLF intends to actively trade and are stated at fair value with changes in fair value reflected in noninterest income. HTLF had no trading securities at both December 31, 2024 and 2023.

 

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Available for Sale (“AFS”) Debt Securities and Equity Securities - Available for sale securities consist of those securities not classified as held to maturity or trading, which management intends to hold for indefinite periods of time or that may be sold in response to changes in interest rates, prepayments or other similar factors. Available for sale securities are stated at fair value with any unrealized gain or loss, net of applicable income tax, reported as a separate component of stockholders’ equity. Security premiums and discounts are amortized/accreted using the interest method over the period from the purchase date to the expected maturity or call date of the related security.

HTLF reviews the investment securities portfolio at the security level on a quarterly basis for potential credit losses, which takes into consideration numerous factors, and the relative significance of any single factor can vary by security. Some factors HTLF may consider include changes in security ratings, the financial condition of the issuer, as well as security and industry-specific economic conditions. In addition, regarding debt securities, HTLF may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral. For certain debt securities in unrealized loss positions, HTLF prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

Realized securities gains or losses on securities sales (using a specific identification method) are included in securities losses, net in the consolidated statements of income.

Equity securities include Community Reinvestment Act funds with readily determinable fair values and are carried at fair value. Certain equity securities do not have readily determinable fair values, such as Federal Reserve Bank stock and Federal Home Loan Bank stock, which are held for debt and regulatory purposes and are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer. HTLF did not record any impairment or other adjustments to the carrying amount of these investments during the years ended December 31, 2024, and December 31, 2023.

Allowance for Credit Losses on AFS Debt Securities - HTLF reviews the investment securities portfolio at the security level on a quarterly basis for potential credit losses, which takes into consideration numerous factors, and the relative significance of any single factor can vary by security. Some factors HTLF may consider include changes in security ratings, financial condition of the issuer, as well as security and industry-specific economic conditions. In addition, with regard to debt securities, HTLF may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral. For certain debt securities in unrealized loss positions, HTLF prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

The decline in fair value of an AFS debt security due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes. Although these evaluations involve judgment, an unrealized loss in the fair value of a debt security is generally considered to not be related to credit when the fair value of the security is below the carrying value primarily due to changes in risk-free interest rates, there has not been significant deterioration in the financial condition of the issuer, and HTLF does not intend to sell nor does it believe it will be required to sell the security before the recovery of its cost basis. HTLF had no allowance for credit losses on AFS debt securities recorded at December 31, 2024, and December 31, 2023.

Securities Held to Maturity - Securities which HTLF has the ability and positive intent to hold to maturity are classified as held to maturity. Such securities are stated at amortized cost, adjusted for premiums and discounts that are amortized/accreted using the interest method over the period from the purchase date to the expected maturity or call date of the related security.

Allowance for Credit Losses on Held to Maturity Debt Securities - HTLF measures expected credit losses on held to maturity debt securities on a collective basis based on security type. The estimate of expected credit losses considers historical credit information that is adjusted for current conditions and supportable forecasts. HTLF’s held to maturity debt securities consist primarily of investment grade obligations of states and political subdivisions. The forecast and forecast period used in the calculation of the allowance for credit losses for loans is used in calculating the allowance for credit losses on held to maturity debt securities. HTLF had no allowance for credit losses on held to maturity debt securities recorded at both December 31, 2024, and December 31, 2023.

Loans Held to Maturity - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, which is the principal amount outstanding, net of cumulative charge-offs, unamortized net deferred loan origination fees and costs and unamortized premiums or discounts on purchased loans. HTLF has a loan policy which establishes the credit risk appetite, lending standards and underwriting criteria designed so that HTLF may extend credit in a prudent and sound manner. The HTLF loan policy is reviewed and approved on a regular basis. A reporting system supplements the review process by providing management and the board with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem loans.

