Fair Value

3 Months Ended

Mar. 31, 2025

Fair Value.

Fair Value

Note 14 — Fair Value

GAAP defines fair value and establishes a framework for measuring and disclosing fair value. Fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Available for sale and trading securities, derivative contracts, mortgage loans held for sale, SBA servicing rights, and mortgage servicing rights (“MSRs”) are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans, OREO, bank properties held for sale, and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

FASB ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1	Observable inputs such as quoted prices in active markets;
Level 2	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

A description of valuation methodologies used for assets recorded at fair value is disclosed in Note 23 — Fair Value of our Annual Report on Form 10-K for the year ended December 31, 2024.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis:

			Quoted Prices
			In Active		Significant
			Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
(Dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2025:
Assets
Derivative financial instruments	$	177,262	$	—	$	177,262	$	—
Mortgage loans held for sale		86,772		—		86,772		—
Trading securities		107,401		—		107,401		—
Securities available for sale:
U.S. Treasuries		18,293		—		18,293		—
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,447,116		—		1,447,116		—
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		2,347,134		—		2,347,134		—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		560,634		—		560,634		—
State and municipal obligations		910,649		—		910,649		—
Small Business Administration loan-backed securities		542,553		—		542,553		—
Corporate securities		26,990		—		26,990		—
Total securities available for sale		5,853,369		—		5,853,369		—
Mortgage servicing rights		87,742		—		—		87,742
SBA servicing asset		6,209		—		—		6,209
	$	6,318,755	$	—	$	6,224,804	$	93,951
Liabilities
Derivative financial instruments	$	698,933	$	—	$	698,933	$	—
December 31, 2024:
Assets
Derivative financial instruments	$	161,490	$	—	$	161,490	$	—
Mortgage loans held for sale		98,115		—		98,115		—
Trading securities		102,932		—		102,932		—
Securities available for sale:
U.S. Treasuries		10,656		—		10,656		—
U.S. Government agencies		150,418		—		150,418		—
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,377,525		—		1,377,525		—
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		459,095		—		459,095		—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,040,555		—		1,040,555		—
State and municipal obligations		945,723		—		945,723		—
Small Business Administration loan-backed securities		310,112		—		310,112		—
Corporate securities		26,509		—		26,509		—
Total securities available for sale		4,320,593		—		4,320,593		—
Mortgage servicing rights		89,795		—		—		89,795
SBA servicing asset		6,028		—		—		6,028
	$	4,778,953	$	—	$	4,683,130	$	95,823
Liabilities
Derivative financial instruments	$	879,855	$	—	$	879,855	$	—

Fair Value Option

The Company has elected the fair value option for mortgage loans held for sale primarily to ease the operational burden required to maintain hedge accounting for these loans. The Company also has opted for the fair value option for the SBA servicing asset, as it is the industry-preferred method for valuing such assets.

The following table summarizes the difference between the fair value and the unpaid principal balance of mortgage loans held for sale and the changes in fair value of these loans:

	March 31,		December 31,
(Dollars in thousands)	2025		2024
Fair value	$	86,772	$	98,115
Unpaid principal balance		83,826		95,612
Fair value less aggregated unpaid principal balance	$	2,946	$	2,503

Changes in Level 1, 2 and 3 Fair Value Measurements

When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources), the gains and losses below include changes in fair value due in part to observable factors that are part of the valuation methodology.

There were no changes in hierarchy classifications of Level 3 assets or liabilities for the three months ended March 31, 2025. A reconciliation of the beginning and ending balances of the MSRs recorded at fair value on a recurring basis for the three months ended March 31, 2025 is as follows. The changes in fair value of the MSRs are recorded in Mortgage Banking Income on the Consolidated Statements of Income.

(Dollars in thousands)	MSRs
Fair value, January 1, 2025	$	89,795
Servicing assets that resulted from transfers of financial assets		2,056
Changes in fair value due to valuation inputs or assumptions		(3,081)
Changes in fair value due to decay		(1,028)
Fair value, March 31, 2025	$	87,742

A reconciliation of the beginning and ending balances of the SBA servicing asset, a Level 3 asset recorded at fair value on a recurring basis for the three months ended March 31, 2025 is as follows. The changes in fair value of the SBA servicing asset are recorded in in SBA Income on the Consolidated Statements of Income.

(Dollars in thousands)	SBA Servicing Asset
Fair value, January 1, 2025	$	6,028
Servicing assets that resulted from transfers of financial assets		420
Changes in fair value due to decay		(301)
Changes in fair value due to valuation inputs or assumptions		62
Fair value, March 31, 2025	$	6,209

There were no unrealized losses included in accumulated other comprehensive income related to Level 3 financial assets and liabilities at March 31, 2025.

