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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2024
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The determination of fair value may require the use of estimates when quoted market prices are not available. Fair value estimates made at a specific point in time are based on management’s judgments regarding future expected losses, current economic conditions, the risk characteristics of each financial instrument, and other subjective factors that cannot be determined with precision. The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels within the fair value hierarchy are as follows: •Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. •Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, rate volatility, prepayment speeds, and credit ratings), or inputs that are derived principally from or corroborated by market data, correlation or other means. •Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. This includes certain pricing models or other similar techniques that require significant management judgment or estimation. Assets and Liabilities Measured at Fair Value on a Recurring Basis Available-for-Sale Securities. When unadjusted quoted prices are available in an active market, the Company classifies its available-for-sale investment securities within Level 1 of the fair value hierarchy. When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service’s results and has a process in place to challenge their valuations and methodologies. Government agency debentures, Municipal bonds and notes, Agency CMO, Agency MBS, Agency CMBS, CMBS, Corporate debt, Private label MBS, and Other available-for-sale securities are classified within Level 2 of the fair value hierarchy. Derivative Instruments. The fair values presented for derivative instruments include any accrued interest. Foreign exchange contracts are valued based on unadjusted quoted prices in active markets and accordingly are classified within Level 1 of the fair value hierarchy. Except for mortgage banking derivatives, all other derivative instruments are valued using third-party valuation software, which considers the present value of cash flows discounted using observable forward rate assumptions. The resulting fair value is then validated against valuations performed by dealer counterparties. These derivative instruments are classified within Level 2 of the fair value hierarchy. Mortgage Banking Derivatives. The Company uses forward sales of mortgage loans and mortgage-backed securities to manage the risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans, an interest rate lock commitment is generally extended to the borrower. During this in-between time period, the Company is subject to the risk that market interest rates may change. If rates rise, investors generally will pay less to purchase mortgage loans, which would result in a reduction in the gain on sale of the loans, or possibly a loss. In an effort to mitigate this risk, forward delivery sales commitments are established in which the Company agrees to either deliver whole mortgage loans to various investors or issue mortgage-backed securities. The fair value of mortgage banking derivatives is determined based on current market prices for similar assets in the secondary market. Accordingly, mortgage banking derivatives are classified within Level 2 of the fair value hierarchy. Originated Loans Held For Sale. The Company has elected to measure originated residential mortgage loans held for sale at fair value under the fair value option per ASC Topic 825, Financial Instruments. Electing to measure originated residential mortgage loans held for sale at fair value reduces certain timing differences and better reflects the price the Company would expect to receive from the sale of these loans. The fair value of originated residential mortgage loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions. Accordingly, originated residential mortgage loans held for sale are classified within Level 2 of the fair value hierarchy. The following table compares the fair value to the UPB of originated residential mortgage loans held for sale:
| At December 31,
| 2024 |  | 2023
(In thousands) | Fair Value |  | UPB |  | Difference |  | Fair Value |  | UPB |  | Difference
Originated loans held for sale | $ | 297 |  |  | $ | 283 |  |  | $ | 14 |  |  | $ | 2,610 |  |  | $ | 2,658 |  |  | $ | (48) |
Rabbi Trust Investments. Investments held in each of the Company’s Rabbi Trusts consist primarily of mutual funds that invest in equity and fixed income securities. Shares of these mutual funds are valued based on the NAV as reported by the trustee of the funds, which represents quoted prices in active markets. Accordingly, the Rabbi Trusts’ investments are classified within Level 1 of the fair value hierarchy. At both December 31, 2024, and 2023, the total cost basis of the investments held in the Rabbi Trusts was $9.2 million. Alternative Investments. Equity investments have a readily determinable fair value when unadjusted quoted prices are available in an active market for identical assets. Accordingly, these alternative investments are classified within Level 1 of the fair value hierarchy. At December 31, 2023, equity investments with a readily determinable fair value had a total carrying amount of $0.9 million, with no remaining unfunded commitments. During the second quarter of 2024, the Company sold its equity