LOANS

3 Months Ended

Mar. 31, 2022

Loans as of March 31, 2022, and December 31, 2021, were as follows, in thousands:


	March 31, 2022		December 31, 2021
Loans receivable held to maturity:
Commercial and industrial	$	2,814,513	$	2,645,085
Paycheck Protection Program ("PPP")	74,065		199,883
Owner occupied commercial real estate	2,266,076		2,240,334
Non-owner occupied commercial real estate	2,161,761		2,010,591
Real estate construction	842,483		856,119
Agricultural and agricultural real estate	766,443		753,753
Residential real estate	825,242		829,283
Consumer	426,802		419,524
Total loans receivable held to maturity	10,177,385		9,954,572






Allowance for credit losses	(100,522)		(110,088)
Loans receivable, net	$	10,076,863	$	9,844,484

As of March 31, 2022, and December 31, 2021, HTLF had $33.0 million and $35.3 million, respectively, of accrued interest receivable, which is included in other assets on the consolidated balance sheets. HTLF does not consider accrued interest receivable in the allowance for credit losses calculation.

The following table shows the balance in the allowance for credit losses at March 31, 2022, and December 31, 2021, and the related loan balances, disaggregated on the basis of measurement methodology, in thousands. 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 are on nonaccrual are individually assessed using a collateral dependency calculation. All other loans are collectively evaluated for losses.


	Allowance For Credit Losses						Gross Loans Receivable Held to Maturity
	Individually Evaluated for Credit Losses		Collectively Evaluated for Credit Losses		Total		Loans Individually Evaluated for Credit Losses		Loans Collectively Evaluated for Credit Losses		Total
March 31, 2022
Commercial and industrial	$	2,956	$	22,844	$	25,800	$	13,503	$	2,801,010	$	2,814,513
PPP	—		—		—		—		74,065		74,065
Owner occupied commercial real estate	37		17,938		17,975		9,284		2,256,792		2,266,076
Non-owner occupied commercial real estate	506		15,507		16,013		12,244		2,149,517		2,161,761
Real estate construction	31		21,366		21,397		2,015		840,468		842,483
Agricultural and agricultural real estate	80		2,587		2,667		9,594		756,849		766,443
Residential real estate	—		7,875		7,875		863		824,379		825,242
Consumer	—		8,795		8,795		—		426,802		426,802

Total	$	3,610	$	96,912	$	100,522	$	47,503	$	10,129,882	$	10,177,385


	Allowance For Credit Losses						Gross Loans Receivable Held to Maturity
	Individually Evaluated for Credit Losses		Collectively Evaluated for Credit Losses		Total		Loans Individually Evaluated for Credit Losses		Loans Collectively Evaluated for Credit Losses		Total
December 31, 2021
Commercial and industrial	$	4,562	$	23,176	$	27,738	$	13,551	$	2,631,534	$	2,645,085
PPP	—		—		—		—		199,883		199,883
Owner occupied commercial real estate	105		19,109		19,214		8,552		2,231,782		2,240,334
Non-owner occupied commercial real estate	610		17,298		17,908		12,557		1,998,034		2,010,591
Real estate construction	—		22,538		22,538		—		856,119		856,119
Agricultural and agricultural real estate	2,369		2,844		5,213		13,773		739,980		753,753
Residential real estate	—		8,427		8,427		855		828,428		829,283
Consumer	—		9,050		9,050		—		419,524		419,524

Total	$	7,646	$	102,442	$	110,088	$	49,288	$	9,905,284	$	9,954,572

HTLF had $10.1 million of troubled debt restructured loans at March 31, 2022, of which $9.3 million were classified as nonaccrual and $882,000 were accruing according to the restructured terms. HTLF had $10.4 million of troubled debt restructured loans at December 31, 2021, of which $9.5 million were classified as nonaccrual and $817,000 were accruing according to the restructured terms.

HTLF had no troubled debt restructured loans that were modified in the during the three months ended March 31, 2022, and March 31, 2021. The provisions of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which modified troubled debt restructured loan classification, expired on January 1, 2022, and any new troubled debt restructured loan modifications are evaluated in accordance with generally accepted accounting principles.

At March 31, 2022, there were no commitments to extend credit to any of the borrowers with an existing troubled debt restructured loan.

HTLF had no troubled debt restructured loans for which there was a payment default during the three months ended March 31, 2022, and March 31, 2021, that had been modified during the twelve-month period prior to default.

