Borrowed Funds

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Borrowed Funds

7. Borrowed Funds

The components of the Company's short-term and long-term debt are as follows (in thousands):

	September 30, 2023		December 31, 2022
Short-term debt:
Federal Home Loan Bank 5.04% due 2024	$	1,000,000	$	—
Federal Home Loan Bank 5.47% due 2023		500,000		—
Federal Reserve Bank Term Funding Program 4.70% due 2023		800,000		—
Total short-term debt		2,300,000		—
Long-term debt:
Trust Preferred Securities:
Marquette Capital Trust I Subordinated Debentures 6.36% due 2036		18,538		18,319
Marquette Capital Trust II Subordinated Debentures 6.36% due 2036		19,067		18,863
Marquette Capital Trust III Subordinated Debentures 7.16% due 2036		7,492		7,415
Marquette Capital Trust IV Subordinated Debentures 7.27% due 2036		30,256		29,956
Subordinated notes 3.70% due 2030, net of issuance costs		199,118		198,781
Subordinated notes 6.25% due 2032, net issuance costs		108,297		107,977
Total long-term debt		382,768		381,311
Total borrowed funds	$	2,682,768	$	381,311

The Company assumed long-term debt obligations from the acquisition of Marquette Financial Companies (Marquette) consisting of debt obligations payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that previously issued trust preferred securities. These long-term debt obligations had an aggregate contractual balance of $103.1 million and had a carrying value of $75.4 million as of September 30, 2023. Interest rates on trust preferred securities are tied to the three-month term Secured Overnight Financing Rate (SOFR) with spreads ranging from 133 basis points to 160 basis points and reset quarterly. The trust preferred securities have maturity dates ranging from January 2036 to September 2036.

In September 2020, the Company issued $200.0 million of 3.70% fixed-to-fixed rate subordinated notes that mature on September 17, 2030. The notes bear interest at the rate of 3.70% per annum, payable semi-annually on each March 17 and September 17. The Company may redeem the notes, in whole or in part, on September 17, 2025, or on any interest payment date thereafter. Unamortized debt issuance costs related to these notes totaled $0.9 million as of September 30, 2023. Proceeds from the issuance of the notes were used for general corporate purposes, including contributing Tier 1 capital into the Bank.

In September 2022, the Company issued $110.0 million of 6.25% fixed-to-fixed rate subordinated notes that mature on September 28, 2032. The notes bear interest at the rate of 6.25% per annum, payable semi-annually on each March 28 and September 28. The Company may redeem the notes, in whole or in part, on September 28, 2027, or on any interest payment date thereafter. Unamortized debt issuance costs related to these notes totaled $1.7 million as of September 30, 2023. Proceeds from the issuance of the notes were used for general corporate purposes, including contributing Tier 1 capital into the Bank.

The Company is a member bank of the FHLB of Des Moines. Through this relationship, the Company purchased $70.2 million of FHLB stock and has access to additional liquidity and funding sources through FHLB

advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB. The Company had two short-term advances of $1.0 billion and $500.0 million outstanding at FHLB of Des Moines as of September 30, 2023. Additionally, in 2023, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. This letter of credit will expire in January 2024. The Company’s borrowing capacity with the FHLB was $436.7 million as of September 30, 2023.

The Company had an $800.0 million short-term borrowing outstanding with the Federal Reserve Bank's Bank Term Funding Program (BTFP) as of September 30, 2023. The Company’s remaining borrowing capacity with the BTFP was $20.0 million and its remaining borrowing capacity at the Federal Reserve Discount Window was $10.2 billion as of September 30, 2023.

The Company has a revolving line of credit with Wells Fargo Bank, N.A. which allows the Company to borrow up to $30.0 million for general working capital purposes. The interest rate applied to borrowed balances will be at the Company’s option either 1.40% above Term SOFR or 1.75% below the prime rate on the date of an advance. The Company pays a 0.4% unused commitment fee for unused portions of the line of credit. The Company currently has no outstanding balance on this line of credit.

The Company enters into sales of securities with simultaneous agreements to repurchase (repurchase agreements). The Company utilizes repurchase agreements to facilitate the needs of customers and to facilitate secured short-term funding needs. Repurchase agreements are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with the Company’s safekeeping agents.

The table below presents the remaining contractual maturities of repurchase agreements outstanding at September 30, 2023 and December 31, 2022, in addition to the various types of marketable securities that have been pledged as collateral for these borrowings (in thousands):

	As of September 30, 2023
	Remaining Contractual Maturities of the Agreements
	2-29 Days		30-90 Days		Over 90 Days		Total
Repurchase agreements, secured by:
U.S. Treasury	$	36,312	$	—	$	43,440	$	79,752
U.S. Agencies		1,411,134		171,442		46,060		1,628,636
Total repurchase agreements	$	1,447,446	$	171,442	$	89,500	$	1,708,388

	As of December 31, 2022
	Remaining Contractual Maturities of the Agreements
	2-29 Days		30-90 Days		Total
Repurchase agreements, secured by:
U.S. Treasury	$	33,888	$	—	$	33,888
U.S. Agencies		1,835,298		290,501		2,125,799
Total repurchase agreements	$	1,869,186	$	290,501	$	2,159,687