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DERIVATIVE FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS
HTLF uses derivative financial instruments as part of its interest rate risk management strategy. As part of the strategy, HTLF considers the use of interest rate swaps, risk participation agreements, caps, floors, collars, and certain interest rate lock commitments and forward sales of securities related to mortgage banking activities. HTLF's current strategy includes the use of interest rate swaps, interest rate lock commitments and forward sales of mortgage securities. In addition, HTLF is facilitating back-to-back loan swaps to assist customers in managing their interest rate risk while executing offsetting interest rate swaps with dealer counterparties. HTLF's objectives are to add stability to its net interest margin and to manage its exposure to movements in interest rates. The contract or notional amount of a derivative is used to determine, along with the other terms of the derivative, the amounts to be exchanged between the counterparties. HTLF is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. HTLF minimizes this risk by entering into derivative contracts with counterparties that meet HTLF’s credit standards, and the contracts contain collateral provisions protecting the at-risk party. HTLF has not experienced any losses from nonperformance by these counterparties. HTLF monitors counterparty risk in accordance with the provisions of ASC 815.

In addition, interest rate-related derivative instruments generally contain language outlining collateral pledging requirements for each counterparty. Collateral must be posted when the market value exceeds certain threshold limits which are determined by the credit ratings of each counterparty. HTLF was required to pledge no cash as collateral at both September 30, 2022, and December 31, 2021. At both September 30, 2022, and December 31, 2021, no collateral was required to be pledged by HTLF's counterparties.

HTLF's derivative and hedging instruments are recorded at fair value on the consolidated balance sheets. See Note 7, "Fair Value," for additional fair value information and disclosures.

Cash Flow Hedges
During the third quarter of 2021, the interest rate swap transactions associated with Heartland Financial Statutory VI and VII were terminated, and the debt was converted to variable rate subordinated debentures. In addition, HTLF had two swap transactions associated with an unaffiliated bank, one of which matured in the second quarter, and the other was terminated in the third quarter. The underlying debt with the unaffiliated bank was paid off in the third quarter of 2021. For the next twelve months, HTLF estimates that cash payments and reclassification from accumulated other comprehensive income (loss) to interest expense related to the terminated swaps will total $733,000.

At both September 30, 2022, and December 31, 2021, HTLF had no derivative instruments designated as cash flow hedges.

Fair Value Hedges
HTLF uses interest rate swaps to convert certain long term fixed rate loans to floating rates to hedge interest rate risk exposure. HTLF uses hedge accounting in accordance with ASC 815, with the 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, being recorded in the consolidated statements of income. The ineffective portions of the unrealized gains or losses, if any, are recorded in interest income and interest expense 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 the 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.
HTLF was required to pledge $481,000 and $3.8 million of cash as collateral for these fair value hedges at September 30, 2022, and December 31, 2021, respectively.

The table below identifies the notional amount, fair value and balance sheet category of HTLF's fair value hedges at September 30, 2022, and December 31, 2021, in thousands:
Notional AmountFair ValueBalance Sheet Category
September 30, 2022
Fair value hedges$1,237 $56 Other assets
December 31, 2021
Fair value hedges $16,755 $(1,208)Other liabilities

The table below identifies the gains and losses recognized on HTLF's fair value hedges for the three- and nine- months ended September 30, 2022, and September 30, 2021, in thousands:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Gain recognized in interest income on fair value hedges$39 $35 $1,264 $930 

Embedded Derivatives
HTLF has fixed rate loans with embedded derivatives. These loans contain terms that affect the cash flows or value of the loan similar to a derivative instrument, and therefore are considered to contain an embedded derivative. The embedded derivatives are bifurcated from the loans because the terms of the derivative instrument are not clearly and closely related to the loans. The embedded derivatives are recorded at fair value on the consolidated balance sheets as a part of other assets, and changes in the fair value are a component of noninterest income. The table below identifies the notional amount, fair value and balance sheet category of the embedded derivatives at September 30, 2022, and December 31, 2021, in thousands:
Notional AmountFair ValueBalance Sheet Category
September 30, 2022
Embedded derivatives $6,118 $129 Other assets
December 31, 2021
Embedded derivatives $7,496 $(317)Other liabilities

