v3.26.1
Fair Value Measurements and Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value Option
The Company may elect to report financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in earnings. The election is made upon the initial recognition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur. The fair value election may not otherwise be revoked once an election is made. The changes in fair value are recorded in "Noninterest income" on the consolidated statements of earnings. However, movements in debt valuation adjustments are reported as a component of "Accumulated other comprehensive loss, net" on the consolidated balance sheets. Debt valuation adjustments represent the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk.
Fair Value Option for Certain Debt Liabilities
The Company has elected the fair value option for the credit-linked notes issued in September 2022. The Company elected the fair value option because these exposures are considered to be structured notes, which are financial instruments that contain embedded derivatives. The notes are linked to the credit risk of an approximately $2.1 billion reference pool of previously purchased SFR mortgage loans. The principal balance of the credit-linked notes was $111.6 million at June 30, 2026. The carrying value of the credit-linked notes at June 30, 2026 was the estimated fair value of $110.4 million. Interest expense on the credit-linked notes totaled $4.1 million and $8.2 million for the three and six months ended June 30, 2026, and $4.5 million and $9.0 million for the three and six months ended June 30, 2025, respectively, and was recorded in "Interest expense - borrowings" on the consolidated statements of earnings.
The following table presents the changes in fair value of the credit-linked notes for which the fair value option has been elected for the periods indicated:
Three Months Ended June 30,Six Months Ended June 30,
Credit-Linked Notes2026202520262025
(In thousands)
Changes in fair value - gains included in earnings$112 $(637)$206 $(155)
Changes in fair value - other comprehensive (loss) income $(106)$(517)$(217)$(371)
The following table provides information about the credit-linked notes carried at fair value as of the dates indicated:
Credit-Linked NotesJune 30, 2026December 31, 2025
(In thousands)
Carrying value reported on the consolidated balance sheets$110,363 $113,634 
Aggregate unpaid principal balance in excess of fair value$1,209 $1,220 
Fair Value Measurements
The Company uses fair value to measure certain assets and liabilities on a recurring basis, primarily AFS securities, derivatives, and certain debt liabilities. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period and such measurements are therefore considered “nonrecurring” for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for individually evaluated loans and leases and OREO and also to record impairment on certain assets, such as goodwill, CDI, and other long-lived assets.
For information regarding the valuation methodologies used to measure our assets recorded at fair value (under ASC Topic 820), and for estimating fair value for financial instruments not recorded at fair value (under ASC Topic 825, as amended by ASU 2016-01 and ASU 2018-03), see "Note 1. Nature of Operations and Summary of Significant Accounting Policies" and "Note 15. Fair Value Measurements" to the Consolidated Financial Statements of the Form 10-K.
The Company also holds SBIC investments measured at fair value using the net asset value per share practical expedient that are not required to be classified in the fair value hierarchy. At June 30, 2026, the fair value of these investments was $128.9 million.
The following tables present information on the assets and liabilities measured and recorded at fair value on a recurring basis as of the dates indicated:
Fair Value Measurements as of June 30, 2026
Measured on a Recurring BasisTotalLevel 1Level 2Level 3
(In thousands)
Securities AFS:
Agency residential MBS$788,640 $— $788,640 $— 
U.S. Treasury securities223,475 223,475 — — 
Agency commercial MBS149,572 — 149,572 — 
Agency residential CMOs2,599,212 — 2,599,212 — 
Corporate debt securities237,864 — 230,964 6,900 
Private label residential CMOs262,028 — 262,028 — 
Collateralized loan obligations200,500 — 200,500 — 
Private label commercial MBS7,511 — 7,511 — 
Asset-backed securities12,181 — 12,181 — 
SBA securities3,038 — 3,038 — 
Total securities AFS$4,484,021 $223,475 $4,253,646 $6,900 
Equity investments with readily determinable fair values$2,159 $2,159 $— $— 
Derivatives (1):
Derivative assets
Cash flow hedges5,253 — 5,253 — 
Interest rate and foreign exchange contracts4,546 — 4,546 — 
Equity warrants 3,326 — — 3,326 
Derivative liabilities
Cash flow hedges3,617 — 3,617 — 
Interest rate and foreign exchange contracts4,406 — 4,406 — 
Credit-linked notes110,363 — — 110,363 
___________________
(1)    For information regarding derivative instruments, see "Note 9. Derivatives".
