v3.26.1
Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
Fair Value Hierarchy
There are three levels of inputs in the fair value hierarchy that may be used to measure fair value. Financial instruments are considered Level 1 when valuation can be based on quoted prices in active markets for identical assets or liabilities. Level 2 financial instruments are valued using quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or models using inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable and when determination of the fair value requires significant management judgment or estimation.
Recurring Fair Value
The table below provides a rollforward of the fair value of the Level 3 equity warrant assets:
Three Months Ended March 31,
Equity Warrant Assets20262025
Balance at beginning of period$1,775 $7,162 
New equity warrant assets118 217 
Changes in fair value, net26 (304)
Settlements(3)(40)
Balance at end of period$1,916 $7,035 
The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis.
March 31, 2026TotalLevel 1Level 2Level 3
Investment securities available-for-sale
U.S. government agencies$20,254 $— $20,254 $— 
Mortgage-backed securities1,411,220 — 1,411,220 — 
Municipal bonds (1)
3,064 — 2,981 83 
Loans held for investment (2)
244,940 — — 244,940 
Servicing assets (3)
64,520 — — 64,520 
Equity warrant assets1,916 — — 1,916 
Total assets at fair value$1,745,914 $— $1,434,455 $311,459 
December 31, 2025TotalLevel 1Level 2Level 3
Investment securities available-for-sale
U.S. government agencies$13,617 $— $13,617 $— 
Mortgage-backed securities1,410,679 — 1,410,679 — 
Municipal bonds (1)
3,105 — 3,022 83 
Loans held for investment (2)
260,625 — — 260,625 
Servicing assets (3)
62,941 — — 62,941 
Mutual fund (4)
19 — 19 — 
Equity warrant assets1,775 — — 1,775 
Total assets at fair value$1,752,761 $— $1,427,337 $325,424 
(1)
During the three months ended March 31, 2026 and 2025 there were no level 3 fair value adjustment gains or losses.
(2)
Loans accounted for under the fair value option.
(3)See Note 6 for a rollforward of recurring Level 3 fair values for servicing assets.
(4)
Included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.
For additional information on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities that are measured at fair value on a recurring basis, see Note 10. Fair Value of Financial Instruments in the Company’s 2025 Form 10-K.
Fair Value Option
Until the first quarter of 2021, the Company had historically elected to account for retained participating interests of all government guaranteed loans under the fair value option in order to align the accounting presentation with the Company’s viewpoint of the economics of the loans. Interest income is recognized in the same manner on loans reported at fair value as on non-fair value loans, except in regard to origination fees and costs which are recognized immediately upon fair value election. Not electing fair value generally results in a larger discount being recorded on the date of the sale. This discount is subsequently accreted into interest income over the underlying loan’s remaining term using the effective interest method. Management made this change of election in alignment with its ongoing effort to reduce volatility and drive more predictable revenue. In accordance with GAAP, any loans for which fair value was previously elected continue to be measured as such.
There were no loans accounted for under the fair value option that were 90 days or more past due and still accruing interest at March 31, 2026 or December 31, 2025. The unpaid principal balance of unguaranteed exposure for nonaccruals was $8.0 million and $8.5 million at March 31, 2026 and December 31, 2025, respectively.
The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of loans accounted for under the fair value option at March 31, 2026 and December 31, 2025.
March 31, 2026
Total Loans Nonaccruals 90 Days or More Past Due
Fair Value
Carrying
Amount		Unpaid
Principal
Balance		Difference Fair Value
Carrying
Amount		Unpaid
Principal
Balance		Difference Fair Value
Carrying
Amount		Unpaid
Principal
Balance		Difference
Fair Value Option Elections
Loans held for investment$244,940 $253,668 $(8,728)$61,563 $62,839 $(1,276)$48,109 $49,087 $(978)
$244,940 $253,668 $(8,728)$61,563 $62,839 $(1,276)$48,109 $49,087 $(978)
December 31, 2025
Total Loans Nonaccruals 90 Days or More Past Due
Fair Value
Carrying
Amount		Unpaid
Principal
Balance		Difference Fair Value
Carrying
Amount		Unpaid
Principal
Balance		Difference Fair Value
Carrying
Amount		Unpaid
Principal
Balance		Difference
Fair Value Option Elections
Loans held for investment$260,625 $269,851 $(9,226)$61,602 $62,824 $(1,222)$45,784 $46,824 $(1,040)
$260,625 $269,851 $(9,226)$61,602 $62,824 $(1,222)$45,784 $46,824 $(1,040)
The following table presents the net losses from changes in fair value.
Three Months Ended March 31,
Losses on Loans Accounted for under the Fair Value Option20262025
Loans held for investment$(1,165)$(1,034)
$(1,165)$(1,034)
The following tables summarize the activity pertaining to loans accounted for under the fair value option:
Three Months Ended March 31,
Loans held for investment20262025
Balance at beginning of period$260,625 $328,746 
Repurchases2,945 6,252 
Fair value changes(1,165)(1,034)
Settlements(17,465)(17,157)
Balance at end of period$244,940 $316,807 
Non-Recurring Fair Value
The tables below present the recorded amount of assets measured at fair value on a non-recurring basis. The Company has no liabilities recorded at fair value on a non-recurring basis.