 

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HTLF originates commercial and industrial loans and owner occupied commercial real estate loans for a wide variety of business purposes, including lines of credit for capital and operating purposes and term loans for real estate and equipment purchases. Non-owner occupied commercial real estate loans provide financing for various non-owner occupied or income producing properties. Real estate construction loans are generally short-term or interim loans that provide financing for acquiring or developing commercial income properties, multi-family projects or single-family residential homes. Agricultural and agricultural real estate loans provide financing for capital improvements and farm operations, as well as livestock and machinery purchases. Residential real estate loans are originated for the purchase or refinancing of single-family residential properties. Consumer loans include loans for motor vehicles, home improvement, home equity and personal lines of credit.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. HTLF’s policy is to discontinue the accrual of interest income on any loan when, in the opinion of management, there is a reasonable doubt as to the timely collection of the interest and principal, normally when a loan is 90 days past due. When interest accruals are deemed uncollectible, interest credited to income in the current year is reversed and interest accrued in prior years is charged to the allowance for credit losses. A loan can be restored to accrual status if the borrower has resumed paying the full amount of the scheduled contractual interest and principal payments on the loan, and (1) all principal and interest amounts contractually due (including arrearages) are reasonably assured of repayment within a reasonable period of time, and (2) there is a sustained period of repayment performance (generally a minimum of six months) by the borrower in accordance with the scheduled contractual terms.

Allowance for Credit Losses for Loans - The allowance for credit losses is a valuation account that is deducted from the loans held to maturity amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged-off against the allowance when management believes the loan balance is deemed to be uncollectible. Provisions for credit losses for loans and recoveries on loans previously charged-off by HTLF are added back to the allowance.

HTLF’s allowance model is designed to consider the current contractual term of the loan, defined as starting as of the most recent renewal date and ending at maturity date.

Management’s estimation of expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts, including expected defaults and prepayments. Historical loss experience is generally the starting point for estimating expected credit losses. Adjustments are made to historical loss experience to reflect differences in asset-specific risk characteristics, such as underwriting standards, portfolio mix or asset terms and differences in economic conditions, both current conditions and reasonable and supportable forecasts. If HTLF is not able to make or obtain reasonable and supportable forecasts for the entire life of the financial asset, it is required to estimate expected credit losses for the remaining life using an approach that reverts to historical credit loss information. The components of the allowance for credit losses are described more specifically below.

Quantitative Factors

The quantitative component of the allowance for credit losses is measured using historical loss experience using a look back period, currently over the most recent 16 years, on a pool basis for loans with similar risk characteristics. HTLF utilizes third-party software to calculate the expected credit losses using two separate methodologies. For certain commercial and agricultural loans, the expected credit losses are calculated through a transition matrix model derived probability of default and loss given default methodology. The transition matrix model determines the life of loan probability of default using the historical transitions of loans between risk ratings and through default. The probability of default and loss given default methodology has been developed using HTLF’s historical loss experience over the look back period. For smaller commercial and agricultural loans, residential real estate loans and consumer loans, a lifetime average historical loss rate is established for each pool of loans based upon an average loss rate calculated using HTLF historical loss experience over the look back period.

The risks in the commercial and industrial loan portfolio include the unpredictability of the cash flow of the borrowers and the variability in the value of the collateral securing the loans. Owner occupied commercial real estate loans depend upon the cash flow of the borrowers and the collateral value of the real estate. Non-owner occupied commercial real estate loans typically depend, in large part, on sufficient income from the properties securing the loans to cover the operating expenses and debt service. Real estate construction loans involve additional risks because funds are advanced based upon estimates of costs and the estimated value of the completed project. Additionally, real estate construction loans have a greater risk of default in a weaker economy because the source of repayment relies on the successful and timely completion of the project. Agricultural

 

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and agricultural real estate loans depend upon the profitable operation or management of the farm property securing the loan. Loans secured by farm equipment, livestock or crops may not provide an adequate source of repayment because of damage or depreciation. Residential real estate loans depend upon the borrower’s ability to repay the loan and the underlying collateral value. Consumer loans depend upon the borrower’s personal financial circumstances and continued financial stability.

If a loan no longer shares similar risk characteristics with other loans in the pool, it is evaluated on an individual basis and is not included in the collective evaluation. Lending relationships with $500,000 or more of total exposure and on nonaccrual status are individually assessed using a collateral dependency calculation. A loan is collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. The impairment will be recognized by creating a specific reserve against the loan with a corresponding charge to provision expense. In most cases, the specific reserve will be charged off in the same quarter the loss is probable. In some cases, when HTLF believes certain loans do not share the same risk characteristics with other loans in the pool, the standard allows for these loans to be individually assessed. All individually assessed loan calculations are completed at least semi-annually.

Qualitative Factors

HTLF’s allowance methodology also has a qualitative component, the purpose of which is to provide management with a means to take into consideration changes in current conditions that could potentially have an effect on the level of recognized loan losses, that otherwise fail to show up in the quantitative analysis performed in determining its base loan loss rates.

