Other Assets

3 Months Ended

Mar. 31, 2025

Mortgage Servicing Rights [Abstract]

Other Assets

5. Other Assets

Bank-Owned Life Insurance

During 2025 and 2024, the Company entered into noncash exchanges of certain bank-owned life insurance (“BOLI”) policies in accordance with Internal Revenue Code (“IRC”) Section 1035. Cash surrender value of $0.1 million and $65.3 million were transferred into new policies during the three months ended March 31, 2025 and 2024, respectively. No gain or loss was recognized as part of these exchanges.

Mortgage Servicing Rights

Mortgage servicing activities include collecting principal, interest, tax and insurance payments from borrowers while accounting for and remitting payments to investors, taxing authorities and insurance companies. The Company also monitors delinquencies and administers foreclosure proceedings.

Mortgage loan servicing income is recorded in noninterest income as a part of other service charges and fees and amortization of the servicing assets is recorded in noninterest income as part of other income. The Company’s maximum potential exposure to repurchases is limited to the unpaid principal amount of residential real estate loans serviced for others, which were $1.2 billion and $1.3 billion as of March 31, 2025 and December 31, 2024, respectively. Servicing fees include contractually specified fees, late charges and ancillary fees and was $0.8 million for both three months ended March 31, 2025 and 2024.

Amortization of mortgage servicing rights (“MSRs”) were $0.2 million and $0.3 million for the three months ended March 31, 2025 and 2024, respectively. The estimated future amortization expenses for MSRs over the next five years are as follows:

	Estimated
(dollars in thousands)	Amortization
Under one year	$	717
One to two years		636
Two to three years		563
Three to four years		499
Four to five years		444

The details of the Company’s MSRs are presented below:

	March 31,		December 31,
(dollars in thousands)	2025		2024
Gross carrying amount	$	69,953	$	69,903
Less: accumulated amortization		65,027		64,825
Net carrying value	$	4,926	$	5,078

The following table presents changes in amortized MSRs for the three months ended March 31, 2025 and 2024:

	Three Months Ended March 31,
(dollars in thousands)	2025		2024
Balance at beginning of period	$	5,078	$	5,699
Originations		50		97
Amortization		(202)		(263)
Balance at end of period	$	4,926	$	5,533
Fair value of amortized MSRs at beginning of period	$	13,404	$	14,308
Fair value of amortized MSRs at end of period	$	13,357	$	14,071

MSRs are evaluated for impairment if events and circumstances indicate a possible impairment. No impairment of MSRs was recorded for the three months ended March 31, 2025 and 2024.

The quantitative assumptions used in determining the lower of cost or fair value of the Company’s MSRs as of March 31, 2025 and December 31, 2024 were as follows:

	March 31, 2025							December 31, 2024
						Weighted							Weighted
	Range					Average		Range					Average
Conditional prepayment rate	6.31	%	-	12.16	%	6.71	%	6.99	%	-	11.77	%	7.16	%
Life in years (of the MSR)	4.45		-	7.25		7.08		4.14		-	7.02		6.94
Weighted-average coupon rate	3.72	%	-	5.49	%	3.81	%	3.71	%	-	5.66	%	3.80	%
Discount rate	10.36	%	-	11.15	%	10.40	%	10.35	%	-	10.94	%	10.40	%

The sensitivities surrounding MSRs are expected to have an immaterial impact on fair value.

Low-Income Housing Tax Credit Investments

The Company has a limited partnership interest or is a member in a limited liability company (“LLC”) in several low-income housing partnerships. These partnerships or LLCs provide funds for the construction and operation of apartment complexes that provide affordable housing to that segment of the population with lower family income. If these developments successfully attract a specified percentage of residents falling in that lower income range, state and/or federal income tax credits are made available to the partners or members. The tax credits are generally recognized over 5 or 10 years. In order to continue receiving the tax credits each year over the life of the partnership or LLC, the low-income residency targets must be maintained.

The Company generally accounts for its interests in these low-income housing partnerships using the proportional amortization method. The Company had $269.0 million and $235.5 million in affordable housing and other tax credit investment partnership interests as of March 31, 2025 and December 31, 2024, respectively, included in other assets on the unaudited interim consolidated balance sheets. The amount of amortization of such investments reported in the provision for income taxes was $7.6 million and $7.7 million during the three months ended March 31, 2025 and 2024, respectively. The affordable housing tax credits and other benefits recognized were $9.6 million during both the three months ended March 31, 2025 and 2024, and were included in the provision for income taxes on the unaudited interim consolidated statements of income and net income on the unaudited interim consolidated statements of cash flows.

Unfunded commitments to fund these investments were $133.3 million and $98.7 million as of March 31, 2025 and December 31, 2024, respectively. These unfunded commitments are unconditional and legally binding and are recorded in other liabilities in the unaudited interim consolidated balance sheets.