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Fair Value of Financial Instruments (Tables) | 6 Months Ended
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Jun. 30, 2022
Fair Value Disclosures [Abstract] |
Fair Value of Assets and Liabilities Recorded on a Recurring Basis | The following tables summarize financial assets and financial liabilities recorded at fair value on a recurring basis at June 30, 2022, and December 31, 2021, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value. There were no changes in the valuation techniques during 2022 or 2021.
| June 30, 2022 |
(Dollars in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total |
State and municipal securities | $ | — |  |  | $ | 344,379 |  |  | $ | 57,565 |  |  | $ | 401,944 |  |
Corporate bonds | — |  |  | 79,593 |  |  | — |  |  | 79,593 |  |
U.S. treasury securities | 115,642 |  |  | — |  |  | — |  |  | 115,642 |  |
U.S. government agency securities | — |  |  | 141,405 |  |  | — |  |  | 141,405 |  |
Commercial mortgage-backed securities | — |  |  | 110,697 |  |  | — |  |  | 110,697 |  |
Residential mortgage-backed securities | — |  |  | 649,126 |  |  | — |  |  | 649,126 |  |
Commercial collateralized mortgage obligations | — |  |  | 40,965 |  |  | — |  |  | 40,965 |  |
Residential collateralized mortgage obligations | — |  |  | 188,591 |  |  | — |  |  | 188,591 |  |
Asset-backed securities | — |  |  | 76,407 |  |  | — |  |  | 76,407 |  |
Securities available for sale | 115,642 |  |  | 1,631,163 |  |  | 57,565 |  |  | 1,804,370 |  |
Securities carried at fair value through income | — |  |  | — |  |  | 6,630 |  |  | 6,630 |  |
Loans held for sale | — |  |  | 31,840 |  |  | — |  |  | 31,840 |  |
Mortgage servicing rights | — |  |  | — |  |  | 22,127 |  |  | 22,127 |  |
Other assets - derivatives | — |  |  | 17,328 |  |  | — |  |  | 17,328 |  |
Total recurring fair value measurements - assets | $ | 115,642 |  |  | $ | 1,680,331 |  |  | $ | 86,322 |  |  | $ | 1,882,295 |  |
Other liabilities - derivatives | $ | — |  |  | $ | (15,824) |  |  | $ | — |  |  | $ | (15,824) |  |
Total recurring fair value measurements - liabilities | $ | — |  |  | $ | (15,824) |  |  | $ | — |  |  | $ | (15,824) |  |
| December 31, 2021 |
(Dollars in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total |
State and municipal securities | $ | — |  |  | $ | 364,357 |  |  | $ | 41,461 |  |  | $ | 405,818 |  |
Corporate bonds | — |  |  | 82,734 |  |  | — |  |  | 82,734 |  |
U.S. treasury securities | 92,245 |  |  | — |  |  | — |  |  | 92,245 |  |
U.S. government agency securities | — |  |  | 5,413 |  |  | — |  |  | 5,413 |  |
Commercial mortgage-backed securities | — |  |  | 64,243 |  |  | — |  |  | 64,243 |  |
Residential mortgage-backed securities | — |  |  | 557,801 |  |  | — |  |  | 557,801 |  |
Commercial collateralized mortgage obligations | — |  |  | 19,672 |  |  | — |  |  | 19,672 |  |
Residential collateralized mortgage obligations | — |  |  | 193,740 |  |  | — |  |  | 193,740 |  |
Asset-backed securities | — |  |  | 83,062 |  |  | — |  |  | 83,062 |  |
Securities available for sale | 92,245 |  |  | 1,371,022 |  |  | 41,461 |  |  | 1,504,728 |  |