HTLF utilizes the following qualitative factors:

 

•

changes in lending policies and procedures

 

•

changes in the nature of loans

 

•

experience and ability of management

 

•

changes in the credit quality of the loan portfolio

 

•

risk in acquired portfolios

 

•

concentrations of credit

The qualitative factors for changes in lending policies and procedures, management and acquired portfolios are weighted as one factor. The other qualitative factors noted above are equally weighted as individual factors.

The qualitative adjustments are based on the comparison of the current condition to the average condition over the look back period. The adjustment amount can be either positive or negative depending on whether the current condition is better or worse than the historical average. HTLF incorporates the adjustments for changes in current conditions using an overlay approach. The adjustments are applied as a percentage adjustment in addition to the calculated historical loss rates of each pool. These adjustments reflect the extent to which HTLF expects current conditions to differ from the conditions that existed for the period over which historical information was evaluated. HTLF utilizes an anchoring approach to determine the minimum and maximum amount of qualitative allowance for credit losses, which is determined by comparing the highest and lowest historical rate to the current quantitative allowance rate to calculate the rate for the adjustment.

Economic Forecasting

The allowance for credit losses estimate incorporates a reasonable and supportable forecast of various macro-economic indices over the remaining life of HTLF’s assets. HTLF utilizes an overlay approach for its economic forecasting component, similar to the method utilized for the qualitative factors. The length of the reasonable and supportable forecast period is a judgmental determination based on the level to which the entity can support its forecast of economic conditions that drive its estimate of expected loss. HTLF compares forecasted macro-economic indices, such as unemployment and gross domestic product, to the economic conditions that existed over HTLF’s look back period.

HTLF uses Moody’s baseline economic forecast scenario, which is updated quarterly in HTLF’s methodology, and considers other Moody’s forecast scenarios to support the economic forecast component of the allowance for credit losses. The economic forecast reverts to the historical mean immediately at the end of the reasonable and supportable forecast period. HTLF utilized a one-year reasonable and supportable forecast period for the calculation of the December 31, 2024, and December 31, 2023, allowance for credit losses.

It is expected that actual economic conditions will, in many cases, differ from forecasts because the ultimate outcomes during the forecast period may be affected by events that were unforeseen, such as economic disruption and fiscal or monetary policy actions, which are exacerbated by longer forecasting periods. This uncertainty would be relevant to the entity’s confidence level as to the outcomes being forecasted. That is, an entity is likely less confident in the ultimate outcome of events that will occur at the end of the forecast period as compared to the beginning. As a result, actual future economic conditions may not be an effective indicator of the quality of management’s forecasting process, including the length of the forecast period.

 

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Financial Difficulty Modifications - Any loans that are modified are reviewed by HTLF to identify if a financial difficulty modification has occurred, which is when HTLF modifies a loan related to a borrower experiencing financial difficulties. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status. The modification of the terms of such loans includes one or a combination of the following: a reduction of the stated interest rate of the loan, an extension of the maturity date, a permanent reduction of the recorded investment of the loan, or an other-than-insignificant payment delay. The adoption of ASU 2022-02 on January 1, 2023 eliminated the recognition and measurement of TDRs and enhanced disclosures for modifications to loans related to borrowers experiencing financial difficulties. See Note Three to the consolidated financial statements for additional detail regarding the adoption of ASU 2022-02.

Loans Held for Sale - Loans held for sale are stated at the lower of cost or fair value on an aggregate basis. Gains or losses on sales are recorded in noninterest income. Direct loan origination costs and fees are deferred at origination of the loan. These deferred costs and fees are recognized in noninterest income as part of the gain or loss on sales of loans upon sale of the loan.

At December 31 2023, loans held for sale primarily consisted of 1-4 family residential mortgages.

Allowance for Credit Losses on Unfunded Loan Commitments - HTLF estimates expected credit losses over the contractual term of the loan for the unfunded portion of the loan commitment that is not unconditionally cancellable by HTLF using the same collective allowance methodology for credit losses for loans described above. Management uses an estimated average utilization rate to determine the exposure at default. The allowance for unfunded commitments is recorded in the accrued expenses and other liabilities section of the consolidated balance sheets.

Mortgage Servicing and Transfers of Financial Assets - Prior to dissolving its mortgage operations in 2023, HTLF regularly sold residential mortgage loans to others, primarily government sponsored entities, on a non-recourse basis. Sold loans are not included in the accompanying consolidated balance sheets. HTLF generally retained the right to service the sold loans for a fee prior to the sale of its mortgage servicing rights portfolio in the first quarter of 2023.