investments with a readily determinable fair value for proceeds of $1.2 million. Prior to the sale, these alternative investments experienced total write-ups in fair value of $0.3 million. Equity investments that do not have a readily determinable fair value may qualify for the NAV practical expedient if they meet certain requirements. The Company’s alternative investments measured at NAV consist of investments in non-public entities that cannot be redeemed since investments are distributed as the underlying equity is liquidated. Alternative investments measured at NAV are not classified within the fair value hierarchy. At December 31, 2024, and 2023, these alternative investments had a total carrying amount of $43.4 million and $35.9 million, respectively, and a remaining unfunded commitment of $30.1 million and $29.8 million, respectively. During the year ended December 31, 2024, the change in NAV related to these alternative investments that were still held at the end of the year was $3.5 million. Contingent Consideration. The Company recorded contingent consideration at fair value related to two earn-out agreements associated with the acquisition of interLINK in January 2023. The terms of the purchase agreement specified that the seller would receive earn-outs based on the ability of the Company to: (i) re-sign the existing broker dealers under contract, and (ii) generate $2.5 billion in new broker dealer deposit programs within three years of the acquisition date. The estimated fair values of the contingent consideration liabilities are measured on a recurring basis and determined using an income approach considering management’s evaluation of the probability of achievement, forecasted achievement date (payment term), and a discount rate equivalent to the cost of debt. These significant inputs, which are the responsibility of management and calculated with the assistance of a third-party valuation specialist, are not observable, and accordingly, are classified within Level 3 of the fair value hierarchy. The following tables summarize the unobservable inputs used to derive the estimated fair value of the Company’s contingent consideration liabilities (dollars in thousands):
| At December 31, 2024
Agreement | Maximum Amount | Probability of Achievement | Payment Term (in years) | Discount Rate | Fair Value
(i) Re-sign broker dealers (1) | $ | 207 | 99.0 % | 0.88 | 6.40 % | $ | 182
(ii) Deposit program growth (2) | $ | 12,500 | 100.0 % | 0.50 | 6.40 % | $ | 11,568
| At December 31, 2023
Agreement | Maximum Amount | Probability of Achievement | Payment Term (in years) | Discount Rate | Fair Value
(i) Re-sign broker dealers | $ | 4,826 | 99.0 % | 1.88 | 6.40 % | $ | 4,232
(ii) Deposit program growth | $ | 12,500 | 100.0 % | 1.00 | 6.40 % | $ | 11,568
(1)The Company re-signed one of the existing broker dealers under contract in January 2024, which resulted in the cash payment of $4.6 million during the first quarter of 2024 to settle a portion of its contingent consideration obligation with StoneCastle Partners LLC in accordance with the purchase agreement. (2)During the fourth quarter of 2024, the Company re-evaluated its initial estimate of the forecasted achievement date (payment term) for the deposit program growth event earn-out, which resulted in a revised expected achievement date of June 30, 2025, instead of December 31, 2024. The change in fair value resulting from this change in estimate was not significant. Contingent consideration liabilities are included within Accrued expenses and other liabilities on the accompanying Consolidated Balance Sheets. Any fair value adjustments to contingent consideration liabilities are included in Other expense on the accompanying Consolidated Statements of Income. The following table summarizes the fair values of assets and liabilities measured at fair value on a recurring basis:
| At December 31, 2024
(In thousands) | Level 1 | Level 2 | Level 3 | Total
Financial Assets: |  |  |  |
Available-for-sale securities: |  |  |  |
Government agency debentures | $ | — |  | $ | 186,426 |  | $ | — |  | $ | 186,426 |
Municipal bonds and notes | — |  | 110,876 |  | — |  | 110,876 |
Agency CMO | — |  | 29,043 |  | — |  | 29,043 |
Agency MBS | — |  | 4,519,785 |  | — |  | 4,519,785 |
Agency CMBS | — |  | 3,034,392 |  | — |  | 3,034,392 |
CMBS | — |  | 625,388 |  | — |  | 625,388 |
Corporate debt | — |  | 452,266 |  | — |  | 452,266 |
Private label MBS | — |  | 39,219 |  | — |  | 39,219 |
Other | — |  | 9,205 |  | — |  | 9,205 |
Total available-for-sale securities | — |  | 9,006,600 |  | — |  | 9,006,600 |
Gross derivative instruments, before netting (1) | 1,263 |  | 300,879 |  | — |  | 302,142 |
Originated loans held for sale | — |  | 297 |  | — |  | 297 |
Investments held in Rabbi Trusts | 13,438 |  | — |  | — |  | 13,438 |
Alternative investments measured at NAV (2) | — |  | — |  | — |  | 43,360 |
Total financial assets | $ | 14,701 |  | $ | 9,307,776 |  | $ | — |  | $ | 9,365,837 |
Financial Liabilities: |  |  |  |
Gross derivative instruments, before netting (1) | $ | 43 |  | $ | 311,518 |  | $ | — |  | $ | 311,561 |
Contingent consideration | — |  | — |  | 11,750 |  | 11,750 |
Total financial liabilities | $ | 43 |  | $ | 311,518 |  | $ | 11,750 |  | $ | 323,311 |
| At December 31, 2023
(In thousands) | Level 1 | Level 2 | Level 3 | Total
Financial Assets: |  |  |  |
Available-for-sale securities: |  |  |  |
Government agency debentures | $ | — |  | $ | 264,633 |  | $ | — |  | $ | 264,633 |
