Fair Value Measurements

9 Months Ended

Sep. 30, 2023

The Company uses fair value measurements to record fair value adjustments to certain financial and nonfinancial assets and liabilities and to determine fair value disclosures. Various financial instruments such as available for sale debt securities, equity securities, trading debt securities, certain investments relating to private equity activities, and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets and liabilities on a nonrecurring basis, such as mortgage servicing rights and certain other investment securities. These nonrecurring fair value adjustments typically involve lower of cost or fair value accounting or write-downs of individual assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value. For accounting disclosure purposes, a three-level valuation hierarchy of fair value measurements has been established. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

•Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and inputs that are observable for the assets or liabilities, either directly or indirectly (such as interest rates, yield curves, and prepayment speeds).

•Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. These may be internally developed, using the Company’s best information and assumptions that a market participant would consider.

The valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis are described in the Fair Value Measurements note in the Company's 2022 Annual Report on Form 10-K. There have been no significant changes in these methodologies since then.

Instruments Measured at Fair Value on a Recurring Basis

The table below presents the September 30, 2023 and December 31, 2022 carrying values of assets and liabilities measured at fair value on a recurring basis. There were no transfers among levels during the first nine months of 2023 or the year ended December 31, 2022.


			Fair Value Measurements Using
(In thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2023
Assets:
Residential mortgage loans held for sale	$	366	$	—	$	366	$	—
Available for sale debt securities:
U.S. government and federal agency obligations	947,976		947,976		—		—
Government-sponsored enterprise obligations	40,593		—		40,593		—
State and municipal obligations	1,178,414		—		1,177,476		938
Agency mortgage-backed securities	3,792,567		—		3,792,567		—
Non-agency mortgage-backed securities	1,137,448		—		1,137,448		—
Asset-backed securities	2,313,545		—		2,313,545		—
Other debt securities	450,285		—		450,285		—
Trading debt securities	35,564		—		35,564		—
Equity securities	5,453		5,453		—		—
Private equity investments	165,322		—		—		165,322
Derivatives *	112,182		—		112,136		46
Assets held in trust for deferred compensation plan	18,859		18,859		—		—
Total assets	10,198,574		972,288		9,059,980		166,306
Liabilities:
Derivatives *	58,718		—		58,674		44
Liabilities held in trust for deferred compensation plan	18,859		18,859		—		—
Total liabilities	$	77,577	$	18,859	$	58,674	$	44
December 31, 2022
Assets:
Residential mortgage loans held for sale	$	—	$	—	$	—	$	—
Available for sale debt securities:
U.S. government and federal agency obligations	1,035,406		1,035,406		—		—
Government-sponsored enterprise obligations	43,108		—		43,108		—
State and municipal obligations	1,767,109		—		1,765,268		1,841
Agency mortgage-backed securities	4,308,427		—		4,308,427		—
Non-agency mortgage-backed securities	1,211,607		—		1,211,607		—
Asset-backed securities	3,397,801		—		3,397,801		—
Other debt securities	474,858		—		474,858		—
Trading debt securities	43,523		—		43,523		—
Equity securities	6,210		6,210		—		—
Private equity investments	178,127		—		—		178,127
Derivatives *	60,492		—		60,458		34
Assets held in trust for deferred compensation plan	17,856		17,856		—		—
Total assets	12,544,524		1,059,472		11,305,050		180,002
Liabilities:
Derivatives *	54,984		—		54,865		119
Liabilities held in trust for deferred compensation plan	17,856		17,856		—		—
Total liabilities	$	72,840	$	17,856	$	54,865	$	119

* The fair value of each class of derivative is shown in Note 11.