HTLF's internal rating system is a series of grades reflecting management's credit risk assessment, based on its analysis of the borrower's financial condition. The "pass" category consists of all loans that are not in the "nonpass" category and categorized into a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the pass category is monitored for early identification of credit deterioration.

The "nonpass" category consists of watch, substandard, doubtful and loss rated loans. The "watch" rating is attached to loans where the borrower exhibits negative trends in financial circumstances due to borrower specific or systemic conditions that, if left uncorrected, threaten the borrower's capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. These credits are closely monitored for improvement or deterioration.

The "substandard" rating is assigned to loans that are inadequately protected by the current net worth and repaying capacity of the borrower and that may be further at risk due to deterioration in the value of collateral pledged. Well-defined weaknesses jeopardize liquidation of the debt. These loans are still considered collectible; however, a distinct possibility exists that HTLF will sustain some loss if deficiencies are not corrected. Substandard loans may exhibit some or all of the following weaknesses: deteriorating financial trends, lack of earnings, inadequate debt service capacity, excessive debt and/or lack of liquidity.

The "doubtful" rating is assigned to loans where identified weaknesses in the borrowers' ability to repay the loan make collection or liquidation in full, on the basis of existing facts, conditions and values, highly questionable and improbable. These borrowers are usually in default, lack liquidity and capital, as well as resources necessary to remain as an operating entity. Specific pending events, such as capital injections, liquidations or perfection of liens on additional collateral, may strengthen the credit, thus deferring the rating of the loan as "loss" until the exact status of the loan can be determined. The "loss" rating is

assigned to loans considered uncollectible. HTLF had no loans classified as "loss" or "doubtful" as of March 31, 2022, and December 31, 2021.

The following tables show the risk category of loans by loan category and year of origination as of March 31, 2022, and December 31, 2021, in thousands:


As of March 31, 2022	Amortized Cost Basis of Term Loans by Year of Origination
	2022		2021		2020		2019		2018		2017 and Prior		Revolving		Total
Commercial and industrial
Pass	$	282,325	$	563,865	$	321,463	$	142,201	$	82,846	$	490,118	$	771,746	$	2,654,564
Watch	1,133		12,201		10,346		9,644		6,049		3,309		28,376		71,058
Substandard	2,512		14,886		5,700		12,662		7,939		16,922		28,270		88,891
Commercial and industrial total	$	285,970	$	590,952	$	337,509	$	164,507	$	96,834	$	510,349	$	828,392	$	2,814,513
PPP
Pass	$	—	$	60,429	$	4,463	$	—	$	—	$	—	$	—	$	64,892
Watch	—		1,797		31		—		—		—		—		1,828
Substandard	—		7,326		19		—		—		—		—		7,345
PPP total	$	—	$	69,552	$	4,513	$	—	$	—	$	—	$	—	$	74,065
Owner occupied commercial real estate
Pass	$	186,033	$	896,361	$	312,517	$	306,341	$	148,493	$	275,086	$	20,300	$	2,145,131
Watch	2,944		6,266		17,523		6,524		8,556		10,802		35		52,650
Substandard	3,373		11,363		9,387		12,087		3,553		26,782		1,750		68,295
Owner occupied commercial real estate total	$	192,350	$	913,990	$	339,427	$	324,952	$	160,602	$	312,670	$	22,085	$	2,266,076
Non-owner occupied commercial real estate
Pass	$	238,611	$	602,044	$	257,093	$	330,145	$	211,111	$	286,939	$	31,114	$	1,957,057
Watch	206		2,757		11,098		26,639		20,512		38,483		—		99,695
Substandard	2,807		12,768		9,148		20,609		1,821		57,856		—		105,009
Non-owner occupied commercial real estate total	$	241,624	$	617,569	$	277,339	$	377,393	$	233,444	$	383,278	$	31,114	$	2,161,761
Real estate construction
Pass	$	117,525	$	378,301	$	149,415	$	98,294	$	14,036	$	9,362	$	15,009	$	781,942
Watch	—		3,058		1,033		—		44,468		3,697		13		52,269
Substandard	—		2,548		49		486		5,098		91		—		8,272
Real estate construction total	$	117,525	$	383,907	$	150,497	$	98,780	$	63,602	$	13,150	$	15,022	$	842,483