Municipal bonds and notes | — |  | 1,573,233 |  | — |  | 1,573,233 |
Agency CMO | — |  | 48,941 |  | — |  | 48,941 |
Agency MBS | — |  | 3,347,098 |  | — |  | 3,347,098 |
Agency CMBS | — |  | 2,288,071 |  | — |  | 2,288,071 |
CMBS | — |  | 763,749 |  | — |  | 763,749 |
Corporate debt | — |  | 622,155 |  | — |  | 622,155 |
Private label MBS | — |  | 42,808 |  | — |  | 42,808 |
Other | — |  | 9,041 |  | — |  | 9,041 |
Total available-for-sale securities | — |  | 8,959,729 |  | — |  | 8,959,729 |
Gross derivative instruments, before netting (1) | 217 |  | 330,419 |  | — |  | 330,636 |
Originated loans held for sale | — |  | 2,610 |  | — |  | 2,610 |
Investments held in Rabbi Trust | 11,900 |  | — |  | — |  | 11,900 |
Alternative investments | 959 |  | — |  | — |  | 959 |
Alternative investments measured at NAV (2) | — |  | — |  | — |  | 35,888 |
Total financial assets | $ | 13,076 |  | $ | 9,292,758 |  | $ | — |  | $ | 9,341,722 |
Financial Liabilities: |  |  |  |
Gross derivative instruments, before netting (1) | $ | 970 |  | $ | 334,840 |  | $ | — |  | $ | 335,810 |
Contingent consideration | — |  | — |  | 15,800 |  | 15,800 |
| $ | 970 |  | $ | 334,840 |  | $ | 15,800 |  | $ | 351,610 |
(1)Additional information regarding the impact of netting derivative assets and derivative liabilities, as well as the impact from offsetting cash collateral paid to the same derivative counterparties, can be found within Note 17: Derivative Financial Instruments. (2)Certain alternative investments are recorded at NAV. Assets measured at NAV are not classified within the fair value hierarchy. Assets Measured at Fair Value on a Non-Recurring Basis The Company measures certain assets at fair value on a non-recurring basis. The following is a description of valuation methodologies used for assets measured at fair value on a non-recurring basis. Alternative Investments. The measurement alternative has been elected for alternative investments without readily determinable fair values that do not qualify for the NAV practical expedient. The measurement alternative requires investments to be measured at cost minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Accordingly, these alternative investments are classified within Level 2 of the fair value hierarchy. At December 31, 2024, and 2023, the carrying amount of these alternative investments was $61.5 million and $53.1 million, respectively, of which $8.3 million and $7.9 million, respectively, were considered to be measured at fair value. During the year ended December 31, 2024, there were $2.8 million in total write-ups due to observable price changes and $1.3 million of total write-downs due to impairment. Additionally, during the year ended December 31, 2024, the Company sold measurement alternative investments with a carrying amount of $3.5 million for proceeds of $18.4 million, resulting in total gains on sale of $14.9 million. Loans Transferred to Held for Sale. Once a decision has been made to sell loans not previously classified as held for sale, these loans are transferred into the held for sale category and carried at the lower of cost or fair value, less estimated costs to sell. At the time of transfer and classification as held for sale, any amount by which cost exceeds fair value is accounted for as a valuation allowance. This activity generally pertains to loans with observable inputs, and therefore, are classified within Level 2 of the fair value hierarchy. However, should these loans include adjustments for changes in loan characteristics based on unobservable inputs, the loans would then be classified within Level 3 of the fair value hierarchy. At December 31, 2024, and 2023, there were $27.3 million and $3.9 million loans transferred to held for sale on the accompanying Consolidated Balance Sheets, respectively. Collateral Dependent Loans and Leases. Loans and leases for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent, and are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, using customized discounting criteria. Accordingly, collateral dependent loans and leases are classified within Level 3 of the fair value hierarchy. Other Real Estate Owned and Repossessed Assets. OREO and repossessed assets are held at the lower of cost or fair value and are considered to be measured at fair value when recorded below cost. The fair value of OREO is calculated using independent appraisals or internal valuation methods, less estimated selling costs, and may consider available pricing guides, auction results, and price opinions. Certain repossessed assets may also require assumptions about factors that are not observable in an active market when determining fair value. Accordingly, OREO and repossessed assets are classified within Level 3 of the fair value hierarchy. At December 31, 2024, and 2023, the total carrying value of OREO and repossessed assets was $0.4 million and $9.1 million, respectively. In addition, the amortized cost of consumer loans secured by residential real estate property that are in the process of foreclosure at December 31, 2024, was $12.0 million. Estimated Fair Values of Financial Instruments and Mortgage Servicing Assets The Company is required to disclose the estimated fair values of certain financial instruments and mortgage servicing rights. The following is a description of the valuation methodologies used to estimate fair value for those assets and liabilities. Cash and Cash Equivalents. Given