v3.25.2
Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair value of financial instruments
FASB ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a framework for measuring the fair value of assets and liabilities according to a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that are derived from assumptions based on management’s estimate of assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances.
The hierarchy is broken down into the following three levels, based on the reliability of inputs:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs for assets or liabilities that are derived from assumptions based on management’s estimate of assumptions that market participants would use in pricing the assets or liabilities.
The Company records the fair values of financial assets and liabilities on a recurring and nonrecurring basis using the following methods and assumptions:
Investment securities
Investment securities are recorded at fair value on a recurring basis. Fair values for securities are based on quoted market prices, where available. If quoted prices are not available, fair values are based on quoted market prices of similar instruments or are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the pricing relationship or correlation among other benchmark quoted securities. Investment securities valued using quoted market prices of similar instruments or that are valued using matrix pricing are classified as Level 2.
Loans held for sale
Mortgage loans held for sale are carried at fair value determined using current secondary market prices for loans with similar characteristics, that is, using Level 2 inputs.
Derivatives
The fair value of the Company's interest rate swap agreements to facilitate customer transactions are based upon fair values provided from entities that engage in interest rate swap activity and is based upon projected future cash flows and interest rates. The fair value of interest rate lock commitments associated with the mortgage pipeline is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments, the difference between current levels of interest rates and the committed rates is also considered. The fair values of the Company's designated cash flow and fair value hedges are determined by calculating the difference between the discounted fixed rate cash flows and the discounted variable rate cash flows. The fair values of both the Company's hedges, including designated cash flow hedges and designated fair value hedges are based on pricing models that utilize observable market inputs. These financial instruments are classified as Level 2.
OREO
OREO is comprised of properties obtained in partial or total satisfaction of loan obligations and excess land and facilities held for sale. OREO acquired in settlement of indebtedness is recorded at the lower of the carrying amount of the loan or the fair value of the real estate less costs to sell. Fair value is determined on a nonrecurring basis based on appraisals by qualified licensed appraisers and is adjusted for management’s estimates of costs to sell and holding period discounts. OREO valuations are classified as Level 3.
Mortgage servicing rights
MSRs are carried at fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, servicing costs, and other factors. As such, MSRs are considered Level 3.
Collateral- dependent loans
Collateral-dependent loans are loans for which, based on current information and events, the Company has determined foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral and it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collateral-dependent loans are classified as Level 3.

The balances and levels of the assets and liabilities measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024 are presented in the following tables:
At June 30, 2025Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Recurring valuations:    
Financial assets:     
AFS debt securities:    
U.S. government agency securities$— $642,264 $— $642,264 
Mortgage-backed securities - residential— 541,343 — 541,343 
Mortgage-backed securities - commercial— 8,752 — 8,752 
Municipal securities— 144,228 — 144,228 
Corporate securities— 978 — 978 
Total securities$— $1,337,565 $— $1,337,565 
Loans held for sale, at fair value$— $123,235 $— $123,235 
Mortgage servicing rights— — 153,464 153,464 
Derivatives— 27,566 — 27,566 
Financial Liabilities:
Derivatives— 23,832 — 23,832 
At December 31, 2024Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Recurring valuations:    
Financial assets:     
AFS debt securities:    
U.S. government agency securities$— $563,007 $— $563,007 
Mortgage-backed securities - residential— 810,999 — 810,999 
Mortgage-backed securities - commercial— 14,857 — 14,857 
Municipal securities — 147,857 — 147,857 
U.S. Treasury securities— 299 — 299 
Corporate securities— 989 — 989 
Total securities$— $1,538,008 $— $1,538,008 
Loans held for sale, at fair value$— $95,403 $— $95,403 
Mortgage servicing rights— — 162,038 162,038 
Derivatives— 29,951 — 29,951 
Financial Liabilities:
Derivatives— 32,383 — 32,383 
The balances and levels of the assets measured at fair value on a nonrecurring basis as of June 30, 2025 and December 31, 2024 are presented in the following tables: 
At June 30, 2025Quoted prices
in active
markets for
identical assets
(liabilities
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Nonrecurring valuations:    
Financial assets:    
Other real estate owned$— $— $1,602 $1,602 
Collateral-dependent net loans held for
   investment:
Construction— — 16,908 16,908 
Residential real estate:
   Multifamily— — 8,661 8,661 
Total collateral-dependent loans$— $— $25,569 $25,569 
 