Agricultural and agricultural real estate
Pass	$	72,343	$	195,360	$	97,315	$	45,549	$	29,107	$	49,812	$	215,800	$	705,286
Watch	421		3,694		5,630		2,051		2,002		2,739		3,126		19,663
Substandard	880		7,186		943		3,747		14,517		8,633		5,588		41,494
Agricultural and agricultural real estate total	$	73,644	$	206,240	$	103,888	$	51,347	$	45,626	$	61,184	$	224,514	$	766,443
Residential real estate
Pass	$	59,105	$	303,926	$	78,252	$	46,766	$	44,833	$	246,933	$	23,456	$	803,271
Watch	—		484		157		736		1,435		6,915		—		9,727
Substandard	101		2,036		385		42		1,984		7,696		—		12,244
Residential real estate total	$	59,206	$	306,446	$	78,794	$	47,544	$	48,252	$	261,544	$	23,456	$	825,242

Consumer
Pass	$	17,097	$	59,774	$	17,754	$	11,299	$	7,365	$	26,551	$	279,886	$	419,726
Watch	3		472		73		332		366		664		1,784		3,694
Substandard	31		222		306		161		248		2,005		409		3,382
Consumer total	$	17,131	$	60,468	$	18,133	$	11,792	$	7,979	$	29,220	$	282,079	$	426,802

Total Pass	$	973,039	$	3,060,060	$	1,238,272	$	980,595	$	537,791	$	1,384,801	$	1,357,311	$	9,531,869
Total Watch	4,707		30,729		45,891		45,926		83,388		66,609		33,334		310,584
Total Substandard	9,704		58,335		25,937		49,794		35,160		119,985		36,017		334,932
Total Loans	$	987,450	$	3,149,124	$	1,310,100	$	1,076,315	$	656,339	$	1,571,395	$	1,426,662	$	10,177,385


As of December 31, 2021	Amortized Cost Basis of Term Loans by Year of Origination
	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Total
Commercial and industrial
Pass	$	604,659	$	359,533	$	203,960	$	89,694	$	171,709	$	330,094	$	708,525	$	2,468,174
Watch	10,633		12,790		12,550		8,210		3,611		14,976		24,626		87,396
Substandard	19,888		6,391		13,050		8,535		6,619		12,052		22,980		89,515
Commercial and industrial total	$	635,180	$	378,714	$	229,560	$	106,439	$	181,939	$	357,122	$	756,131	$	2,645,085
PPP
Pass	$	146,370	$	25,707	$	—	$	—	$	—	$	—	$	—	$	172,077
Watch	10,726		127		—		—		—		—		—		10,853
Substandard	16,932		21		—		—		—		—		—		16,953
PPP total	$	174,028	$	25,855	$	—	$	—	$	—	$	—	$	—	$	199,883
Owner occupied commercial real estate
Pass	$	940,043	$	328,052	$	315,497	$	180,936	$	115,142	$	189,647	$	34,233	$	2,103,550
Watch	4,676		13,956		7,759		10,501		15,032		6,830		35		58,789
Substandard	11,958		20,769		13,734		2,809		13,912		13,063		1,750		77,995
Owner occupied commercial real estate total	$	956,677	$	362,777	$	336,990	$	194,246	$	144,086	$	209,540	$	36,018	$	2,240,334
Non-owner occupied commercial real estate
Pass	$	609,968	$	263,093	$	315,815	$	236,823	$	152,059	$	166,792	$	28,728	$	1,773,278
Watch	4,754		9,109		35,496		29,227		4,865		35,901		—		119,352
Substandard	15,722		10,612		21,798		3,599		14,023		51,766		441		117,961
Non-owner occupied commercial real estate total	$	630,444	$	282,814	$	373,109	$	269,649	$	170,947	$	254,459	$	29,169	$	2,010,591
Real estate construction
Pass	$	381,283	$	206,879	$	169,606	$	14,197	$	7,163	$	7,823	$	14,507	$	801,458
Watch	2,704		858		2,145		44,846		—		—		14		50,567
Substandard	—		50		46		3,944		—		54		—		4,094
Real estate construction total	$	383,987	$	207,787	$	171,797	$	62,987	$	7,163	$	7,877	$	14,521	$	856,119