Fair Value Measurements as of December 31, 2025
Measured on a Recurring BasisTotalLevel 1Level 2Level 3
(In thousands)
Securities AFS:
Agency residential MBS$834,085 $— $834,085 $— 
Agency commercial MBS50,966 — 50,966 — 
Agency residential CMOs871,624 — 871,624 — 
Corporate debt securities241,596 — 239,226 2,370 
Private label residential CMOs228,975 — 228,975 — 
Collateralized loan obligations200,822 — 200,822 — 
Private label commercial MBS9,279 — 9,279 — 
Asset-backed securities13,249 — 13,249 — 
SBA securities3,462 — 3,462 — 
Total securities AFS$2,454,058 $— $2,451,688 $2,370 
Equity investments with readily determinable fair values$2 $2 $— $— 
Derivatives (1):
Derivative assets
Interest rate and foreign exchange contracts4,124 — 4,124 — 
Equity warrants 3,437 — — 3,437 
Derivative liabilities
Cash flow hedges4,065 — 4,065 — 
Interest rate and foreign exchange contracts4,156 — 4,156 — 
Credit-linked notes113,634 — — 113,634 
____________________
(1)    For information regarding derivative instruments, see "Note 9. Derivatives".
During the six months ended June 30, 2026, there were $1.6 million transfers from Level 3 equity warrants to Level 1 equity investments with readily determinable fair values measured on a recurring basis. There was no transfer of AFS corporate debt securities from Level 3 to Level 2 during the six months ended June 30, 2026 and $4.5 million transfer of AFS corporate debt securities from Level 2 to Level 3 during the same period.
The following table presents information about quantitative inputs and assumptions used to determine the fair values provided by our third-party pricing service for our Level 3 corporate debt securities AFS measured at fair value on a recurring basis as of the date indicated:
Corporate Debt Securities as of June 30, 2026
Input or Range
Weighted Average
Unobservable Inputsof Inputs
Input (1)
Spread to 10 Year Treasury
(0.2)% - 41.9%
8.3%
Discount rates
4.3% - 13.3%
12.8%
____________________
(1)    Unobservable inputs for corporate debt securities were weighted by the relative fair values of the instruments.

The following table presents information about quantitative inputs and assumptions used in the modified Black-Scholes option pricing model to determine the fair value for our Level 3 equity warrants measured at fair value on a recurring basis as of the date indicated:
Equity Warrants as of June 30, 2026
RangeWeighted Average
Unobservable Inputsof Inputs
Input (1)
Volatility (1)
24.1% - 1,327.4%
24.7%
Risk-free interest rate
3.7% - 4.2%
4.1%
Remaining life assumption (in years)
0.08 - 4.95
3.17 years
____________________
(1)    Unobservable inputs for equity warrants were weighted by the relative fair values of the instruments.
The following table summarizes activity for our Level 3 corporate debt securities AFS, equity warrants, and credit-linked notes measured at fair value on a recurring basis for the period indicated:
Corporate Equity Credit-Linked
Debt SecuritiesWarrantsNotes
(In thousands)
Balance, December 31, 2025$2,370 $3,437 $113,634 
Total included in earnings— 1,834 (206)
Total included in other comprehensive income 30 — 217 
Issuances— 204 — 
Principal payments— — (3,282)
Transfer from Level 24,500 — — 
Exercises and settlements — (591)— 
Transfers to Level 1 (equity investments with readily determinable fair values)— (1,558)— 
Balance, June 30, 2026$6,900 $3,326 $110,363 
Unrealized net gain for the period included in other
comprehensive income for securities held at quarter-end$30 
The following tables present assets measured at fair value on a non-recurring basis as of the dates indicated:
Fair Value Measurement as of June 30, 2026
Measured on a Nonrecurring BasisTotalLevel 1Level 2Level 3
(In thousands)
Individually evaluated loans and leases $54,493 $— $20,168 $34,325 
OREO21 — 21 — 
Total non-recurring$54,514 $— $20,189 $34,325 

Fair Value Measurement as of December 31, 2025
Measured on a Nonrecurring BasisTotalLevel 1Level 2Level 3
(In thousands)
Individually evaluated loans and leases $52,443 $— $48,401 $4,042 
OREO248 — 248 — 
Total non-recurring$52,691 $— $48,649 $4,042 
In addition to individually evaluated loans and leases and OREO, loans HFS are carried at the LOCOM and may be measured at fair value on a nonrecurring basis when fair value is less than cost. Fair value is based on active bids and other observable market inputs, such as appraised value of the underlying collaterals, adjusted for specific attributes of that loan or other available market data for similar loans. Loans HFS are classified as Level 2 in the fair value hierarchy.