The table below identifies the gains and losses recognized on HTLF's embedded derivatives for the three- and nine- months ended September 30, 2022, and September 30, 2021, in thousands:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Gain (loss) recognized in other noninterest income on embedded derivatives$121 $(66)$446 $(249)
Back-to-Back Loan Swaps
HTLF has interest rate swap loan 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. 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. HTLF was required to post $101,000 of collateral at September 30, 2022, compared to $24.1 million as of December 31, 2021, respectively, as collateral related to these back-to-back swaps. HTLF's counterparties were required to pledge $44.7 million at September 30, 2022, compared to $0 at December 31, 2021. Any gains and losses on these back-to-back swaps are recorded in noninterest income on the consolidated statements of income, and for the three and nine months ended September 30, 2022, and September 30, 2021, no gain or loss was recognized. The table below identifies the balance sheet category and fair values of the derivative instruments designated as loan swaps at September 30, 2022, and December 31, 2021, in thousands:
Notional
Amount		Fair
Value 		Balance Sheet
Category		Weighted
Average
Receive Rate		Weighted
Average
Pay Rate
September 30, 2022
Customer interest rate swaps$740,620 $48,708 Other assets4.16 %5.83 %
Customer interest rate swaps740,620 (48,708)Other liabilities5.83 4.16 
December 31, 2021
Customer interest rate swaps$463,069 $23,574 Other assets4.44 %2.35 %
Customer interest rate swaps463,069 (23,574)Other liabilities2.35 4.44 

Other Free Standing Derivatives
HTLF has entered into interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans and mortgage backed securities that are considered derivative instruments. HTLF enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into and to economically hedge the effect of future changes in interest rates on the commitments to fund the loans as well as on residential mortgage loans available for sale. 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. HTLF was required to pledge no collateral at both September 30, 2022, and December 31, 2021. HTLF's counterparties were required to pledge no collateral at both September 30, 2022, and December 31, 2021, as collateral for these forward commitments.

HTLF acquired undesignated interest rate swaps in 2015. These swaps were entered into primarily for the benefit of customers seeking to manage their interest rate risk and are not designated against specific assets or liabilities on the consolidated balance sheets or forecasted transactions and therefore do not qualify for hedge accounting in accordance with ASC 815. These swaps are carried at fair value on the consolidated balance sheets as a component of other liabilities, with changes in the fair value recorded as a component of other noninterest income.
The table below identifies the balance sheet category and fair values of HTLF's other free standing derivative instruments not designated as hedging instruments at September 30, 2022, and December 31, 2021, in thousands:
 Balance Sheet CategoryNotional AmountFair Value
September 30, 2022
Interest rate lock commitments (mortgage)Other assets$20,476 $231 
Forward commitmentsOther assets24,750 829 
Forward commitmentsOther liabilities 2,000 (11)
Undesignated interest rate swapsOther liabilities6,118 (129)
December 31, 2021
Interest rate lock commitments (mortgage)Other assets$37,046 $1,306 
Forward commitmentsOther assets19,000 32 
Forward commitmentsOther liabilities35,500 (95)
Undesignated interest rate swapsOther assets7,496 317 

HTLF recognizes gains and losses on other free standing derivatives in two separate income statement categories. Interest rate lock commitments and forward commitments are recognized in net gains on sale of loans held for sale and undesignated interest rate swaps are recognized in other noninterest income. The table below identifies the gains and losses recognized in income on HTLF's other free standing derivative instruments not designated as hedging instruments for the three- and nine- months ended September 30, 2022, and September 30, 2021, in thousands:
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2022202120222021
Interest rate lock commitments (mortgage)$(1,337)$(189)$(2,009)$(1,924)
Forward commitments813 413 881 916 
Undesignated interest rate swaps(121)66 (446)249