Securities carried at fair value through income | — |  |  | — |  |  | 7,497 |  |  | 7,497 |  |
Loans held for sale | — |  |  | 37,032 |  |  | — |  |  | 37,032 |  |
Mortgage servicing rights | — |  |  | — |  |  | 16,220 |  |  | 16,220 |  |
Other assets - derivatives | — |  |  | 11,459 |  |  | — |  |  | 11,459 |  |
Total recurring fair value measurements - assets | $ | 92,245 |  |  | $ | 1,419,513 |  |  | $ | 65,178 |  |  | $ | 1,576,936 |  |
Other liabilities - derivatives | $ | — |  |  | $ | (11,494) |  |  | $ | — |  |  | $ | (11,494) |  |
Total recurring fair value measurements - liabilities | $ | — |  |  | $ | (11,494) |  |  | $ | — |  |  | $ | (11,494) |  |
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis | The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the six months ended June 30, 2022 and 2021, are summarized as follows:
(Dollars in thousands) |  |  | MSRs |  | Securities Available for Sale |  | Securities at Fair Value Through Income |
Balance at January 1, 2022 |  |  | $ | 16,220 |  |  | $ | 41,461 |  |  | $ | 7,497 |  |
Gain (loss) recognized in earnings: |  |  |  |  |  |  |  |
Mortgage banking revenue(1) |  |  | 4,443 |  |  | — |  |  | — |  |
Other noninterest income |  |  | — |  |  | — |  |  | (592) |  |
Loss recognized in AOCI |  |  | — |  |  | (4,491) |  |  | — |  |
Purchases, issuances, sales and settlements: |  |  |  |  |  |  |  |
Originations |  |  | 1,464 |  |  | — |  |  | — |  |
Purchases |  |  | — |  |  | 23,877 |  |  | — |  |
Settlements |  |  | — |  |  | (3,282) |  |  | (275) |  |
Balance at June 30, 2022 |  |  | $ | 22,127 |  |  | $ | 57,565 |  |  | $ | 6,630 |  |
(Dollars in thousands) | Loans at Fair Value |  | MSRs |  | Securities Available for Sale |  | Securities at Fair Value Through Income
Balance at January 1, 2021 | $ | 17,011 |  |  | $ | 13,660 |  |  | $ | 44,065 |  |  | $ | 11,554 |
Gain (loss) recognized in earnings: |  |  |  |  |  |  |
Mortgage banking revenue(1) | — |  |  | (772) |  |  | — |  |  | — |
Other noninterest income | (125) |  |  | — |  |  | — |  |  | (316) |
Loss recognized in AOCI | — |  |  | — |  |  | (595) |  |  | — |
Purchases, issuances, sales and settlements: |  |  |  |  |  |  |
Originations | — |  |  | 3,193 |  |  | — |  |  | — |
Purchases | — |  |  | — |  |  | 1,000 |  |  | — |
Settlements | (11,443) |  |  | — |  |  | (2,180) |  |  | (265) |
Balance at June 30, 2021 | $ | 5,443 |  |  | $ | 16,081 |  |  | $ | 42,290 |  |  | $ | 10,973 |
___________________________ (1)Total mortgage banking revenue includes changes in fair value due to market changes and run-off.
Significant Assumptions Used to Value Mortgage Servicing Rights | The significant assumptions used to value MSRs were as follows:
| June 30, 2022 |  | December 31, 2021
| Range |  | Weighted Average(1) |  | Range |  | Weighted Average(1)
Prepayment speeds | 5.70% - 17.11% |  | 6.76 | % |  | 9.10% - 36.51% |  | 15.63 | %
Discount rates | 9.19 - 12.21 |  | 9.98 |  |  | 8.89 - 10.39 |  | 9.32 |
__________________________ (1)The weighted average was calculated with reference to the principal balance of the underlying mortgages.