The following table presents losses recognized on assets measured on a nonrecurring basis for the periods indicated:
Three Months Ended June 30,Six Months Ended June 30,
Loss on Assets Measured on a Non‑Recurring Basis2026202520262025
(In thousands)
Individually evaluated loans and leases$13,216 $490 $15,494 $1,394 
OREO6 367 6 424 
Total losses$13,222 $857 $15,500 $1,818 
The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis as of the date indicated:
June 30, 2026
ValuationUnobservable
Asset
Fair Value
TechniqueInputs
(In thousands)
Individually evaluated loans and leases34,325Third-party appraisalNo discounts
Total non-recurring Level 3$34,325
The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated:
June 30, 2026
Carrying
Estimated Fair Value
AmountTotalLevel 1Level 2Level 3
(In thousands)
Financial Assets:
Cash and due from banks$225,343 $225,343 $225,343 $— $— 
Interest-earning deposits in financial institutions2,592,712 2,592,712 2,592,712 — — 
Securities AFS4,484,021 4,484,021 223,475 4,253,646 6,900 
Investment in FRB and FHLB stock181,352 181,352 — 181,352 — 
Loans HFS915,171 915,324 — 915,324 — 
Loans and leases HFI, net23,967,527 22,955,046 — 20,168 22,934,878 
Equity investments with readily determinable fair values2,159 2,159 2,159 — — 
Equity warrants3,326 3,326 — — 3,326 
Cash flow hedges5,253 5,253 — 5,253 — 
Interest rate and foreign exchange contracts4,546 4,546 — 4,546 — 
Servicing rights190 190 — — 190 
Financial Liabilities:
Demand, checking, money market, and savings deposits23,468,565 23,468,565 — 23,468,565 — 
Time deposits4,652,617 4,638,194 — 4,638,194 — 
Borrowings2,460,363 2,459,613 — 2,349,250 110,363 
Subordinated debt573,555 575,837 — 575,837 — 
Cash flow hedges3,617 3,617 — 3,617 — 
Interest rate and foreign exchange contracts4,406 4,406 — 4,406 — 
December 31, 2025
Carrying
Estimated Fair Value
AmountTotalLevel 1Level 2Level 3
(In thousands)
Financial Assets:
Cash and due from banks$181,103 $181,103 $181,103 $— $— 
Interest-earning deposits in financial institutions2,126,862 2,126,862 2,126,862 — — 
Securities AFS2,454,058 2,454,058 — 2,451,688 2,370 
Securities HTM2,308,636 2,246,526 185,088 2,057,189 4,249 
Investment in FRB and FHLB stock160,442 160,442 — 160,442 — 
Loans HFS182,936 183,083 — 183,083 — 
Loans and leases HFI, net24,787,067 23,871,794 — 48,401 23,823,393 
Equity investments with readily determinable fair values2 2 2 — — 
Equity warrants3,437 3,437 — — 3,437 
Interest rate and foreign exchange contracts4,124 4,124 — 4,124 — 
Servicing rights17,480 19,427 — — 19,427 
Financial Liabilities:
Demand, checking, money market, and savings deposits23,156,094 23,156,094 — 23,156,094 — 
Time deposits4,687,263 4,684,099 — 4,684,099 — 
Borrowings2,063,819 2,069,076 275,185 1,680,257 113,634 
Subordinated debt952,740 934,819 — 934,819 — 
Cash flow hedges4,065 4,065 — 4,065 — 
Interest rate and foreign exchange contracts4,156 4,156 — 4,156 — 
Limitations
Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates do not reflect income taxes or any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a portion of the Company’s financial instruments, fair value estimates are based on what management believes to be reasonable judgments regarding expected future cash flows, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimated fair values are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Since the fair values have been estimated as of June 30, 2026, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different.