Premises, Furniture and Equipment, Net - Premises, furniture and equipment are stated at cost less accumulated depreciation. The provision for depreciation of premises, furniture and equipment is determined by straight-line and accelerated methods over the estimated useful lives of 18 to 39 years for buildings, 15 years for land improvements and 3 to 7 years for furniture and equipment.

Premises, Furniture and Equipment Held for Sale - Premises, furniture and equipment are stated at the estimated fair value less disposal costs. Subsequent write-downs and gains or losses on the sales are recorded to gain on sales/valuation of assets, net.

Other Real Estate - Other real estate represents property acquired through foreclosures and settlements of loans. Property acquired is recorded at the estimated fair value of the property less disposal costs. The excess of carrying value over fair value less disposal costs is charged against the allowance for credit losses. Subsequent write downs estimated on the basis of later valuations and gains or losses on sales are charged to gain on sales/valuation of assets, net. Expenses incurred in maintaining such properties are charged to other real estate and loan collection expenses.

Goodwill - Goodwill represents the excess of the purchase price of acquired subsidiaries’ net assets over their fair value at the purchase date. HTLF assesses goodwill for impairment annually, and more frequently if events occur which may indicate possible impairment, and assesses goodwill at the reporting unit level, also giving consideration to overall enterprise value as part of that assessment.

In evaluating goodwill for impairment, HTLF first assesses qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If HTLF concludes that it is more likely than not that the fair value of a reporting unit is more than its carrying value, then no further testing of goodwill assigned to the reporting unit is required. However, if HTLF concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then HTLF performs a quantitative goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment to recognize, if any. In addition, the income tax effects of tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. A goodwill impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

 

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Core Deposit Intangibles, Net - Core deposit intangibles are amortized over 8 to 18 years on an accelerated basis. Annually, HTLF reviews these intangible assets for events or circumstances that may indicate a change in the recoverability of the underlying basis.

Servicing Rights, Net - Mortgage and commercial servicing rights associated with loans originated and sold, where servicing is retained, are initially capitalized at fair value and recorded on the consolidated statements of income as a component of gains on sale of loans held for sale. The values of these capitalized servicing rights are amortized as an offset to the loan servicing income earned in relation to the servicing revenue expected to be earned.

First Bank & Trust, a division of HTLF Bank, sold its mortgage servicing portfolio in the first quarter of 2023, and the value of the mortgage servicing rights was derecognized on the consolidated balance sheets. In prior periods, the carrying values of these rights were reviewed quarterly for impairment based on the calculation of their fair value as performed by an outside third-party. For purposes of measuring impairment, the rights were stratified into certain risk characteristics including loan type and loan term.

Cash Surrender Value on Life Insurance - HTLF and its subsidiaries have purchased life insurance policies on the lives of certain officers. The one-time premiums paid for the policies, which coincide with the initial cash surrender value, are recorded as an asset. Increases or decreases in the cash surrender value, other than proceeds from death benefits, are recorded as noninterest income in income on bank owned life insurance. Proceeds from death benefits first reduce the cash surrender value attributable to the individual policy and then any additional proceeds are recorded in other noninterest income.

Income Taxes - HTLF and its subsidiaries file a consolidated federal income tax return and separate or combined income or franchise tax returns as required by the various states. HTLF recognizes certain income and expenses in different time periods for financial reporting and income tax purposes. The provision for deferred income taxes is based on an asset and liability approach and represents the change in deferred income tax accounts during the year, including the effect of enacted tax rate changes. A valuation allowance is provided to reduce deferred tax assets if their expected realization is deemed not to be more likely than not.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. HTLF recognizes interest and penalties related to income tax matters in income tax expense.

Derivative Financial Instruments - HTLF uses derivative financial instruments as part of its interest rate risk management, which includes interest rate swaps, certain interest rate lock commitments and forward sales of securities related to mortgage banking activities. FASB ASC Topic 815 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by ASC 815, HTLF records all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives used to manage the exposure to changes in the fair value of a recognized asset or liability on the consolidated balance sheets are fair value hedges. To qualify for hedge accounting, HTLF must comply with the detailed rules and documentation requirements at the inception of the hedge, and hedge effectiveness is assessed at inception and periodically throughout the life of each hedging relationship. Hedge ineffectiveness, if any, is measured periodically throughout the life of the hedging relationship.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (loss) and subsequently reclassified to interest income or expense when the hedged transaction affects earnings, while the ineffective portion of changes in the fair value of the derivative, if any, is recognized immediately in other noninterest income. HTLF assesses the effectiveness of each hedging relationship by comparing the cumulative changes in cash flows of the derivative hedging instrument with the cumulative changes in cash flows of the designated hedged item or transaction. No component of the change in the fair value of the hedging instrument is excluded from the assessment of hedge effectiveness. In the first quarter of 2023 HTLF terminated its cash flow hedges. It was determined that the forecasted transactions remain probable, so the unrealized gains at termination were kept in accumulated comprehensive income and are being amortized into income over the remaining life of the forecasted transaction.