Difference Between Fair Value and the Unpaid Principal Balance for Financial Instruments for which the Fair Value Option has been Elected and Classification in Income Statement | The following tables summarize the difference between the fair value and the unpaid principal balance for financial instruments for which the fair value option has been elected:
| June 30, 2022
(Dollars in thousands) | Aggregate Fair Value |  | Aggregate Unpaid Principal Balance |  | Difference
Loans held for sale(1) | $ | 31,840 |  |  | $ | 31,312 |  |  | $ | 528 |
Securities carried at fair value through income | 6,630 |  |  | 7,100 |  |  | (470) |
Total | $ | 38,470 |  |  | $ | 38,412 |  |  | $ | 58 |
____________________________ (1)$2.5 million of loans held for sale were designated as nonaccrual or 90 days or more past due at June 30, 2022. Of this balance, $1.9 million was guaranteed by U.S. Government agencies.
| December 31, 2021
(Dollars in thousands) | Aggregate Fair Value |  | Aggregate Unpaid Principal Balance |  | Difference
Loans held for sale(1) | $ | 37,032 |  |  | $ | 36,072 |  |  | $ | 960 |
Securities carried at fair value through income | 7,497 |  |  | 7,375 |  |  | 122 |
Total | $ | 44,529 |  |  | $ | 43,447 |  |  | $ | 1,082 |
____________________________ (1)$1.8 million of loans held for sale were designated as nonaccrual or 90 days or more past due at December 31, 2021. Of this balance, $1.2 million was guaranteed by U.S. Government agencies. Changes in the fair value of assets for which the Company elected the fair value option are classified in the consolidated statement of income line items reflected in the following table:
(Dollars in thousands) | Three Months Ended June 30, |  | Six Months Ended June 30, |  |
Changes in fair value included in noninterest income: | 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |  |  |
Mortgage banking revenue (loans held for sale) | $ | 65 |  |  | $ | (177) |  |  | $ | (432) |  |  | $ | (4,302) |  |  |  |  |  |  |
Other income: |  |  |  |  |  |  |  |  |  |  |  |  |
Loans at fair value held for investment | — |  |  | (66) |  |  | — |  |  | (125) |  |  |  |  |  |  |
Securities carried at fair value through income | (154) |  |  | 161 |  |  | (592) |  |  | (316) |  |  |  |  |  |  |
Total impact on other income | (154) |  |  | 95 |  |  | (592) |  |  | (441) |  |  |  |  |  |  |
Total fair value option impact on noninterest income (1) | $ | (89) |  |  | $ | (82) |  |  | $ | (1,024) |  |  | $ | (4,743) |  |  |  |  |  |  |
____________________________ (1)The fair value option impact on noninterest income is offset by the derivative gain/loss recognized in noninterest income. Please see Note 6 - Mortgage Banking for more detail.
Carrying Value and Estimated Fair Value of Financial Instruments Not Measured at Fair Value | The carrying value and estimated fair values of financial instruments not recorded at fair value are as follows:
(Dollars in thousands) | June 30, 2022 |  | December 31, 2021 |
Financial assets: Level 1 inputs: | Carrying Value |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value |
Cash and cash equivalents | $ | 323,920 |  |  | $ | 323,920 |  |  | $ | 705,618 |  |  | $ | 705,618 |  |
Level 2 inputs: |  |  |  |  |  |  |  |
Non-marketable equity securities held in other financial institutions | 76,822 |  |  | 76,822 |  |  | 45,192 |  |  | 45,192 |  |
Accrued interest and loan fees receivable | 24,277 |  |  | 24,277 |  |  | 23,402 |  |  | 23,402 |  |
Level 3 inputs: |  |  |  |  |  |  |  |
Securities held to maturity | 4,288 |  |  | 5,448 |  |  | 22,767 |  |  | 25,117 |  |
LHFI, net | 5,464,970 |  |  | 5,421,977 |  |  | 5,166,745 |  |  | 5,133,257 |  |
Financial liabilities: |  |  |  |  |  |  |  |
Level 2 inputs: |  |  |  |  |  |  |  |
Deposits | 6,303,158 |  |  | 6,293,928 |  |  | 6,570,693 |  |  | 6,572,215 |  |
FHLB advances and other borrowings | 894,581 |  |  | 846,980 |  |  | 309,801 |  |  | 305,374 |  |
Subordinated indebtedness | 157,540 |  |  | 147,836 |  |  | 157,417 |  |  | 156,629 |  |
Accrued interest payable | 2,460 |  |  | 2,460 |  |  | 2,696 |  |  | 2,696 |  |

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- Definition Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19279-110258 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (c) -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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