Fair Value Measurements

9 Months Ended

Sep. 30, 2024

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 2023 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, 2024 and December 31, 2023 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 2024 or the year ended December 31, 2023.


			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, 2024
Assets:
Residential mortgage loans held for sale	$	1,605	$	—	$	1,605	$	—
Available for sale debt securities:
U.S. government and federal agency obligations	2,406,840		2,406,840		—		—
Government-sponsored enterprise obligations	45,499		—		45,499		—
State and municipal obligations	782,382		—		781,431		951
Agency mortgage-backed securities	3,673,971		—		3,673,971		—
Non-agency mortgage-backed securities	609,344		—		609,344		—
Asset-backed securities	1,444,597		—		1,444,597		—
Other debt securities	205,048		—		205,048		—
Trading debt securities	42,645		—		42,645		—
Equity securities	48,262		48,262		—		—
Private equity investments	170,973		—		—		170,973
Derivatives *	99,862		—		99,565		297
Assets held in trust for deferred compensation plan	21,989		21,989		—		—
Total assets	9,553,017		2,477,091		6,903,705		172,221
Liabilities:
Derivatives *	26,896		—		26,755		141
Liabilities held in trust for deferred compensation plan	21,989		21,989		—		—
Total liabilities	$	48,885	$	21,989	$	26,755	$	141
December 31, 2023
Assets:
Residential mortgage loans held for sale	$	1,585	$	—	$	1,585	$	—
Available for sale debt securities:
U.S. government and federal agency obligations	816,514		816,514		—		—
Government-sponsored enterprise obligations	43,962		—		43,962		—
State and municipal obligations	1,197,419		—		1,196,472		947
Agency mortgage-backed securities	3,901,346		—		3,901,346		—
Non-agency mortgage-backed securities	1,157,898		—		1,157,898		—
Asset-backed securities	2,107,485		—		2,107,485		—
Other debt securities	460,136		—		460,136		—
Trading debt securities	28,830		—		28,830		—
Equity securities	5,723		5,723		—		—
Private equity investments	176,667		—		—		176,667
Derivatives *	116,876		—		116,710		166
Assets held in trust for deferred compensation plan	20,538		20,538		—		—
Total assets	10,034,979		842,775		9,014,424		177,780
Liabilities:
Derivatives *	37,899		—		37,704		195
Liabilities held in trust for deferred compensation plan	20,538		20,538		—		—
Total liabilities	$	58,437	$	20,538	$	37,704	$	195

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

The changes in the Company's 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, 2024
Balance June 30, 2024	$	953	$	178,321	$	179,274
Total gains or losses (realized/unrealized):
Included in earnings	—		7,428		7,428
Included in other comprehensive income *	(2)		—		(2)


Purchases of private equity investments	—		375		375
Sale/pay down of private equity investments	—		(15,139)		(15,139)
Capitalized interest/dividends	—		(12)		(12)


Balance at September 30, 2024	$	951	$	170,973	$	171,924
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, 2024	$	—	$	7,428	$	7,428
*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, 2024	$	(2)	$	—	$	(2)
For the nine months ended September 30, 2024
Balance January 1, 2024	$	947	$	176,667	$	177,614
Total gains or losses (realized/unrealized):
Included in earnings	—		20,205		20,205
Included in other comprehensive income *	3		—		3

Discount accretion	1		—		1
Purchases of private equity investments	—		11,322		11,322
Sale/pay down of private equity investments	—		(37,103)		(37,103)
Capitalized interest/dividends	—		(118)		(118)


Balance at September 30, 2024	$	951	$	170,973	$	171,924
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, 2024	$	—	$	10,480	$	10,480
*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, 2024	$	3	$	—	$	3


	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 at 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 at 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 at 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

* 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 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, 2024
Total gains or losses included in earnings	$	7,428
Change in unrealized gains or losses relating to assets still held at September 30, 2024	$	7,428
For the nine months ended September 30, 2024
Total gains or losses included in earnings	$	20,205
Change in unrealized gains or losses relating to assets still held at September 30, 2024	$	10,480
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

Level 3 Inputs

The Company's Level 3 measurements at September 30, 2024, 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

3.8

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 2024 and 2023, and still held as of September 30, 2024 and 2023, 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, 2024 and 2023.


			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, 2024
Collateral dependent loans	$	14,872	$	—	$	—	$	14,872	$	(2,646)






September 30, 2023
Collateral dependent loans	$	4,029	$	—	$	—	$	4,029	$	(2,059)



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