At December 31, 2024Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2)		Significant unobservable
inputs
(level 3)		Total
Nonrecurring valuations:    
Financial assets:    
Other real estate owned$— $— $2,873 $2,873 
Collateral-dependent net loans held for
    investment:
Commercial and industrial$— $— $694 $694 
Construction— — 20,818 20,818 
Residential real estate:
   Multifamily— — 9,000 9,000 
Total collateral-dependent loans$— $— $30,512 $30,512 
The significant unobservable inputs (Level 3) used in the valuation and changes in fair value associated with the Company’s mortgage servicing rights for the three and six months ended June 30, 2025 and 2024 are detailed at Note 6, “Mortgage servicing rights.”
The following tables present information as of June 30, 2025 and December 31, 2024 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:
June 30, 2025
Financial instrumentFair ValueValuation techniqueSignificant 
unobservable inputs		Range of
inputs
Collateral-dependent net loans
   held for investment		$25,569 Valuation of collateralDiscount for comparable sales
10%-42%
Other real estate owned$1,602 Appraised value of property less costs to sellDiscount for costs to sell
0%-10%
December 31, 2024
Financial instrumentFair ValueValuation techniqueSignificant 
unobservable inputs		Range of
inputs
Collateral-dependent net loans
    held for investment		$30,512 Valuation of collateralDiscount for comparable sales
10%-40%
Other real estate owned$2,873 Appraised value of property less costs to sellDiscount for costs to sell
0%-10%
Fair value for collateral-dependent loans is determined based on the estimated value of the collateral securing the loans, less estimated selling costs and closing costs related to liquidation of the collateral. For loans secured by real estate, the fair value is determined based on appraisals performed by qualified appraisers and reviewed by qualified personnel. For non-real estate collateral, fair value is determined based on various sources, including third party asset valuation and internally determined values based on cost adjusted or other judgmentally determined factors. Collateral-dependent loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on changes in market conditions from the time of valuation and management’s knowledge of the borrower and borrower’s business. As of June 30, 2025 and December 31, 2024, total amortized cost of collateral-dependent loans measured on a nonrecurring basis amounted to $27,059 and $34,712, respectively. The allowance for credit losses is calculated as the amount for which the loan’s amortized cost basis exceeds fair value.
Other real estate owned acquired in settlement of indebtedness is recorded at fair value of the real estate less estimated costs to sell. Subsequently, it may be necessary to record nonrecurring fair value adjustments for declines in fair value. Any write-downs based on the asset’s fair value at the date of foreclosure are charged to the allowance for credit losses.
Appraisals for both collateral-dependent loans and other real estate owned are performed by certified appraisers whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the lending administrative department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry wide statistics. Collateral-dependent loans that are dependent on recovery through sale of equipment, such as farm equipment, automobiles and aircrafts are generally valued based on public source pricing or subscription services while more complex assets are valued through leveraging brokers who have expertise in the collateral involved.
Fair value option
The following table summarizes the Company’s loans held for sale as of the dates presented:
June 30,December 31,
20252024
Loans held for sale under a fair value option:
  Mortgage loans held for sale123,235 95,403 
Loans held for sale not accounted for under a fair value option:
  Mortgage loans held for sale - guaranteed GNMA repurchase option20,977 31,357 
               Total loans held for sale$144,212 $126,760 
Mortgage loans held for sale
Net losses of $372 and net gains of $1,828 resulting from fair value changes of mortgage loans held for sale were recorded in income during the three and six months ended June 30, 2025, respectively, compared to net gains of $353 and $556 during the three and six months ended June 30, 2024, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans held for sale. The net change in fair value of these loans held for sale and derivatives resulted in a net loss of $876 and a net gain of $1,940 for the three and six months ended June 30, 2025, respectively, compared to a net loss of $4 and a net gain of $1,817 during the three and six months ended June 30, 2024, respectively. The change in fair value of mortgage loans held for sale and the related derivative instruments are recorded in mortgage banking income in the consolidated statements of income. Election of the fair value option allows the Company to reduce the accounting volatility that would otherwise result from the asymmetry created by accounting for the financial instruments at the lower of cost or fair value and the derivatives at fair value.
The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these mortgage loans held for sale, valuation adjustments attributable to instrument-specific credit risk is nominal.
The following table summarizes the differences between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of June 30, 2025 and December 31, 2024: 
June 30,December 31,
20252024
Aggregate fair value$123,235 $95,403 
Aggregate unpaid principal balance119,922 93,918 
     Difference$3,313 $1,485 
The following table contains the estimated fair values and the related carrying values of the Company’s financial instruments. Non-financial instruments are excluded from the table below.
 
 Fair Value
June 30, 2025Carrying amount Level 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$1,165,729 $1,165,729 $— $— $1,165,729 
Investment securities1,337,565 — 1,337,565 — 1,337,565 
Net loans held for investment9,725,334 — — 9,555,265 9,555,265 
Loans held for sale, at fair value123,235 — 123,235 — 123,235 
Interest receivable50,386 304 7,325 42,757 50,386 
Mortgage servicing rights153,464 — — 153,464 153,464 
Derivatives27,566 — 27,566 — 27,566 
Financial liabilities: 
Deposits: 
Without stated maturities$9,163,006 $9,163,006 $— $— $9,163,006 
With stated maturities2,240,464 — 2,235,505 — 2,235,505 
Securities sold under agreements to
repurchase and federal funds purchased
11,431 11,431 — — 11,431 
Subordinated debt, net130,898 — — 128,021 128,021 
Interest payable21,891 3,785 16,606 1,500 21,891 
Derivatives23,832 — 23,832 — 23,832 
 
 Fair Value
December 31, 2024Carrying amount Level 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$1,042,488 $1,042,488 $— $— $1,042,488 
Investment securities1,538,008 — 1,538,008 — 1,538,008 
Net loans held for investment9,450,442 — — 9,221,311 9,221,311 
Loans held for sale, at fair value95,403 — 95,403 — 95,403 
Interest receivable49,611 629 8,012 40,970 49,611 
Mortgage servicing rights162,038 — — 162,038 162,038 
Derivatives29,951 — 29,951 — 29,951 
Financial liabilities: 
Deposits: 
Without stated maturities$9,361,140 $9,361,140 $— $— $9,361,140 
With stated maturities1,849,294 — 1,846,989 — 1,846,989 
Securities sold under agreements to
repurchase and federal funds purchased
13,499 13,499 — — 13,499 
Subordinated debt, net130,704 — — 126,684 126,684 
Interest payable24,182 3,759 18,923 1,500 24,182 
Derivatives32,383 — 32,383 — 32,383