See Note 19 — Mortgage Loan Servicing, Obligation, and Loans Held for Sale for information about recurring Level 3 fair value measurements of mortgage servicing rights.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis:

			Quoted Prices
			In Active		Significant
			Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
(Dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2025:
OREO	$	7,469	$	—	$	—	$	7,469
Bank properties held for sale		74,881		—		—		74,881
Individually evaluated loans		534,207		—		—		534,207
December 31, 2024:
OREO	$	2,154	$	—	$	—	$	2,154
Bank properties held for sale		3,268		—		—		3,268
Individually evaluated loans		71,112		—		—		71,112

For an individually evaluated loan, the fair value of collateral is measured based on appraisal or third-party valuation when the loan is placed on nonaccrual. For OREO and bank properties held for sale, the fair value is initially recorded based on external appraisals at the time of transfer. These assets recorded at fair value on a nonrecurring basis are updated on at least an annual basis.

Quantitative Information about Level 3 Fair Value Measurement

			Weighted Average Discount
			March 31,		December 31,
	Valuation Technique	Unobservable Input	2025		2024
Nonrecurring measurements:
Individually evaluated loans	Discounted appraisals and discounted cash flows	Collateral discounts	13	%	28	%
OREO and Bank properties held for sale	Discounted appraisals	Collateral discounts and estimated costs to sell	5	%	10	%

Fair Value of Financial Instruments

We used the following methods and assumptions in estimating our fair value disclosures for financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those models are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The use of different methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented in the table below are based on pertinent information available to management as of March 31, 2025, and December 31, 2024. Such amounts have not been revalued for purposes of these consolidated financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

Methods and assumptions used to estimate the fair value of each class of financial instruments are disclosed in Note 23 — Fair Value of our Annual Report on Form 10-K for the year ended December 31, 2024.

The estimated fair value, and related carrying amount, of our financial instruments are as follows:

	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
March 31, 2025
Financial assets:
Cash and cash equivalents	$	3,299,690	$	3,299,690	$	3,299,690	$	—	$	—
Trading securities		107,401		107,401		—		107,401		—
Investment securities		8,395,044		8,019,537		280,119		7,673,842		65,576
Loans held for sale		357,918		357,918		—		357,918		—
Loans, net of allowance for credit losses		46,143,042		45,562,297		—		—		45,562,297
Accrued interest receivable		227,921		227,921		—		33,900		194,021
Mortgage servicing rights		87,742		87,742		—		—		87,742
SBA servicing asset		6,209		6,209		—		—		6,209
Interest rate swap – non-designated hedge		175,155		175,155		—		175,155		—
Other derivative financial instruments (mortgage banking related)		2,107		2,107		—		2,107		—
Financial liabilities:
Deposits
Noninterest-bearing		13,757,255		13,757,255		—		13,757,255		—
Interest-bearing other than time deposits		32,422,118		32,422,118		—		32,422,118		—
Time deposits		7,158,242		7,133,462		—		7,133,462		—
Federal funds purchased and securities sold under agreements to repurchase		679,337		679,337		—		679,337		—
Corporate and subordinated debentures		752,798		756,080		—		756,080		—
Other borrowings		—		—		—		—		—
Accrued interest payable		39,694		39,694		—		39,694		—
Interest rate swap – non-designated hedge		698,392		698,392		—		698,392		—
Other derivative financial instruments (mortgage banking related)		541		541		—		541		—
December 31, 2024
Financial assets:
Cash and cash equivalents	$	1,392,067	$	1,392,067	$	1,392,067	$	—	$	—
Trading securities		102,932		102,932		—		102,932		—
Investment securities		6,798,876		6,378,734		187,266		6,155,120		36,348
Loans held for sale		279,426		281,662		—		281,662		—
Loans, net of allowance for credit losses		33,437,647		32,448,618		—		—		32,448,618
Accrued interest receivable		163,402		163,402		—		25,035		138,367
Mortgage servicing rights		89,795		89,795		—		—		89,795
SBA servicing asset		6,028		6,028		—		—		6,028
Interest rate swap – non-designated hedge		160,407		160,407		—		160,407		—
Other derivative financial instruments (mortgage banking related)		1,083		1,083		—		1,083		—
Financial liabilities:
Deposits
Noninterest-bearing		10,192,117		10,192,117		—		10,192,117		—
Interest-bearing other than time deposits		23,703,027		23,703,027		—		23,703,027		—
Time deposits		4,165,722		4,145,687		—		4,145,687		—
Federal funds purchased and securities sold under agreements to repurchase		514,912		514,912		—		514,912		—
Corporate and subordinated debentures		391,534		377,616		—		377,616		—
Accrued interest payable		40,739		40,739		—		40,739		—
Interest rate swap – non-designated hedge		878,046		878,046		—		878,046		—
Other derivative financial instruments (mortgage banking related)		1,809		1,809		—		1,809		—