v3.26.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Accounting standards define fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that we have the ability to access as of the measurement date.
Level 2: Valuation is based upon significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be derived from or corroborated by observable market data by correlation or other means.
Level 3: Valuation is based upon significant unobservable inputs that reflect our own conclusions about the assumptions that market participants would use in pricing an asset or liability.
In instances whereby inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.
The Company records the fair values of financial assets and liabilities on a recurring and non-recurring basis using the following methods and assumptions:
Equity Securities
Equity securities with readily determinable fair value are reported at fair value. Fair value for these investments is primarily determined using a quoted price in an active market or exchange (Level 1).
Available for Sale Debt Securities
Where quoted market prices are available in an active market, securities are classified as Level 1 of the valuation hierarchy. The Company does not currently have any Level 1 debt securities. If quoted prices are not available, fair values can be estimated using (1) quoted market prices of securities with similar characteristics, (2) matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices, or (3) a discounted cash flow analysis whose significant fair value inputs can generally be verified and do not typically involve judgment by management. Included in the Company’s available for sale debt securities are corporate bonds which are classified as Level 2 assets. The valuation of these corporate bonds is determined using third-party quoted market prices of securities with similar characteristics.
Loans
Certain loans held for sale and HFI are measured at fair value on a recurring basis due to the Company’s election to adopt fair value accounting treatment for those loans originated for which the Company has entered into certain derivative financial instruments as part of its mortgage banking and related risk management activities. These instruments include interest rate lock commitments and mandatory forward commitments to sell these loans to investors known as forward mortgage-backed securities trades. This election allows for a more effective offset of the changes in fair values of the assets and the mortgage related derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting under ASC 815, Derivatives and Hedging. Mortgage loans held for sale, for which the fair value option was elected, are valued using a market approach by utilizing either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted to credit risk and other individual loan characteristics. As these prices are derived from market observable inputs, the Company classifies these valuations as Level 2 in the fair value disclosures. For mortgage loans held for sale for which the fair value option was elected, the earned current contractual interest payment is recognized in interest income, loan origination costs and fees on fair value option loans are recognized in earnings as incurred and not deferred. The Company has no continuing involvement in any residential mortgage loans sold.
Loans HFI that are measured at fair value are those that initially were intended for sale and then transferred to portfolio. At March 31, 2026, these loans had an aggregate unpaid principal balance of $198.7 million and aggregate fair value of $173.9 million. At December 31, 2025, these loans had an aggregate unpaid principal balance of $202.6 million and aggregate fair value of $178.6 million.
At March 31, 2026 and December 31, 2025, the fair value option was applied to loans that had been transferred from held for sale to portfolio and also to mortgage loans held for sale. The fair value adjustments are reflected in net gain on sale of loans on the Company’s consolidated statements of income.
The table below shows the income statement impact for these fair value adjustments for the three months ended March 31, 2026 and 2025:
(dollars in thousands)For the Three Months Ended March 31,
20262025
Loans$(886)$2,919 
Loans held for sale(2,611)1,810 
Loans reported at fair value which were over 90 days past due amounted to $1.5 million and $1.6 million in unpaid principal balance with a fair values of $1.3 million and $1.4 million as of March 31, 2026 and December 31, 2025, respectively. The accrual of interest on loans is discontinued at the time the loan is delinquent (120 days for mortgages). Non-accrual loans reported at fair value amounted to $12.0 million in unpaid principal balance and $9.8 million in fair value as of March 31, 2026. Non-accrual loans reported at fair value amounted to $11.1 million in unpaid principal balance and $9.1 million in fair value as of December 31, 2025.
Interest Rate Lock Commitments
The estimated fair values of interest rate lock commitments utilize current secondary market prices for underlying loans and estimated servicing value with similar coupons, maturity and credit quality, subject to the anticipated loan funding probability (pull-through rate). The fair value of interest rate lock commitments is subject to change primarily due to changes in interest rates and the estimated pull-through rate. Given the significant and unobservable nature of the pull-through factor, interest rate lock commitments are classified as Level 3.
