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FAIR VALUES OF FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
FAIR VALUES OF FINANCIAL INSTRUMENTS FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair Value Hierarchy
ASC 820-10 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 topic describes three levels of inputs that may be used to measure fair value:
•Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
•Level 2: Significant 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 that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Assets and Liabilities Measured on a Recurring Basis
Securities Available-for-Sale (“AFS”): The fair values of AFS securities are generally determined by quoted market prices in active markets, if available (Level 1). If quoted market prices are not available, we primarily employ independent pricing services that utilize pricing models to calculate fair value. Such 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 respective terms and conditions for debt instruments (Level 2). We adhere to established processes to monitor the pricing services’ assumptions and challenge the valuations that appear unusual or unexpected. Multiple quotes or prices may be obtained in this process and we determine which fair value is most appropriate based on market information and analysis. Quotes obtained through this process are generally non-binding. We follow established procedures to ensure that assets and liabilities are properly classified in the fair value hierarchy. Level 2 securities include SBA loan pool securities, U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities, non-agency residential mortgage-backed securities, non-agency commercial mortgage-backed securities, collateralized loan obligations, and corporate debt securities. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and management’s judgment and evaluation for valuation.
Derivative Assets and Liabilities:
Cash Flow Hedge. We have entered into pay-fixed, receive-variable interest rate swap contracts with institutional counterparties to hedge against variability in cash flows attributable to interest rate risk caused by changes in interest rates on our deposits and borrowings. We estimate the fair value of these contracts based on inputs from a third-party pricing model, which incorporates such factors as the Treasury curve, SOFR rates, and the pay rate on the interest rate swaps. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.
Interest Rate Swaps. We offer interest rate swap products to certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans. We originate a variable rate loan and enter into a variable-to-fixed interest rate swap with the client. We also enter into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow us to originate a variable rate loan while providing a contract for fixed interest payments for the client. The net cash flow for us is equal to the interest income received from a variable rate loan originated with the client plus a fee.
The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.
Foreign Exchange Contracts. We offer short-term foreign exchange contracts to customers to purchase and/or sell foreign currencies at set rates in the future. These products allow customers to hedge the foreign exchange rate risk of their deposits and loans denominated in foreign currencies. In conjunction with these products, we also enter into offsetting back-to-back contracts with institutional counterparties to hedge our foreign exchange rate risk. These back-to-back contracts are intended to offset each other and allow us to offer our customers foreign exchange products. The fair value of both of these offsetting asset and liability instruments is based on the change in the underlying foreign exchange rate. We are subject to counterparty risk in the event our customers or institutional counterparties default under these contracts. Given the short-term nature of the contracts, the counterparties’ credit risks are considered nominal and typically result in no adjustments to the valuation of the short-term foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of these contracts is classified as Level 2.
Interest Rate Swaptions. In connection with our proposed merger with PacWest, we entered into pay-fixed, receive-variable interest rate swaption contracts with institutional counterparties to mitigate rising interest rate risk from the time the merger was announced through the closing date. We receive estimated fair value for these contracts from a third-party pricing which reflected mid-market values obtained from market pricing data sources available for comparable transactions in the over the counter (“OTC”) interest rate derivative market. These sources are believed to be reliable. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaptions is classified as Level 2.
Contingent Forward Loan Sale Agreement. In connection with our proposed merger with PacWest, we entered into a contingent forward loan sale agreement for the sale of $1.8 billion of our SFR loan portfolio. These commitments are valued using the terms of the agreement that includes available market pricing sources that reflect the commitments particular product, coupon, and settlement. These derivatives are classified as Level 2.