the short time frame to maturity, the carrying amount of cash and cash equivalents, which is comprised of Cash and due from banks and Interest-bearing deposits, approximates fair value. Cash and cash equivalents are classified within Level 1 of the fair value hierarchy. Held-to-Maturity Securities. When quoted market prices are not available, the Company employs an independent pricing service that utilizes matrix pricing to calculate fair value. These fair value measurements consider observable data, such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service’s results and has a process in place to challenge their valuations and methodologies. Held-to-maturity securities, which include Agency CMO, Agency MBS, Agency CMBS, Municipal bonds and notes, and CMBS, are classified within Level 2 of the fair value hierarchy. Loans and Leases, net. Except for collateral dependent loans and leases, the fair value of loans and leases held for investment is estimated using a discounted cash flow methodology, based on future prepayments and market interest rates inclusive of an illiquidity discount for comparable loans and leases. The associated cash flows are then adjusted for associated credit risks and other potential losses, as appropriate. Loans and leases are classified within Level 3 of the fair value hierarchy. Mortgage Servicing Rights. Mortgage servicing rights are initially measured at fair value and subsequently measured using the amortization method. The Company assesses mortgage servicing rights for impairment each quarter and establishes or adjusts the valuation allowance to the extent that amortized cost exceeds the estimated fair market value. Fair value is calculated as the present value of estimated future net servicing income and relies on market based assumptions for loan prepayment speeds, servicing costs, discount rates, and other economic factors. Accordingly, the primary risk inherent in valuing mortgage servicing rights is the impact of fluctuating interest rates on the related servicing revenue stream. Mortgage servicing rights are classified within Level 3 of the fair value hierarchy. Deposit Liabilities. The fair value of deposit liabilities, which is comprised of demand deposits, interest-bearing checking, savings, health savings, and money market accounts, reflects the amount payable on demand at the reporting date. Deposit liabilities are classified within Level 2 of the fair value hierarchy. Time Deposits. The fair value of fixed-maturity certificates of deposit is estimated using rates that are currently offered for deposits with similar remaining maturities. Time deposits are classified within Level 2 of the fair value hierarchy. Securities Sold Under Agreements to Repurchase and Federal Funds Purchased. The fair value of securities sold under agreements to repurchase and federal funds purchased that mature within 90 days approximates their carrying value. The fair value of securities sold under agreements to repurchase and federal funds purchased that mature after 90 days is estimated using a discounted cash flow methodology based on current market rates and adjusted for associated credit risks, as appropriate. Securities sold under agreements to repurchase and federal funds purchased are classified within Level 2 of the fair value hierarchy. Federal Home Loan Bank Advances and Long-Term Debt. The fair value of FHLB advances and long-term debt is estimated using a discounted cash flow methodology in which discount rates are matched with the time period of the expected cash flows and adjusted for associated credit risks, as appropriate. FHLB advances and long-term debt are classified within Level 2 of the fair value hierarchy. The following table summarizes the carrying amounts, estimated fair values, and classifications within the fair value hierarchy of selected financial instruments and mortgage servicing rights:
| At December 31,
| 2024 |  | 2023
(In thousands) | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Assets: |  |  |  |  |  |  |
Level 1 |  |  |  |  |  |  |
Cash and cash equivalents | $ | 2,074,434 |  |  | $ | 2,074,434 |  |  | $ | 1,715,795 |  |  | $ | 1,715,795 |
Level 2 |  |  |  |  |  |  |
Held-to-maturity investment securities, net | 8,444,191 |  |  | 7,453,123 |  |  | 7,074,588 |  |  | 6,264,623 |
Level 3 |  |  |  |  |  |  |
Loans and leases, net | 51,815,602 |  |  | 50,245,305 |  |  | 50,090,315 |  |  | 48,048,106 |
Mortgage servicing rights | 1,234 |  |  | 3,667 |  |  | 8,523 |  |  | 24,495 |
Liabilities: |  |  |  |  |  |  |
Level 2 |  |  |  |  |  |  |
Deposit liabilities | $ | 56,518,126 |  |  | $ | 56,518,126 |  |  | $ | 52,319,825 |  |  | $ | 52,319,825 |
Time deposits | 8,234,954 |  |  | 8,211,582 |  |  | 8,464,459 |  |  | 8,426,708 |
Securities sold under agreements to repurchase and federal funds purchased | 344,168 |  |  | 344,166 |  |  | 458,387 |  |  | 458,380 |
FHLB advances | 2,110,108 |  |  | 2,107,790 |  |  | 2,360,018 |  |  | 2,358,381 |
Long-term debt (1) | 909,185 |  |  | 860,200 |  |  | 1,048,820 |  |  | 999,918 |
(1)Any unamortized premiums/discounts, debt issuance costs, or basis adjustments to long-term debt, as applicable, are excluded from the determination of fair value.

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- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 820 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/820/tableOfContent + Details
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