HTLF had multiple fair value hedging relationships at December 31, 2023. HTLF uses hedge accounting in accordance with ASC 815. For hedges where the fair value change in the loan portfolio is being hedged, unrealized gains and losses representing the change in fair value of the derivative and the change in fair value of the risk being hedged on the related loan are being recorded in the consolidated statements of income. The ineffective portions of the unrealized gains or losses, if any, are recorded in interest income in the consolidated statements of income. For hedges where the fair value change in the investment

 

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portfolio are being hedged, the change in the fair value of the derivative and the change in the fair value of the risk being hedged on the related investments is being recorded in interest income on the consolidated statements of income. The ineffective portions of the unrealized gains or losses, if any, are recorded in interest income in the consolidated statements of income. HTLF uses statistical regression to assess hedge effectiveness, both at the inception of the hedge as well as on a continual basis. The regression analysis involves regressing the periodic change in fair value of the hedging instrument against the periodic changes in the fair value of the asset being hedged due to changes in the hedge risk. In the fourth quarter of 2024, HTLF terminated the interest rate swaps designated as fair value hedges which were primarily designed to provide protection against unrealized securities losses. Additionally in the fourth quarter of 2024, HTLF terminated the interest rate swaps designated as fair value hedges which were used to convert certain long-term fixed rate loans to floating rates to hedge interest rate risk exposure The net fair value basis will be amortized over the remaining life of the underlying assets.

HTLF also has loan interest rate swap relationships with customers to assist them in managing their interest rate risk. Upon entering into these loan swaps HTLF enters into offsetting positions with counterparties in order to minimize interest rate risk to HTLF. These back-to-back loan swaps qualify as free standing financial derivatives with the fair values reported in other assets and other liabilities on the consolidated balance sheets. Any gains and losses on these back-to-back swaps are recorded in noninterest income on the consolidated statements of income.

HTLF does not use derivatives for speculative purposes. Derivatives not designated as hedges are not speculative and are used to manage HTLF’s exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements of ASC 815.

Mortgage Derivatives - HTLF uses interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans and mortgage-backed securities. These commitments are considered derivative instruments. The fair value of these commitments is recorded on the consolidated balance sheets with the changes in fair value recorded in the consolidated statements of income as a component of gains on sale of loans held for sale. These derivative contracts are designated as free-standing derivative contracts and are not designated against specific assets and liabilities on the consolidated balance sheets or forecasted transactions and therefore do not qualify for hedge accounting treatment.

Fair Value Measurements - Fair value represents the estimated price at which an orderly transaction to sell an asset or transfer a liability would take place between market participants at the measurement date under current market conditions (i.e., an exit price concept). Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using discounted cash flow or other valuation techniques. Inputs into the valuation methods are subjective in nature, involve uncertainties, and require judgment and therefore cannot be determined with precision. Accordingly, the derived fair value estimates presented herein are not necessarily indicative of the amounts HTLF could realize in a current market exchange. Assets and liabilities are categorized into three levels based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine the fair value. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy in which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. HTLF’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Below is a brief description of each fair value level:

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 which 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.

Treasury Stock - Treasury stock is accounted for by the cost method, whereby shares of common stock reacquired are recorded at their purchase price. When treasury stock is reissued, any difference between the sales proceeds, or fair value when issued for business combinations, and the cost is recognized as a charge or credit to capital surplus. HTLF had no treasury stock at December 31, 2024 and December 31, 2023.

 

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Trust Department Assets - Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets because such items are not assets of HTLF Bank.