March 31, 2026TotalLevel 1Level 2Level 3
Collateral-dependent loans$36,054 $— $— $36,054 
Foreclosed assets9,550 — — 9,550 
Total assets at fair value$45,604 $— $— $45,604 
December 31, 2025TotalLevel 1Level 2Level 3
Collateral-dependent loans$20,619 $— $— $20,619 
Foreclosed assets6,877 — — 6,877 
Equity security investment with a non-readily determinable fair value
2,101 — — 2,101 
Total assets at fair value$29,597 $— $— $29,597 
For additional information on the valuation techniques and significant inputs for Level 2 and Level 3 assets that are measured at fair value on a non-recurring basis, see Note 10. Fair Value of Financial Instruments in the Company’s 2025 Form 10-K.
Level 3 Analysis
For Level 3 assets measured at fair value on a recurring or non-recurring basis as of March 31, 2026 and December 31, 2025, the significant unobservable inputs used in the fair value measurements were as follows:
March 31, 2026
Level 3 Assets with Significant Unobservable Inputs
Fair ValueValuation TechniqueSignificant Unobservable InputsRange
Weighted Average (1)
Recurring fair value
Municipal bond$83 Discounted expected cash flowsDiscount rate7.0 %N/A
Prepayment speed5.0 %N/A
Loans held for investment$244,940 Discounted expected cash flowsLoss rate
0.0 % - 5.5 %
1.1 %
Discount rate
6.6 % - 18.0 %
8.8 %
Prepayment speed
16.2 % - 24.1 %
18.2 %
Servicing assets$64,520 Discounted expected cash flowsDiscount rate12.8 %12.8 %
Prepayment speed
12.2 % - 19.1 %
16.6 %
Equity warrant assets$1,916 Black-Scholes option pricing modelVolatility
13.1 % - 104.4 %
58.4 %
Risk-free interest rate
3.9 % - 4.3 %
4.3 %
Marketability discount
20.0 % - 100.0 %
20.4 %
Remaining life
2.3 - 11.8 years
8.0 years
Non-recurring fair value
Collateral-dependent loans$36,054 Discounted appraisals
Appraisal adjustments (2)
6.1 % - 90.3 %
33.2 %
Foreclosed assets$9,550 Discounted appraisals
Appraisal adjustments (2)
7.1% - 10.0 %
10.0 %
December 31, 2025
Level 3 Assets with Significant Unobservable Inputs
Fair ValueValuation Technique
Significant Unobservable Inputs
Range
Weighted Average (1)
Recurring fair value
Municipal bond$83 Discounted expected cash flowsDiscount rate7.0 %N/A
Prepayment speed5.0 %N/A
Loans held for investment
$260,625 Discounted expected cash flowsLoss rate
0.0% - 4.6%
1.1 %
Discount rate
6.7% - 10.0%
8.6 %
Prepayment speed
15.1% - 21.2%
17.2 %
Servicing assets$62,941 Discounted expected cash flowsDiscount rate12.8 %12.8 %
Prepayment speed
12.0% - 18.8%
16.2 %
Equity warrant assets$1,775 Black-Scholes option pricing modelVolatility
13.1% - 104.4%
58.3 %
Risk-free interest rate
3.7% - 4.2%
4.2 %
Marketability discount
20.0% - 100.0%
20.4 %
Remaining life
2.5 - 11.5 years
8.2 years
Non-recurring fair value
Collateral-dependent loans
$20,619 Discounted appraisals
Appraisal adjustments (2)
10.0% - 82.7%
39.7 %
Foreclosed assets$6,877 Discounted appraisals
Appraisal adjustments (2)
10.0 %10.0 %
Equity security investment with a non-readily determinable fair value$2,101 Market ApproachRevenue Multiple3.75N/A

(1)
Weighted averages are determined by the relative fair value of the instruments or the relative contribution to the instruments fair value.
(2)
Appraisals may be adjusted by management for customized discounting criteria, estimated sales costs, and other qualitative adjustments.
Estimated Fair Value of Other Financial Instruments
GAAP also requires disclosure of the fair value of financial instruments carried at book value on the Unaudited Condensed Consolidated Balance Sheets.
The carrying amounts and estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis are as follows:
March 31, 2026
Carrying
Amount
Quoted Price
In Active
Markets for
Identical Assets/Liabilities
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Fair
Value
Financial assets
Cash and due from banks$816,135 $816,135 $— $— $816,135 
Certificates of deposit with other banks250 250 — — 250 
Loans held for sale435,313 — — 460,878 460,878 
Loans and leases held for investment, net of allowance for credit losses on loans and leases11,719,997 — — 11,548,151 11,548,151 
Financial liabilities
Deposits13,835,058 — 13,181,865 — 13,181,865 
Borrowings99,746 — — 107,267 107,267 
December 31, 2025
Carrying
Amount
Quoted Price
In Active
Markets for
Identical Assets/Liabilities
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Fair
Value
Financial assets
Cash and due from banks$864,904 $864,904 $— $— $864,904 
Certificates of deposit with other banks250 250 — — 250 
Loans held for sale420,055 — — 440,928 440,928 
Loans and leases held for investment, net of allowance for credit losses on loans and leases11,520,733 — — 11,329,479 11,329,479 
Financial liabilities
Deposits13,688,659 — 13,096,941 — 13,096,941 
Borrowings102,404 — — 110,782 110,782