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Fair Value of Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2023

Balances of Assets and Liabilities Measured at Fair Value on Recurring Basis

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2023, and December 31, 2022:


(dollars in thousands)	Quoted Prices In Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
December 31, 2023
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	146,214	$	66,359	$	—	$	212,573
Debt Securities Issued by States and Political Subdivisions		—		63,806		—		63,806
Debt Securities Issued by U.S. Government-Sponsored Enterprises		—		1,476		—		1,476
Debt Securities Issued by Corporations		—		657,701		—		657,701
Mortgage-Backed Securities:
Residential - Government Agencies		—		629,327		—		629,327
Residential - U.S. Government-Sponsored Enterprises		—		709,127		—		709,127
Commercial - Government Agencies or Sponsored Agencies		—		134,923		—		134,923
Total Mortgage-Backed Securities		—		1,473,377		—		1,473,377
Total Investment Securities Available-for-Sale		146,214		2,262,719		—		2,408,933
Loans Held for Sale		—		3,124		—		3,124
Mortgage Servicing Rights		—		—		678		678
Other Assets		13,448		—		—		13,448
Derivatives 1		—		94,921		148		95,069
Total Assets Measured at Fair Value on a Recurring Basis as of December 31, 2023	$	159,662	$	2,360,764	$	826	$	2,521,252
Liabilities:
Derivatives 1	$	—	$	143,857	$	—	$	143,857
Total Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2023	$	—	$	143,857	$	—	$	143,857
December 31, 2022
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	141,944	$	91,962	$	—	$	233,906
Debt Securities Issued by States and Political Subdivisions		—		95,265		—		95,265
Debt Securities Issued by U.S. Government-Sponsored Enterprises		—		48,628		—		48,628
Debt Securities Issued by Corporations		—		794,658		—		794,658
Mortgage-Backed Securities:
Residential - Government Agencies		—		732,828		—		732,828
Residential - U.S. Government-Sponsored Enterprises		—		793,871		—		793,871
Commercial - Government Agencies or Sponsored Agencies		—		145,667		—		145,667
Total Mortgage-Backed Securities		—		1,672,366		—		1,672,366
Total Investment Securities Available-for-Sale		141,944		2,702,879		—		2,844,823
Loans Held for Sale		—		1,035		—		1,035
Mortgage Servicing Rights		—		—		717		717
Other Assets		47,755		—		—		47,755
Derivatives 1		—		1,822		45,895		47,717
Total Assets Measured at Fair Value on a Recurring Basis as of December 31, 2022	$	189,699	$	2,705,736	$	46,612	$	2,942,047
Liabilities:
Derivatives 1	$	—	$	70	$	167,967	$	168,037
Total Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2022	$	—	$	70	$	167,967	$	168,037

The fair value of each class of derivatives is shown in Note 17 Derivative Financial Instruments.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis

For the years ended December 31, 2023, and December 31, 2022, the changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:


(dollars in thousands)	Mortgage Servicing Rights 1			Net Derivative Assets and Liabilities 2
Year Ended December 31, 2023
Balance as of January 1, 2023	$	717		$	(122,072	)
Transfer to Level 2 3		—			122,130
Realized and Unrealized Net Gains (Losses):
Included in Net Income		(39	)		828
Transfers to Loans Held for Sale		—			(738	)
Balance as of December 31, 2023	$	678		$	148
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of December 31, 2023	$	—		$	828

Year Ended December 31, 2022
Balance as of January 1, 2022	$	800		$	23,904
Realized and Unrealized Net Gains (Losses):
Included in Net Income		(83	)		(871	)
Transfers to Loans Held for Sale		—			(112	)
Variation Margin Payments		—			(144,993	)
Balance as of December 31, 2022	$	717		$	(122,072	)
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of December 31, 2022	$	—		$	(871	)

Realized and unrealized gains and losses related to mortgage servicing rights are reported as a component of mortgage banking income in the Company’s consolidated statements of income.

Realized and unrealized gains and losses related to interest rate lock commitments are reported as a component of mortgage banking income in the Company’s consolidated statements of income. Realized and unrealized gains and losses related to interest rate swap agreements are reported as a component of other noninterest income in the Company’s consolidated statements of income.