Agricultural and agricultural real estate
Pass	$	217,179	$	102,030	$	47,927	$	32,913	$	22,029	$	35,548	$	220,065	$	677,691
Watch	4,018		10,390		4,688		2,270		33		2,038		2,948		26,385
Substandard	9,250		1,095		4,910		15,825		3,212		8,859		6,526		49,677
Agricultural and agricultural real estate total	$	230,447	$	113,515	$	57,525	$	51,008	$	25,274	$	46,445	$	229,539	$	753,753
Residential real estate
Pass	$	311,292	$	86,355	$	50,762	$	53,773	$	43,619	$	230,566	$	29,017	$	805,384
Watch	3,928		1,499		750		1,452		734		1,977		1,000		11,340
Substandard	2,528		444		410		2,317		1,139		5,721		—		12,559
Residential real estate total	$	317,748	$	88,298	$	51,922	$	57,542	$	45,492	$	238,264	$	30,017	$	829,283
Consumer
Pass	$	69,172	$	20,258	$	13,051	$	9,001	$	10,986	$	18,202	$	271,034	$	411,704
Watch	555		309		392		373		113		591		2,210		4,543
Substandard	267		204		218		236		363		1,611		378		3,277
Consumer total	$	69,994	$	20,771	$	13,661	$	9,610	$	11,462	$	20,404	$	273,622	$	419,524

Total Pass	$	3,279,966	$	1,391,907	$	1,116,618	$	617,337	$	522,707	$	978,672	$	1,306,109	$	9,213,316
Total Watch	41,994		49,038		63,780		96,879		24,388		62,313		30,833		369,225
Total Substandard	76,545		39,586		54,166		37,265		39,268		93,126		32,075		372,031
Total Loans	$	3,398,505	$	1,480,531	$	1,234,564	$	751,481	$	586,363	$	1,134,111	$	1,369,017	$	9,954,572

Included in the nonpass loans at March 31, 2022 and December 31, 2021 were $9.2 million and $27.8 million, respectively, of nonpass PPP loans as a result of risk ratings on non-PPP related credits. HTLF's risk rating methodology assigns a risk rating to the whole lending relationship. HTLF has no allowance recorded related to the PPP loans because of the 100% government guarantee.

As of March 31, 2022, HTLF had $980,000 of loans secured by residential real estate property that were in the process of foreclosure.

The following table sets forth information regarding accruing and nonaccrual loans at March 31, 2022, and December 31, 2021, in thousands:


	Accruing Loans
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Nonaccrual		Total Loans
March 31, 2022
Commercial and industrial	$	3,786	$	225	$	246	$	4,257	$	2,792,688	$	17,568	$	2,814,513
PPP	—		—		—		—		74,046		19		74,065
Owner occupied commercial real estate	517		23		—		540		2,254,044		11,492		2,266,076
Non-owner occupied commercial real estate	1,099		—		—		1,099		2,147,671		12,991		2,161,761
Real estate construction	332		—		—		332		839,754		2,397		842,483
Agricultural and agricultural real estate	2,051		282		—		2,333		752,664		11,446		766,443
Residential real estate	991		139		—		1,130		817,174		6,938		825,242
Consumer	659		139		—		798		424,681		1,323		426,802
Total gross loans receivable held to maturity	$	9,435	$	808	$	246	$	10,489	$	10,102,722	$	64,174	$	10,177,385
December 31, 2021
Commercial and industrial	$	1,024	$	183	$	541	$	1,748	$	2,625,109	$	18,228	$	2,645,085
PPP	—		—		—		—		199,883		—		199,883
Owner occupied commercial real estate	130		—		—		130		2,229,054		11,150		2,240,334
Non-owner occupied commercial real estate	3,929		—		—		3,929		1,993,346		13,316		2,010,591
Real estate construction	238		50		—		288		855,463		368		856,119
Agricultural and agricultural real estate	687		—		—		687		737,380		15,686		753,753
Residential real estate	767		46		9		822		819,294		9,167		829,283
Consumer	251		57		—		308		417,762		1,454		419,524
Total gross loans receivable held to maturity	$	7,026	$	336	$	550	$	7,912	$	9,877,291	$	69,369	$	9,954,572

Loans delinquent 30 to 89 days as a percent of total loans were 0.10% at March 31, 2022, compared to 0.07% at December 31, 2021. Changes in credit risk are monitored on a continuous basis as part of relationship management, and changes in risk ratings are made when identified. All individually assessed loans are reviewed at least annually.

HTLF recognized $0 of interest income on nonaccrual loans during the three months ended March 31, 2022 and March 31, 2021. As of March 31, 2022, and December 31, 2021, HTLF had $27.9 million and $25.5 million of nonaccrual loans with no related allowance, respectively.