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Off-Balance Sheet Arrangements, Commitments and Contingencies
12 Months Ended
Dec. 31, 2023
Off Balance Sheet Arrangements Commitments And Contingencies [Abstract]  
Off-Balance Sheet Arrangements, Commitments and Contingencies

14. OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES

The Company’s contractual obligations and other commitments to make future payments (other than deposit obligations and securities sold under repurchase agreements) as of December 31, 2023 are summarized below.

 

Contractual Obligations

 

The Company’s future cash payments associated with its contractual obligations pursuant to its Federal Reserve Board’s BTFP as of December 31, 2023 is summarized below. The future interest payments were calculated using the current rate in effect at December 31, 2023. Payments under the BTFP include interest of $173.9 million that will be due over the future periods. These payments do not include prepayment options that may be available to the Company.

 

 

 

1 year or less

 

 

More than 1 year but less than 3 years

 

 

3 years or more but less than 5 years

 

 

5 years or more

 

 

Total

 

 

 

(Dollars in thousands)

 

Bank Term Funding Program

 

$

3,898,880

 

 

$

 

 

$

 

 

$

 

 

$

3,898,880

 

 

Off-Balance Sheet Items

In the normal course of business, the Company enters into various transactions that, in accordance with GAAP, are not included in its consolidated balance sheets. The Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

The Company’s commitments associated with outstanding standby letters of credit, unused capacity on Warehouse Purchase Program loans and commitments to extend credit expiring by period as of December 31, 2023 are summarized below. Since commitments associated with letters of credit, unused capacity of Warehouse Purchase Program loans and commitments to extend credit may expire unused, the amounts shown may not necessarily reflect the actual future cash funding requirements.

 

 

1 year or less

 

 

More than 1 year but less than 3 years

 

 

3 years or more but less than 5 years

 

 

5 years or more

 

 

Total

 

 

 

(Dollars in thousands)

 

Standby letters of credit

 

$

61,508

 

 

$

17,201

 

 

$

1,020

 

 

$

26

 

 

$

79,755

 

Unused capacity on Warehouse Purchase Program loans

 

 

1,119,755

 

 

 

 

 

 

 

 

 

 

 

 

1,119,755

 

Commitments to extend credit

 

 

1,478,536

 

 

 

1,077,574

 

 

 

239,782

 

 

 

1,800,294

 

 

 

4,596,186

 

Total

 

$

2,659,799

 

 

$

1,094,775

 

 

$

240,802

 

 

$

1,800,320

 

 

$

5,795,696

 

Standby Letters of Credit. Standby letters of credit are written conditional commitments issued by the Company to guarantee the payment by or performance of a customer to a third party. If the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, the Company would be entitled to seek recovery from the customer. The Company’s policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements.

 

Unused Capacity on Warehouse Purchase Program Loans. For Warehouse Purchase Program loans, the Company has established maximum purchase facility amounts, but reserves the right, at any time, to refuse to buy any mortgage loans offered for sale by each customer, for any reason.

Commitments to Extend Credit. The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of the Company’s commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. The Company minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures. Management assesses the credit risk associated with certain commitments to extend credit in determining the level of the allowance for credit losses.

At December 31, 2023, $381.5 million of commitments to extend credit and standby letters of credit have fixed rates ranging from 0% to 21.0%.

The Company evaluates customer creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures. The Company records an allowance for credit losses on off-balance sheet credit exposure that is adjusted through a charge to provision for credit losses on the Company’s consolidated statement of income. At December 31, 2023 and 2022, this allowance, reported as a separate line item on the Company’s consolidated balance sheet, totaled $36.5 million and $29.9 million, respectively. The increase in the allowance was primarily due to the Merger.

Leases

The Company’s leases relate primarily to operating leases for office space and banking centers. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s leases have remaining lease terms of 1 to 15 years, which may include the option to extend the lease when it is reasonably certain for the Company to exercise that option. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental collateralized borrowing rate to determine the present value of lease payments. Short-term leases and leases with variable lease costs are immaterial and the Company has one sublease arrangement. Sublease income for the years ended December 31, 2023, 2022 and 2021 was $3.1 million, $3.2 million and $3.1 million, respectively. As of December 31, 2023, operating lease ROU assets and lease liabilities were approximately $36.8 million. ROU assets and lease liabilities were classified as other assets and other liabilities, respectively.

As of December 31, 2023, the weighted average remaining lease terms of the Company’s operating leases were 5.1 years. The weighted average discount rate used to determine the lease liabilities as of December 31, 2023 for the Company’s operating leases was 2.7%. Cash paid for the Company’s operating leases for the years ended December 31, 2023, 2022 and 2021 was $12.0 million, $10.9 million and $12.2 million, respectively. During the year ended December 31, 2023, the Company obtained $3.6 million in ROU assets in exchange for lease liabilities for eight operating leases, four of which, reflecting $2.7 million in ROU assets, were related to the Merger.

The Company’s future undiscounted cash payments associated with its operating leases as of December 31, 2023 are summarized below (dollars in thousands).

 

2024

 

$

10,312

 

2025

 

 

9,751

 

2026

 

 

8,607

 

2027

 

 

5,586

 

2028

 

 

2,606

 

Thereafter

 

 

6,257

 

Total undiscounted lease payments

 

$

43,119

 

It is expected that in the normal course of business, expiring leases will be renewed or replaced by leases on other property or equipment.

Rent expense under all operating lease obligations aggregated approximately $12.1 million, $10.9 million, and $11.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Litigation—The Company and the Bank are defendants, from time to time, in legal actions arising from transactions conducted in the ordinary course of business. After consultations with legal counsel, the Company and the Bank believe that the ultimate liability, if any, arising from such actions will not have a material adverse effect on their financial statements.