In 2023, the Company concluded that the impact of the credit factor adjustment, while still unobservable, is not significant to the fair value measurement of these instruments. As a result, the fair values of interest rate swaps are classified as a Level 2 measurement as of December 31, 2023.

Summary of the Significant Unobservable Inputs

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2023, and December 31, 2022, the significant unobservable inputs used in the fair value measurements were as follows:


			December 31, 2023												December 31, 2022
(dollars in thousands)	Valuation Technique	Description	Range							Weighted Average1			Fair Value		Range						Weighted Average1			Fair Value
Mortgage Servicing Rights	Discounted Cash Flow	Constant Prepayment Rate		2.98	%	-		21.18	%		4.06	%	$	26,851		2.81	%	-	10.63	%		4.02	%	$	28,040
		Discount Rate		7.65	%	-		10.79	%		9.48	%				8.70	%	-	10.40	%		9.93	%

Net Derivative Assets and Liabilities:
Interest Rate Lock Commitments	Pricing Model	Closing Ratio		83.50	%	-		99.00	%		85.53	%	$	148		84.10	%	-	99.00	%		92.86	%	$	58
Interest Rate Swap Agreements2	Discounted Cash Flow	Credit Factor	NA			-	NA			NA			NA			0.00	%	-	0.49	%		0.01	%	$	(122,129	)

Unobservable inputs for mortgage servicing rights and interest rate lock commitments were weighted by loan amount. Unobservable inputs for interest rate swap agreements were weighted by fair value.

In 2023, we concluded that the impact of the credit factor adjustment, while still unobservable, was not significant to the fair value measurement of these instruments as of December 31, 2023. As a result, the fair values of interest rate swaps were classified as a Level 2 measurement in 2023.

Schedule of Assets Measured at Fair Value on Nonrecurring Basis

The Company may be required periodically to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower-of-cost-or-fair value accounting or impairment write-downs of individual assets. The following table represents the assets measured at fair value on a nonrecurring basis as of December 31, 2023.


(dollars in thousands)	Fair Value Hierarchy	Net Carrying Amount		Valuation Allowance
December 31, 2023
Mortgage Servicing Rights - amortization method	Level 3	$	20,201	$	—

December 31, 2022
Mortgage Servicing Rights - amortization method	Level 3	$	21,902	$	—

Schedule of Difference between Aggregate Fair Value and Aggregate Unpaid Principal Balance

The following table reflects the difference between the aggregate fair value and the aggregate unpaid principal balance of the Company’s residential mortgage loans held for sale as of December 31, 2023, and December 31, 2022.


(dollars in thousands)	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal
December 31, 2023
Loans Held for Sale	$	3,124	$	3,051	$	73

December 31, 2022
Loans Held for Sale	$	1,035	$	1,016	$	19

Schedule of Carrying Amount, Fair Value, and Fair Value Hierarchy of Financial Instruments

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments not recorded at fair value on a recurring basis as of December 31, 2023, and December 31, 2022. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For non-marketable equity securities such as Federal Home Loan Bank of Des Moines and Federal Reserve Bank stock, the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government-supported institution or to another member institution. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.


					Fair Value Measurements
(dollars in thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2023
Financial Instruments – Assets
Investment Securities Held-to-Maturity	$	4,997,335	$	4,253,637	$	116,531	$	4,137,106	$	—
Loans		13,698,701		12,872,260		—		—		12,872,260

Financial Instruments – Liabilities
Time Deposits		3,057,302		3,043,258		—		3,043,258		—
Securities Sold Under Agreements to Repurchase		150,490		155,461		—		155,461		—
Other Debt 1		550,000		541,466		—		541,466		—

December 31, 2022
Financial Instruments – Assets
Investment Securities Held-to-Maturity	$	5,414,139	$	4,615,393	$	113,417	$	4,501,976	$	—
Loans		13,371,226		12,386,615		—		—		12,386,615

Financial Instruments – Liabilities
Time Deposits		1,705,737		1,679,777		—		1,679,777		—
Securities Sold Under Agreements to Repurchase		725,490		718,614		—		718,614		—
Other Debt 1		400,000		402,877		—		402,877		—

Excludes finance lease obligations.