HTLF recorded $38.4 million of goodwill and $1.3 million of core deposit intangible in connection with the acquisition of certain assets and substantially all of the deposits and certain other liabilities of Johnson Bank's Arizona operations, headquartered in Racine, Wisconsin on December 4, 2020.

Goodwill related to the AimBank acquisition resulted from expected operational synergies, increased market presence, cross-selling opportunities, and expanded business lines and is not deductible for tax purposes.

The core deposit intangible and goodwill recorded with Johnson Bank transaction are deductible for tax purposes, and the core deposit intangible is expected to be amortized over a period of 10 years on an accelerated basis.

HTLF's intangible assets consist of core deposit intangibles, mortgage servicing rights, customer relationship intangibles, and commercial servicing rights. The gross carrying amount of these intangible assets and the associated accumulated amortization at March 31, 2021, and December 31, 2020, are presented in the table below, in thousands:


	March 31, 2021						December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	101,185	$	61,477	$	39,708	$	101,185	$	58,970	$	42,215
Customer relationship intangibles	1,177		1,018		159		1,177		1,009		168
Mortgage servicing rights	11,781		5,563		6,218		11,268		6,079		5,189
Commercial servicing rights	7,054		6,319		735		7,054		6,191		863
Total	$	121,197	$	74,377	$	46,820	$	120,684	$	72,249	$	48,435


	Core Deposit Intangibles		Customer Relationship Intangibles		Mortgage Servicing Rights		Commercial Servicing Rights		Total
Nine months ending December 31, 2021	$	6,852	$	27	$	1,201	$	177	$	8,257
Year ending December 31,
2022	7,702		34		1,254		207		9,197
2023	6,739		33		1,075		149		7,996
2024	5,591		33		896		98		6,618
2025	4,700		32		717		104		5,553
2026	3,533		—		538		—		4,071
Thereafter	4,591		—		537		—		5,128
Total	$	39,708	$	159	$	6,218	$	735	$	46,820

Projections of amortization expense for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of March 31, 2021. HTLF's actual experience may be significantly different depending upon changes in mortgage interest rates and market conditions. Mortgage loans serviced for others were approximately $745.1 million at March 31, 2021 compared to $743.3 million at December 31, 2020. Custodial escrow balances maintained in connection with the mortgage loan servicing portfolio were approximately $9.4 million at March 31, 2021 and $5.7 million at December 31, 2020.

At March 31, 2021, the fair value of the mortgage servicing rights was estimated at $6.2 million compared to $5.2 million at December 31, 2020. The fair value of mortgage servicing rights is calculated based upon a discounted cash flow analysis. Cash flow assumptions, including prepayment speeds, servicing costs and escrow earnings of the mortgage servicing rights are

considered in the calculation. The average constant prepayment rate was 14.20% for the March 31, 2021 valuation compared to 16.20% for the December 31, 2020 valuation. The discount rate was 9.02% for both March 31, 2021 and December 31, 2020. The average capitalization rate for the first three months of 2021 ranged from 76 to 112 basis points compared to a range of 95 to 116 basis points for the first three months of 2020. Fees collected for the servicing of mortgage loans for others were $464,000 and $409,000 for the quarter ended March 31, 2021 and March 31, 2020.


	2021			2020
Balance at January 1,	$	5,189		$	5,621
Originations	512			376
Amortization	(400)			(307)

Sale of mortgage servicing rights	—			—

Valuation adjustment	917			(1,565)
Balance at period end	$	6,218		$	4,125

Mortgage servicing rights, net to servicing portfolio	0.83		%	0.67		%

HTLF's commercial servicing portfolio is comprised of loans guaranteed by the United States Small Business Administration ("SBA") and United States Department of Agriculture that have been sold with servicing retained by HTLF, which totaled $62.4 million at March 31, 2021 and $66.2 million at December 31, 2020. The commercial servicing rights portfolio is separated into two tranches at the respective HTLF subsidiary, loans with a term of less than 20 years and loans with a term of more than 20 years. Fees collected for the servicing of commercial loans for others were $129,000 and $118,000 for the quarter ended March 31, 2021 and March 31, 2020.

The fair value of each commercial servicing rights portfolio is calculated based upon a discounted cash flow analysis. Cash flow assumptions, including prepayment speeds and servicing costs, are considered in the calculation. The range of average constant prepayment rates for the valuations was 13.83% to 17.76% as of March 31, 2021 compared to 14.95% to 19.25% as of December 31, 2020. The discount rate range was 6.89% to 8.53% for the March 31, 2021, valuations compared to 7.70% to 12.88% for the December 31, 2020 valuations. The capitalization rate for 2020 ranged from 310 to 445 basis points. The total fair value of the commercial servicing rights was estimated at $1.2 million as of March 31, 2021, and $1.3 million as of December 31, 2020.


	2021			2020
Balance at January 1,	$	863		$	1,115

Originations	—			38
Amortization	(128)			(58)

Balance at period end	$	735		$	1,095
Fair value of commercial servicing rights	$	1,239		$	1,407
Commercial servicing rights, net to servicing portfolio	1.18		%	1.41		%

Mortgage and commercial servicing rights are initially recorded at fair value in net gains on sale of loans held for sale when they are capitalized through loan sales. Fair value is based on market prices for comparable servicing contracts, when available, or based on a valuation model that calculates the present value of estimated future net servicing income.

Mortgage and commercial servicing rights are subsequently measured using the amortization method, which requires the asset to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing rights are evaluated for impairment at each HTLF subsidiary based upon the fair value of the assets as compared to the carrying amount. Impairment is recognized through a valuation allowance for specific tranches to the extent that fair value is less than the carrying amount at each HTLF subsidiary. At March 31, 2021, a $401,000 valuation allowance was required on the mortgage servicing rights 15-year tranche and a $1.4 million valuation allowance was required on the mortgage servicing rights 30-year tranche. At December 31, 2020, a $422,000 valuation allowance was required on the mortgage servicing rights 15-year tranche and a $1.4 million valuation allowance was required on the mortgage servicing rights

30-year tranche. At both March 31, 2021 and December 31, 2020, no valuation allowance was required on commercial servicing rights with a term less than 20 years and no valuation allowance was required on commercial servicing rights with a term greater than 20 years.

The following table summarizes, in thousands, the book value, the fair value of each tranche of the mortgage servicing rights and any recorded valuation allowance at each respective subsidiary at March 31, 2021, and December 31, 2020:


March 31, 2021	Book Value 15-Year Tranche		Fair Value 15-Year Tranche		Valuation Allowance 15-Year Tranche		Book Value 30-Year Tranche		Fair Value 30-Year Tranche		Valuation Allowance 30-Year Tranche

First Bank & Trust	$	1,667	$	1,266	$	401	$	6,380	$	4,952	$	1,428

December 31, 2020

First Bank & Trust	$	1,522	$	1,100	$	422	$	5,445	$	4,089	$	1,356

The following table summarizes, in thousands, the book value, the fair value of each tranche of the commercial servicing rights and any recorded valuation allowance at each respective subsidiary at March 31, 2021, and December 31, 2020:


	Book Value Less than 20 Years		Fair Value Less than 20 Years		Valuation Allowance 15-Year Tranche		Book Value More than 20 Years		Fair Value More than 20 Years		Valuation Allowance 30-Year Tranche



March 31, 2021	$	80	$	230	$	—	$	655	$	1,009	$	—




December 31, 2020	$	87	$	203	$	—	$	776	$	1,085	$	—