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 years ended December 31, 2024, 2023 and 2022, are shown in the table below, dollars and number of shares in thousands, except per share data:

 

		2024				2023				2022
Net income attributable to HTLF		$	171,601			$	79,920			$	212,180
Preferred dividends			(8,050	)			(8,050	)			(8,050	)
Net income available to common stockholders		$	163,551			$	71,870			$	204,130
Weighted average common shares outstanding for basic earnings per share			42,942				42,701				42,496
Assumed incremental common shares issued upon vesting of restricted stock units			207				91				135
Weighted average common shares for diluted earnings per share			43,149				42,792				42,631
Earnings per common share — basic		$	3.81			$	1.68			$	4.80
Earnings per common share — diluted		$	3.79			$	1.68			$	4.79
Number of antidilutive stock units excluded from diluted earnings per share computation			—				112				5
Number of antidilutive stock options excluded from diluted earnings per share computation			53				60				5

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

On April 28, 2024, HTLF entered into an Agreement and Plan of Merger with UMB Financial Corporation, a Missouri corporation (“UMB”) and Blue Sky Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of UMB. The Merger Agreement was unanimously approved by the Board of Directors of each of HTLF and UMB.

On January 31, 2025, UMB acquired all of the outstanding stock of HTLF, in an all-stock transaction, issuing a total of 23.6 million shares of UMB’s common stock and 4.6 million shares of UMB’s 7.00% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A (UMB’s preferred stock). Pursuant to the merger agreement, (i) HTLF merged with and into UMB, with UMB continuing as the surviving corporation and (ii) one day after the closing date of the acquisition of HTLF by UMB, HTLF Bank, HTLF’s wholly owned bank subsidiary, a Colorado-chartered non-member bank, merged with and into UMB Bank, National Association, UMB’s national bank subsidiary, with UMB Bank, National Association, continuing as the surviving bank.

Total consideration for the acquisition was $2.93 billion, consisting of UMB’s common stock valued at $2.82 billion (based on UMB’s common stock price of $117.90) and UMB’s preferred stock valued at $115.2 million (based on UMB’s closing preferred stock price of $25.05). Each HTLF common stock share was converted into 0.55 shares of UMB’s common stock. Each HTLF preferred stock share was converted into a share of UMB’s preferred stock. Acquisition-related costs of $8.1 million for the year ending December 31, 2024, were recognized in HTLF’s Consolidated Statements of Income.

Subsequent to December 31, 2024, HTLF sold $1.23 billion of investments with security losses of $205.1 million. In addition, HTLF sold government guaranteed loans with an amortized cost basis of $367.3 million at a loss of $29.2 million.

Effect of New Financial Accounting Standards

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 was effective on January 1, 2024. HTLF has elected to use the proportional amortization method for investments in low-income housing projects. The amendments in this ASU do not have a material impact on the results of operations or financial position.

 

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ASU 2023-06

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” The amendments in this Update modify the disclosure or presentation requirements of a variety of Topics in the Codification. Certain of the amendments represent clarifications to, or technical corrections of, the current requirements. Each amendment in the ASU will only become effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. The amendments in this ASU are not expected to have a material impact on the results of operations or financial position.

ASU 2023-09

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this Update require qualitative disclosure about specific categories of reconciling items and individual jurisdictions that result in a significant difference between the statutory tax rate and the effective tax rate. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments should be applied on a prospective basis, but retrospective application is permitted. HTLF is currently evaluating the impact of the standard and does not anticipate it will have a significant impact on the results of operations, financial position, or liquidity.

Qualified Affordable Housing Investments

HTLF uses the proportional amortization method for investments in low-income housing projects. HTLF’s net investments in low-income housing projects were $5.0 million and $5.9 million as of December 31, 2024, and December 31, 2023, respectively, and are included in other assets in the consolidated balance sheets.

With respect to HTLF’s investment in low-income housing projects for the twelve months ended December 31, 2024, we recognized income tax credits and other income tax benefits of $1.0 million and $131,000, respectively. The total income tax benefits of $1.2 million are partially offset in the “income taxes” item in the consolidated statements of income by $939,000 of investment amortization recognized, for a net income tax benefit of $219,000. The cash flows related to the total income tax benefits are presented in the following line items in the consolidated statement of cash flows:

 

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$219,000 Net Income Tax Benefit, in the “Net income” line item in operating activities;

 

•

$939,000 Investment Amortization, in the “Other, net” line item, which is an adjustment to reconcile net income to cash from operating activities;

 

•

$1.0 million Tax Credits, in the “Other, net” line item, which is also an adjustment to reconcile net income to cash from operating activities; and

 

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$131,000 Other Tax Benefits Recognized, in the “Other, net” line item, which is also an adjustment to reconcile net income to cash from operating activities.