Forward Sales Commitments
Forward mortgage-backed securities trades are exchange-traded or traded within highly active dealer markets. In order to determine the fair value of these instruments, the Company utilized the exchange price or dealer market price for the particular derivative contract; therefore these contracts are classified as Level 2. The estimated fair values are subject to change primarily due to changes in interest rates.
Mortgage Service 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.
Lender Risk Account
The Company’s Lender risk account is carried at fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, and other factors. As such, the lender risk account is considered Level 3.
Collateral Dependent Loans and Other Real Estate Owned
The fair value of collateral for collateral dependent loans and other real estate owned is generally based upon recent real estate appraisals, less costs to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and the income approach. As such, the fair values of collateral dependent loans and other real estate owned are classified as Level 3.
The following tables present information about the Company’s assets measured at fair value on a recurring basis at March 31, 2026 and December 31, 2025 and the valuation techniques used by the Company to determine those fair values (dollars in thousands):
Fair Value on a Recurring Basis at
March 31, 2026
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Financial Assets:
Equity securities$1,339 $— $— $1,339 
Available for sale debt securities— 4,884 — 4,884 
Mortgage banking assets:
Loans held for sale — 297,243 — 297,243 
Loans held for investment — 173,852 — 173,852 
Interest rate lock commitments — — 4,109 4,109 
Forward sales commitments — 2,227 — 2,227 
Mortgage servicing rights — — 20,608 20,608 
Lender risk account— — 29,569 29,569 
Total$1,339 $478,206 $54,286 $533,831 
Financial Liabilities:
Interest rate lock commitments — — 168 168 
Forward sales commitments— 197 — 197 
Total$— $197 $168 $365 
Fair Value on a Recurring Basis at
December 31, 2025
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Financial Assets:
Equity securities$1,347 $— $— $1,347 
Available for sale debt securities— 4,738 — 4,738 
Mortgage banking assets:
Loans held for sale — 309,213 — 309,213 
Loans held for investment— 178,578 — 178,578 
Interest rate lock commitments— — 2,712 2,712 
Forward sales commitments— 52 — 52 
Mortgage servicing rights— — 17,048 17,048 
Lender risk account— — 30,446 30,446 
Total$1,347 $492,581 $50,206 $544,134 
Financial Liabilities:
Interest rate lock commitments— — 6 6 
Forward sales commitments— 590 — 590 
Total$— $590 $6 $596 
The Company’s policy is to recognize transfers in and transfers out of Level 1, 2, and 3 fair value classifications as of the actual date of the event of change in circumstances that caused the transfer. On June 30, 2025, the Company transferred debt securities available for sale from Level 3 to Level 2 of the fair value hierarchy. As a result, debt securities totaling $8.8 million (based on fair value) were reclassified from Level 3 to Level 2 as of June 30, 2025. These securities were previously classified as Level 3, but were moved to Level 2 after further review. The move from Level 3 to Level 2 did not impact the fair value measurement, only the classification of input used to determine that fair value.
Changes in mortgage servicing rights as well as the related weighted average unobservable inputs are included in Note 5.
The following table presents a reconciliation of the Level 3 available for sale debt securities measured at fair value on a recurring basis for the three months ended March 31, 2026 and 2025 (dollars in thousands):
For the Three Months Ended
March 31,
20262025
Balance at beginning of period$— $8,032 
Unrealized— 379 
Balance at end of period$— $8,411 
The following table presents a reconciliation of the Level 3 interest rate lock commitments measured at fair value on a recurring basis for the three months ended March 31, 2026 and 2025 (dollars in thousands):
For the Three Months Ended
March 31,
20262025
Balance at beginning of period$2,706 $2,047 
Change in fair value1,235 2,503 
Balance at end of period$3,941 $4,550 
The following is a summary of the key unobservable inputs used in the valuation of the Level 3 interest rate lock commitments:
March 31,
20262025
Pull-through rate94.5 %82.2 %

The following table presents a reconciliation of the Level 3 lender risk account measured at fair value on a recurring basis for the three months ended March 31, 2026 and 2025 (dollars in thousands):
For the Three Months Ended
March 31,
20262025
Beginning of period$30,446 $28,436 
Due to loan sales324 400 
Releases and claims paid to the Company(893)(628)
Change in fair value recognized in gain on sale of loans(308)829 
End of period$29,569 $29,037 
Both observable and unobservable inputs may be used to determine the fair value of the lender risk account, which is classified as a Level 3 asset. As a result, the unrealized gains for these assets presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs.
