| 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) | June 30, 2025: | | | | | | | | | | | | | Assets | | | | | | | | | | | | | Derivative financial instruments | | $ | 214,898 | | $ | — | | $ | 214,898 | | $ | — | Mortgage loans held for sale | | | 71,038 | | | — | | | 71,038 | | | — | Trading securities | | | 95,306 | | | — | | | 95,306 | | | — | Securities available for sale: | | | | | | | | | | | | | Residential mortgage-backed securities issued by U.S. government | | | | | | | | | | | | | agencies or sponsored enterprises | | | 1,523,879 | | | — | | | 1,523,879 | | | — | Residential collateralized mortgage-obligations issued by U.S. government | | | | | | | | | | | | | agencies or sponsored enterprises | | | 2,296,971 | | | — | | | 2,296,971 | | | — | Commercial mortgage-backed securities issued by U.S. government | | | | | | | | | | | | | agencies or sponsored enterprises | | | 581,492 | | | — | | | 581,492 | | | — | State and municipal obligations | | | 922,417 | | | — | | | 922,417 | | | — | Small Business Administration loan-backed securities | | | 576,514 | | | — | | | 576,514 | | | — | Corporate securities | | | 26,594 | | | — | | | 26,594 | | | — | Total securities available for sale | | | 5,927,867 | | | — | | | 5,927,867 | | | — | Mortgage servicing rights | | | 85,836 | | | — | | | — | | | 85,836 | SBA servicing asset | | | 5,801 | | | — | | | — | | | 5,801 | | | $ | 6,400,746 | | $ | — | | $ | 6,309,109 | | $ | 91,637 | Liabilities | | | | | | | | | | | | | Derivative financial instruments | | $ | 612,284 | | $ | — | | $ | 612,284 | | $ | — | | | | | | | | | | | | | | 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: | | | | | | | | | | June 30, | | December 31, | | (Dollars in thousands) | | 2025 | | 2024 | | Fair value | | $ | 71,038 | | $ | 98,115 | | Unpaid principal balance | | | 68,214 | | | 95,612 | | Fair value less aggregated unpaid principal balance | | $ | 2,824 | | $ | 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 six months ended June 30, 2025. A reconciliation of the beginning and ending balances of the MSRs recorded at fair value on a recurring basis for the six months ended June 30, 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 | | | 4,124 | | Changes in fair value due to valuation inputs or assumptions | | | (4,770) | | Changes in fair value due to decay | | | (3,313) | | Fair value, June 30, 2025 | | $ | 85,836 | |
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 period ending June 30, 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 | | | 889 | | Changes in fair value due to decay | | | (1,183) | | Changes in fair value due to valuation inputs or assumptions | | | 67 | | Fair value, June 30, 2025 | | $ | 5,801 | |
There were no unrealized losses included in accumulated other comprehensive income related to Level 3 financial assets and liabilities at June 30, 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) | | June 30, 2025: | | | | | | | | | | | | | | OREO | | $ | 25,570 | | $ | — | | $ | — | | $ | 25,570 | | Bank properties held for sale | | | 79,374 | | | — | | | — | | | 79,374 | | Individually evaluated loans | | | 403,727 | | | — | | | — | | | 403,727 | | 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 | | | | | | | June 30, | | December 31, | | | Valuation Technique | | Unobservable Input | | 2025 | | 2024 | Nonrecurring measurements: | | | | | | | | | | | Individually evaluated loans | | Discounted appraisals and discounted cash flows | | Collateral discounts | | 19 | % | | 28 | % | OREO and Bank properties held for sale | | Discounted appraisals | | Collateral discounts and estimated costs to sell | | 4 | % | | 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 June 30, 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 | | June 30, 2025 | | | | | | | | | | | | | | | | | Financial assets: | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | 3,464,106 | | $ | 3,464,106 | | $ | 3,464,106 | | $ | — | | $ | — | | Trading securities | | | 95,306 | | | 95,306 | | | — | | | 95,306 | | | — | | Investment securities | | | 8,431,345 | | | 8,067,102 | | | 274,869 | | | 7,709,615 | | | 82,618 | | Loans held for sale | | | 318,985 | | | 319,939 | | | — | | | 319,939 | | | — | | Loans, net of allowance for credit losses | | | 46,646,201 | | | 46,339,114 | | | — | | | — | | | 46,339,114 | | Accrued interest receivable | | | 227,556 | | | 227,556 | | | — | | | 34,054 | | | 193,502 | | Mortgage servicing rights | | | 85,836 | | | 85,836 | | | — | | | — | | | 85,836 | | SBA servicing asset | | | 5,801 | | | 5,801 | | | — | | | — | | | 5,801 | | Interest rate swap – non-designated hedge | | | 210,999 | | | 210,999 | | | — | | | 210,999 | | | — | | Other derivative financial instruments (mortgage banking related) | | | 3,899 | | | 3,899 | | | — | | | 3,899 | | | — | | Financial liabilities: | | | | | | | | | | | | | | | | | Deposits | | | | | | | | | | | | | | | | | Noninterest-bearing | | | 13,719,030 | | | 13,719,030 | | | — | | | 13,719,030 | | | — | | Interest-bearing other than time deposits | | | 32,269,471 | | | 32,269,471 | | | — | | | 32,269,471 | | | — | | Time deposits | | | 7,708,460 | | | 7,683,701 | | | — | | | 7,683,701 | | | — | | Federal funds purchased and securities sold under agreements to repurchase | | | 630,558 | | | 630,558 | | | — | | | 630,558 | | | — | | Corporate and subordinated debentures | | | 1,099,705 | | | 1,104,781 | | | — | | | 1,104,781 | | | — | | Other borrowings | | | — | | | — | | | — | | | — | | | — | | Accrued interest payable | | | 52,130 | | | 52,130 | | | — | | | 52,130 | | | — | | Interest rate swap – non-designated hedge | | | 611,310 | | | 611,310 | | | — | | | 611,310 | | | — | | Other derivative financial instruments (mortgage banking related) | | | 974 | | | 974 | | | — | | | 974 | | | — | | 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 | | | — | |
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