The changes in the Company's significant Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	State and Municipal Obligations		Private Equity Investments		Total
For the three months ended September 30, 2023
Balance June 30, 2023	$	920	$	172,732	$	173,652
Total gains or losses (realized/unrealized):
Included in earnings	—		5,605		5,605
Included in other comprehensive income *	18		—		18



Sale/pay down of private equity investments	—		(13,342)		(13,342)
Capitalized interest/dividends	—		327		327


Balance September 30, 2023	$	938	$	165,322	$	166,260
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2023	$	—	$	5,605	$	5,605
*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2023	$	17	$	—	$	17
For the nine months ended September 30, 2023
Balance January 1, 2023	$	1,841	$	178,127	$	179,968
Total gains or losses (realized/unrealized):
Included in earnings	—		16,946		16,946
Included in other comprehensive income *	49		—		49
Investment securities called	(1,000)		—		(1,000)
Discount accretion	48		—		48
Purchases of private equity investments	—		10,756		10,756
Sale/pay down of private equity investments	—		(40,834)		(40,834)
Capitalized interest/dividends	—		327		327


Balance September 30, 2023	$	938	$	165,322	$	166,260
Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2023	$	—	$	17,446	$	17,446
*Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2023	$	27	$	—	$	27


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	State and Municipal Obligations		Private Equity Investments		Total
For the three months ended September 30, 2022
Balance June 30, 2022	$	1,816	$	161,771	$	163,587
Total gains or losses (realized/unrealized):
Included in earnings	—		14,050		14,050
Included in other comprehensive income *	40		—		40

Discount accretion	2		—		2
Purchases of private equity investments	—		899		899
Sale/pay down of private equity investments	—		(423)		(423)
Capitalized interest/dividends	—		44		44


Balance September 30, 2022	$	1,858	$	176,341	$	178,199
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022	$	—	$	14,050	$	14,050
*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022	$	40	$	—	$	40
For the nine months ended September 30, 2022
Balance January 1, 2022	$	1,984	$	147,406	$	149,390
Total gains or losses (realized/unrealized):
Included in earnings	—		37,133		37,133
Included in other comprehensive income *	(130)		—		(130)

Discount accretion	4		—		4
Purchases of private equity investments	—		2,021		2,021
Sale/pay down of private equity investments	—		(10,263)		(10,263)
Capitalized interest/dividends	—		44		44


Balance September 30, 2022	$	1,858	$	176,341	$	178,199
Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022	$	—	$	37,083	$	37,083
*Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022	$	(130)	$	—	$	(130)

* Included in "net unrealized gains (losses) on available for sale debt securities" in the consolidated statements of comprehensive income.

Gains and losses included in earnings for the Company's significant Level 3 assets and liabilities in the previous table are reported in the following line items in the consolidated statements of income:


(In thousands)	Investment Securities Gains (Losses), Net
For the three months ended September 30, 2023
Total gains or losses included in earnings	$	5,605
Change in unrealized gains or losses relating to assets still held at September 30, 2023	$	5,605
For the nine months ended September 30, 2023
Total gains or losses included in earnings	$	16,946
Change in unrealized gains or losses relating to assets still held at September 30, 2023	$	17,446
For the three months ended September 30, 2022
Total gains or losses included in earnings	$	14,050
Change in unrealized gains or losses relating to assets still held at September 30, 2022	$	14,050
For the nine months ended September 30, 2022
Total gains or losses included in earnings	$	37,133
Change in unrealized gains or losses relating to assets still held at September 30, 2022	$	37,083

Level 3 Inputs

The Company's significant Level 3 measurements at September 30, 2023, which employ unobservable inputs that are readily quantifiable, pertain to investments in portfolio concerns held by the Company's private equity subsidiaries. Information about these inputs is presented in the table below.

Quantitative Information about Level 3 Fair Value Measurements

Weighted

Valuation Technique

Unobservable Input

Range

Average*

Private equity investments

Market comparable companies

EBITDA multiple

4.0

6.0

5.1

* Unobservable inputs were weighted by the relative fair value of the instruments.

Instruments Measured at Fair Value on a Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the first nine months of 2023 and 2022, and still held as of September 30, 2023 and 2022, the following table provides the adjustments to fair value recognized during the respective periods, the level of valuation inputs used to determine each adjustment, and the carrying value of the related individual assets or portfolios at September 30, 2023 and 2022.


			Fair Value Measurements Using
(In thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Nine Months Ended September 30
September 30, 2023
Collateral dependent loans	$	4,029	$	—	$	—	$	4,029	$	(2,059)



Long-lived assets	1,894		—		—		1,894		(164)

September 30, 2022
Collateral dependent loans	$	200	$	—	$	—	$	200	$	(394)
Mortgage servicing rights	11,228		—		—		11,228		304

Long- lived assets	480		—		—		480		(965)