There was no non-income-tax-related activity or impairment losses related to the low-income housing investments this reporting period.

 

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TWO

SECURITIES

The amortized cost, gross unrealized gains and losses and estimated fair values of debt securities available for sale and equity securities with a readily determinable fair value as of December 31, 2024, and December 31, 2023, are summarized in the table below, in thousands. Within the amortized cost basis of obligations of states and political subdivisions and mortgage-backed securities-agency, there is a basis adjustment of $9.3 million and $8.0 million, respectively, related to a portfolio layer method fair value hedge that was discontinued.

 

						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
December 31, 2024
U.S. treasuries		$	7,999			$	3			$	(32	)		$	7,970
U.S. agencies			10,864				—				(132	)			10,732
Obligations of states and political subdivisions			819,824				3				(107,494	)			712,333
Mortgage-backed securities - agency			1,497,200				36				(220,012	)			1,277,224
Mortgage-backed securities - non-agency			1,189,764				1,538				(53,308	)			1,137,994
Commercial mortgage-backed securities - agency			68,653				—				(10,634	)			58,019
Commercial mortgage-backed securities - non-agency			124,587				—				(4,050	)			120,537
Asset-backed securities			115,261				—				(11,989	)			103,272
Corporate bonds			123,273				—				(13,204	)			110,069
Total debt securities			3,957,425				1,580				(420,855	)			3,538,150
Equity securities with a readily determinable fair value			22,208				—				—				22,208
Total		$	3,979,633			$	1,580			$	(420,855	)		$	3,560,358
December 31, 2023
U.S. treasuries		$	32,459			$	—			$	(341	)		$	32,118
U.S. agencies			14,724				—				(194	)			14,530
Obligations of states and political subdivisions			839,754				25				(98,534	)			741,245
Mortgage-backed securities - agency			1,620,409				13				(226,793	)			1,393,629
Mortgage-backed securities - non-agency			1,616,414				363				(87,649	)			1,529,128
Commercial mortgage-backed securities - agency			76,076				—				(11,288	)			64,788
Commercial mortgage-backed securities - non-agency			526,974				—				(12,116	)			514,858
Asset-backed securities			232,140				—				(14,770	)			217,370
Corporate bonds			120,338				—				(2,169	)			118,169
Total debt securities			5,079,288				401				(453,854	)			4,625,835
Equity securities			21,056				—				—				21,056
Total		$	5,100,344			$	401			$	(453,854	)		$	4,646,891

 

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The amortized cost, gross unrealized gains and losses and estimated fair values of held to maturity securities as of December 31, 2024, and December 31, 2023, are summarized in the table below, in thousands:

 

						Gross				Gross				Estimated				Allowance
		Amortized				Unrealized				Unrealized				Fair				for Credit
		Cost				Gains				Losses				Value				Losses
December 31, 2024
Obligations of states and political subdivisions		$	837,390			$	2,237			$	(42,303	)		$	797,324			$	—
Total		$	837,390			$	2,237			$	(42,303	)		$	797,324			$	—
December 31, 2023
Obligations of states and political subdivisions		$	838,241			$	3,622			$	(25,464	)		$	816,399			$	—
Total		$	838,241			$	3,622			$	(25,464	)		$	816,399			$	—

During the third quarter of 2022, HTLF transferred taxable municipal bonds with an amortized cost basis of $934.5 million and fair value of $748.3 million from available for sale to held to maturity. On the date of the transfer, accumulated other comprehensive income (loss) included $186.3 million of net unrealized losses, after tax, attributable to these securities, and the net unrealized losses will be amortized into interest income over the remaining life of the transferred securities. The bonds were transferred at fair value at the date of transfer.

As of December 31, 2024, HTLF had $23.5 million compared to $28.0 million at December 31, 2023, of accrued interest receivable, which is included in other assets on the consolidated balance sheets. HTLF does not consider accrued interest receivable in the carrying amount of financial assets held at amortized cost basis or in the allowance for credit losses calculation.

The amortized cost and estimated fair value of investment securities carried at fair value at December 31, 2024, by contractual maturity are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.

 

		December 31, 2024
		Amortized Cost				Estimated Fair Value
Due in 1 year or less		$	8,936			$	8,893
Due in 1 to 5 years			54,068				52,320
Due in 5 to 10 years			33,481				30,270
Due after 10 years			865,475				749,621
Total debt securities			961,960				841,104
Mortgage and asset-backed securities			2,995,465				2,697,046
Equity securities with a readily determinable fair value			22,208				22,208
Total investment securities		$	3,979,633			$	3,560,358

The amortized cost and estimated fair value of debt securities held to maturity at December 31, 2024, by contractual maturity are as follows, in thousands. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.

