Borrowed Funds

6 Months Ended

Jun. 30, 2024

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):

	June 30, 2024		December 31, 2023
Short-term debt:
Federal Home Loan Bank 5.51% and 5.04%, respectively	$	500,000	$	1,000,000
Federal Reserve Bank Term Funding Program 4.76% and 4.83%, respectively		800,000		800,000
Total short-term debt		1,300,000		1,800,000
Long-term debt:
Trust Preferred Securities:
Marquette Capital Trust I Subordinated Debentures 6.92%		18,760		18,607
Marquette Capital Trust II Subordinated Debentures 6.92%		19,274		19,132
Marquette Capital Trust III Subordinated Debentures 7.11%		7,572		7,517
Marquette Capital Trust IV Subordinated Debentures 7.20%		30,567		30,356
Subordinated notes 3.70%, net of issuance costs		199,456		199,232
Subordinated notes 6.25%, net issuance costs		108,616		108,403
Total long-term debt		384,245		383,247
Total borrowed funds	$	1,684,245	$	2,183,247

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 $76.2 million as of June 30, 2024. 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 $0.5 million as of June 30, 2024. 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 $1.4 million as of June 30, 2024. 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 $32.7 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 totaling $500.0 million outstanding at FHLB of Des Moines as of June 30, 2024. Additionally, in the first quarter of 2024, 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 expired in July 2024 and was subsequently renewed with an expiration date in October 2024. The Company’s borrowing capacity with the FHLB was $1.4 billion as of June 30, 2024.

The Company had an $800.0 million short-term borrowing outstanding with the Federal Reserve Bank's Bank Term Funding Program (BTFP) as of June 30, 2024. The Company’s remaining borrowing capacity with the BTFP

was $15.0 million and its remaining borrowing capacity at the Federal Reserve Discount Window was $11.3 billion as of June 30, 2024.

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 June 30, 2024 and December 31, 2023, in addition to the various types of marketable securities that have been pledged as collateral for these borrowings (in thousands):

	As of June 30, 2024
	Remaining Contractual Maturities of the Agreements
	2-29 Days		30-90 Days		Over 90 Days		Total
Repurchase agreements, secured by:
U.S. Treasury	$	182,760	$	—	$	36,229	$	218,989
U.S. Agencies		1,734,527		194,506		43,271		1,972,304
Total repurchase agreements	$	1,917,287	$	194,506	$	79,500	$	2,191,293

	As of December 31, 2023
	Remaining Contractual Maturities of the Agreements
	2-29 Days		30-90 Days		Over 90 Days		Total
Repurchase agreements, secured by:
U.S. Treasury	$	119,528	$	—	$	43,618	$	163,146
U.S. Agencies		1,711,014		186,289		45,382		1,942,685
Total repurchase agreements	$	1,830,542	$	186,289	$	89,000	$	2,105,831