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Fair Value of Financial Instruments (Tables)

6 Months Ended

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

X

- 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.

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