Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

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 September 30, 2021, and December 31, 2020:

	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		Total
September 30, 2021
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	751	$	144,113	$	—	$	144,864
Debt Securities Issued by States and Political Subdivisions		—		21,068		—		21,068
Debt Securities Issued by U.S. Government-Sponsored Enterprises		—		1,555		—		1,555
Debt Securities Issued by Corporations		—		387,874		—		387,874
Mortgage-Backed Securities:
Residential - Government Agencies		—		1,417,183		—		1,417,183
Residential - U.S. Government-Sponsored Enterprises		—		2,200,052		—		2,200,052
Commercial - Government Agencies		—		180,924		—		180,924
Total Mortgage-Backed Securities		—		3,798,159		—		3,798,159
Total Investment Securities Available-for-Sale		751		4,352,769		—		4,353,520
Loans Held for Sale		—		21,965		—		21,965
Mortgage Servicing Rights		—		—		826		826
Other Assets		55,167		—		—		55,167
Derivatives ¹		—		288		48,433		48,721
Total Assets Measured at Fair Value on a Recurring Basis as of September 30, 2021	$	55,918	$	4,375,022	$	49,259	$	4,480,199
Liabilities:
Derivatives ¹	$	—	$	720	$	17,324	$	18,044
Total Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2021	$	—	$	720	$	17,324	$	18,044
December 31, 2020
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	921	$	173,324	$	—	$	174,245
Debt Securities Issued by States and Political Subdivisions		—		24,840		—		24,840
Debt Securities Issued by U.S. Government-Sponsored Enterprises		—		1,062		—		1,062
Debt Securities Issued by Corporations		—		224,605		—		224,605
Mortgage-Backed Securities:
Residential - Government Agencies		—		1,594,815		—		1,594,815
Residential - U.S. Government-Sponsored Enterprises		—		1,518,283		—		1,518,283
Commercial - Government Agencies		—		253,839		—		253,839
Total Mortgage-Backed Securities		—		3,366,937		—		3,366,937
Total Investment Securities Available-for-Sale		921		3,790,768		—		3,791,689
Loans Held for Sale		—		82,565		—		82,565
Mortgage Servicing Rights		—		—		958		958
Other Assets		53,410		—		—		53,410
Derivatives ¹		—		878		95,289		96,167
Total Assets Measured at Fair Value on a Recurring Basis as of December 31, 2020	$	54,331	$	3,874,211	$	96,247	$	4,024,789
Liabilities:
Derivatives ¹	$	—	$	752	$	17,409	$	18,161
Total Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2020	$	—	$	752	$	17,409	$	18,161

¹	The fair value of each class of derivatives is shown in Note 11 Derivative Financial Instruments.

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

For the three and nine months ended September 30, 2021, and September 30, 2020, 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
Three Months Ended September 30, 2021
Balance as of July 1, 2021	$	875		$	37,957
Realized and Unrealized Net Gains (Losses):
Included in Net Income		(49	)		2,095
Transfers to Loans Held for Sale		—			(3,068	)
Variation Margin Payments		—			(5,875	)
Balance as of September 30, 2021	$	826		$	31,109
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2021	$	—		$	31,109

Three Months Ended September 30, 2020
Balance as of July 1, 2020	$	1,068		$	88,995
Realized and Unrealized Net Gains (Losses):
Included in Net Income		(50	)		4,909
Transfers to Loans Held for Sale		—			(4,242	)
Variation Margin Payments		—			(1,840	)
Balance as of September 30, 2020	$	1,018		$	87,822
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2020	$	—		$	87,822

Nine Months Ended September 30, 2021
Balance as of January 1, 2021	$	958			77,880
Realized and Unrealized Net Gains (Losses):
Included in Net Income		(132	)		7,008
Transfers to Loans Held for Sale		—			(10,652	)
Variation Margin Payments		—			(43,127	)
Balance as of September 30, 2021	$	826			31,109
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2021	$	—		$	31,109

Nine Months Ended September 30, 2020
Balance as of January 1, 2020	$	1,126		$	22,573
Realized and Unrealized Net Gains (Losses):
Included in Net Income		(108	)		15,372
Transfers to Loans Held for Sale		—			(13,521	)
Variation Margin Payments		—			63,398
Balance as of September 30, 2020	$	1,018		$	87,822
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2020	$	—		$	87,822

¹	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.

Summary of the Significant Unobservable Inputs

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of September 30, 2021, and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:


(dollars in thousands)	Valuation Technique	Description	Range						Weighted Average¹			Fair Value
September 30, 2021
Mortgage Servicing Rights	Discounted Cash Flow	Constant Prepayment Rate		8.13	%	-	14.43	%		11.50	%	$	22,099
		Discount Rate		5.65	%	-	6.74	%		6.67	%	$	—
Net Derivative Assets and Liabilities:
Interest Rate Lock Commitments	Pricing Model	Closing Ratio		84.10	%	-	100.00	%		92.84	%	$	1,222
Interest Rate Swap Agreements	Discounted Cash Flow	Credit Factor		0.00	%	-	0.49	%		0.14	%	$	29,887

December 31, 2020
Mortgage Servicing Rights	Discounted Cash Flow	Constant Prepayment Rate		8.71	%	-	15.89	%		14.42	%	$	19,652
		Discount Rate		5.69	%	-	6.28	%		5.81	%	$	—
Net Derivative Assets and Liabilities:
Interest Rate Lock Commitments	Pricing Model	Closing Ratio		84.10	%	-	99.00	%		90.76	%	$	4,947
Interest Rate Swap Agreements	Discounted Cash Flow	Credit Factor		0.00	%	-	0.49	%		0.29	%	$	72,933

¹	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.

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 September 30, 2021, and December 31, 2020.

(dollars in thousands)	Fair Value Hierarchy	Net Carrying Amount		Valuation Allowance
September 30, 2021
Mortgage Servicing Rights - amortization method	Level 3	$	21,273	$	(2,107	)

December 31, 2020
Mortgage Servicing Rights - amortization method	Level 3	$	18,694	$	(3,892	)

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 September 30, 2021, and December 31, 2020.

(dollars in thousands)	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal
September 30, 2021
Loans Held for Sale	$	21,965	$	21,376	$	589

December 31, 2020
Loans Held for Sale	$	82,565	$	78,577	$	3,988

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 September 30, 2021, and December 31, 2020. 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 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
	Carrying				Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2021
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	4,899,880	$	4,895,763	$	131,558	$	4,764,205	$	—
Loans ¹		11,718,951		11,962,539		—		—		11,962,539
Financial Instruments - Liabilities
Time Deposits		1,072,915		1,074,210		—		1,074,210		—
Securities Sold Under Agreements to Repurchase		450,490		477,228		—		477,228		—
December 31, 2020
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	3,262,727	$	3,348,693	$	7,500	$	3,341,193	$	—
Loans ¹		11,536,011		12,019,151		—		—		12,019,151
Financial Instruments - Liabilities
Time Deposits		1,662,063		1,667,774		—		1,667,774		—
Securities Sold Under Agreements to Repurchase		600,590		649,039		—		649,039		—
Other Debt ²		50,000		51,546		—		51,546		—

¹	Carrying amount is net of unearned income and the Allowance.

²	Excludes finance lease obligations.