The Company estimates the fair value of the lender risk account using management’s best estimate of key assumptions. These assumptions include prepayment rates, discount rates, and projected annual losses on unpaid principal of the sold loan portfolio. The weighted average of unobservable inputs for these valuation assumptions is as follows as of the dates indicated (dollars in thousands):

Fair ValueValuation
Technique		Unobservable InputsRange of InputsWeighted
Average
Assets:
March 31, 2026
Lender Risk Account$29,569 Present value ofCredit losses
—% - 0.22%
0.08 %
cash flowsPrepayment rates16.20 %16.20 %
Discount rates
5.23% - 6.81%
6.04 %
December 31, 2025
Lender Risk Account $30,446 Present value ofCredit losses
—% - 0.17%
0.05 %
cash flowsPrepayment rates17.43 %17.43 %
Discount rates
5.05% - 6.57%
5.80 %
The Company also has assets that under certain conditions are subject to measurement at fair value on a nonrecurring basis. These assets include individually evaluated loans and other real estate which are periodically reviewed for impairment and measured at fair value if the fair value of the asset is below the recorded book value. The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above.
The following asset classes were measured at fair value on the accompanying consolidated balance sheets as of the dates indicated due to declines in the fair value. Certain individually evaluated loans and other real estate carried at original cost, which exceeds fair value, have been omitted from the disclosure below (dollars in thousands):
Assets Measured at Fair Value on a Nonrecurring Basis at
March 31, 2026
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Balance at
March 31, 2026
Individually evaluated loans——$2,044 $2,044 
Other real estate owned——1,759 1,759 
Assets Measured at Fair Value on a Nonrecurring Basis at
December 31, 2025
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Balance at
December 31,
2025
Individually evaluated loans——$3,345 $3,345 
Other real estate owned——991 991 
The following presents estimated fair values of the Company’s financial instruments, not previously presented, and the level within the fair value hierarchy in which fair value measurements falls as of the dates indicated (dollars in thousands):
March 31, 2026
Fair Value HierarchyCarrying ValueFair Value
Financial Assets:
Cash and cash equivalentsLevel 1$487,617 $487,617 
FHLB stockLevel 280,109 80,109 
Loans, netLevel 26,225,601 6,187,395 
Interest receivableLevel 225,613 25,613 
Total6,818,940 6,780,734 
Financial Liabilities:
DepositsLevel 25,001,417 4,992,446 
BorrowingsLevel 21,631,496 1,628,614 
Subordinated debenturesLevel 2111,872 111,872 
Subordinated debentures issued through trustsLevel 25,000 5,000 
Interest payableLevel 216,628 16,628 
Total6,766,413 6,754,560 
December 31, 2025
Fair Value HierarchyCarrying ValueFair Value
Financial Assets:
Cash and cash equivalentsLevel 1$496,459 $496,459 
FHLB stockLevel 280,109 80,109 
Loans, netLevel 25,829,169 5,791,584 
Interest receivableLevel 228,353 28,353 
Total6,434,090 6,396,505 
Financial Liabilities:
DepositsLevel 24,869,667 4,858,176 
BorrowingsLevel 21,439,500 1,426,415 
Subordinated debenturesLevel 291,915 91,915 
Subordinated debentures issued through trustsLevel 25,000 5,000 
Interest payableLevel 216,628 16,628 
Total6,422,710 6,398,134