 

		December 31, 2024
		Amortized Cost				Estimated Fair Value
Due in 1 year or less		$	9,981			$	9,991
Due in 1 to 5 years			89,972				90,379
Due in 5 to 10 years			232,487				225,742
Due after 10 years			504,950				471,212
Total investment securities		$	837,390			$	797,324

As of December 31, 2024, securities with a carrying value of $2.91 billion compared to $2.63 billion at December 31, 2023, were pledged to secure public and trust deposits, short-term borrowings and for other purposes as required and permitted by law.

 

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Gross gains and losses realized related to sales of securities carried at fair value for the years ended December 31, 2024, 2023 and 2022 are summarized as follows, in thousands:

 

		For the Years Ended December 31,
		2024				2023				2022
Proceeds from sales		$	273,917			$	1,196,586			$	1,048,525
Gross security gains			—				589				7,299
Gross security losses			25,298				141,966				9,191

The following tables summarize, in thousands, the amount of unrealized losses, defined as the amount by which cost or amortized cost exceeds fair value, and the related fair value of investments with unrealized losses in HTLF’s securities portfolio as of December 31, 2024, and December 31, 2023. The investments were segregated into two categories: those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months. The reference point for determining how long an investment was in an unrealized loss position was December 31, 2024, and December 31, 2023, respectively.

 

Debt securities available for sale		Less than 12 months												12 months or longer												Total
		Fair				Unrealized								Fair				Unrealized								Fair				Unrealized
		Value				Losses				Count				Value				Losses				Count				Value				Losses				Count
December 31, 2024
U.S. treasuries		$	—			$	—				—			$	4,970			$	(32	)			1			$	4,970			$	(32	)			1
U.S. agencies		$	—			$	—				—			$	10,732			$	(132	)			4			$	10,732			$	(132	)			4
Obligations of states and political subdivisions			25,785				(2,470	)			8				691,963				(105,024	)			146				717,748				(107,494	)			154
Mortgage-backed securities - agency			3,804				(111	)			5				1,275,977				(219,901	)			158				1,279,781				(220,012	)			163
Mortgage-backed securities - non-agency			134,211				(16,505	)			4				617,056				(36,803	)			26				751,267				(53,308	)			30
Commercial mortgage-backed securities - agency			—				—				—				58,019				(10,634	)			14				58,019				(10,634	)			14
Commercial mortgage-backed securities - non-agency			54,158				(184	)			2				66,379				(3,866	)			6				120,537				(4,050	)			8
Asset-backed securities			—				—				—				103,272				(11,989	)			6				103,272				(11,989	)			6
Corporate bonds			53,444				(10,841	)			1				54,535				(2,363	)			6				107,979				(13,204	)			7
Total temporarily impaired securities		$	271,402			$	(30,111	)			20			$	2,882,903			$	(390,744	)			367			$	3,154,305			$	(420,855	)			387
December 31, 2023
U.S. treasuries		$	2,985			$	(12	)			1			$	26,138			$	(329	)			3			$	29,123			$	(341	)			4
U.S. agencies		$	—			$	—				—			$	14,530			$	(194	)			4			$	14,530			$	(194	)			4
Obligations of states and political subdivisions			1,440				(65	)			1				736,653				(98,469	)			150				738,093				(98,534	)			151
Mortgage-backed securities - agency			194				(2	)			2				1,392,769				(226,791	)			166				1,392,963				(226,793	)			168
Mortgage-backed securities - non-agency			415,934				(24,568	)			12				902,291				(63,081	)			35				1,318,225				(87,649	)			47
Commercial mortgage-backed securities - agency			—				—				—				64,788				(11,288	)			17				64,788				(11,288	)			17
Commercial mortgage-backed securities - non-agency			—				—				—				507,044				(12,116	)			16				507,044				(12,116	)			16
Asset-backed securities			148,063				(9,723	)			4				69,307				(5,047	)			7				217,370				(14,770	)			11
Corporate bonds			61,031				(111	)			1				57,138				(2,058	)			8				118,169				(2,169	)			9
Total temporarily impaired securities		$	629,647			$	(34,481	)			21			$	3,770,658			$	(419,373	)			406			$	4,400,305			$	(453,854	)			427

 

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