The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated:
Fair Value Measurement Level
($ in thousands)Carrying ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
September 30, 2023
Assets
Securities available-for-sale:
SBA loan pools securities$8,699 $— $8,699 $— 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities76,844 — 76,844 — 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations85,832 — 85,832 — 
Non-agency residential mortgage-backed securities104,960 — 104,960 — 
Collateralized loan obligations483,804 — 483,804 — 
Corporate debt securities154,915 — 154,915 — 
Derivative assets:
Contingent forward loan sale agreement
34,902 — 34,902 — 
Interest rate swaptions
27,003 — 27,003 — 
Cash flow hedges
5,874 — 5,874 — 
Interest rate swaps and foreign exchange contracts
2,846 — 2,846 — 
Liabilities
Derivative liabilities:
Interest rate swaps and foreign exchange contracts(1)
2,799 — 2,799 — 
December 31, 2022
Assets
Securities available-for-sale:
SBA loan pools securities$11,187 $— $11,187 $— 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities40,206 — 40,206 — 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations93,191 — 93,191 — 
Municipal securities— — — — 
Non-agency residential mortgage-backed securities80,492 — 80,492 — 
Collateralized loan obligations476,603 — 476,603 — 
Corporate debt securities166,618 — 166,618 — 
Derivative assets:
Interest rate swaps and foreign exchange contracts
2,292 — 2,292 — 
Liabilities
Derivative liabilities:
Interest rate swaps and foreign exchange contracts(1)
2,251 — 2,251 — 

(1)Included in accrued expenses and other liabilities in the consolidated statements of financial condition.
There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2023 and 2022.
Assets and Liabilities Measured on a Non-Recurring Basis
Individually Evaluated Loans: The fair value of individually evaluated loans with specific allocations of the ACL based on collateral values is generally derived from recent real estate appraisals and automated valuation models (“AVMs”). 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 for differences between the comparable sales and income data available. Such adjustments are typically deemed significant unobservable inputs used for determining fair value and result in a Level 3 classification.
Other Real Estate Owned (“OREO”): The fair value of OREO is generally based on recent real estate appraisals, less estimated 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 for differences between the comparable sales and income data available. Such adjustments are typically deemed significant unobservable inputs used for determining fair value and result in a Level 3 classification.
The following table presents our financial assets and liabilities measured at fair value on a non-recurring basis as of the dates indicated:
Fair Value Measurement Level
($ in thousands)Fair
Value		Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
September 30, 2023
Assets
Individually evaluated loans:
Commercial and industrial$756 $— $— $756 
SBA9 — — 9 
Other real estate owned:
Single family residential882 — — 882 
December 31, 2022
Assets
Individually evaluated loans:
Single family residential mortgage$3,600 $— $— $3,600 
Commercial and industrial7,115 — — 7,115 
SBA3,704 — — 3,704 

The following table presents the gains (losses) recognized on assets measured at fair value on a non-recurring basis for the periods indicated:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
($ in thousands)2023202220232022
Individually evaluated loans:
Single family residential mortgage$— $135 $(43)$(205)
Commercial and industrial(9,994)(441)(22,294)(1,639)
SBA(154)(35)(229)(207)
Other consumer(95)— (265)(243)
Commercial real estate— — (300)— 
Other real estate owned:
Single family residential— — (165)— 
Estimated Fair Values of Financial Instruments
The following table presents the carrying amounts and estimated fair values of financial assets and liabilities as of the dates indicated:
Carrying AmountFair Value Measurement Level
($ in thousands)Level 1Level 2Level 3Total
September 30, 2023
Financial assets
Cash and cash equivalents$310,985 $310,985 $— $— $310,985 
Securities held-to-maturity328,287 — 250,285 — 250,285 
Securities available-for-sale915,054 — 915,054 — 915,054 
Federal Home Loan Bank and other bank stock60,336 — 60,336 — 60,336 
Loans receivable, net of allowance for credit losses6,886,642 — — 6,261,148 6,261,148 
Accrued interest receivable39,494 39,494 — — 39,494 
Derivative assets
70,625 — 70,625 — 70,625 
Financial liabilities
Deposits6,640,630 5,054,976 1,576,721 — 6,631,697 
Advances from Federal Home Loan Bank and Federal Reserve Bank borrowings1,008,293 — 974,319 — 974,319 
Other borrowings185,802 — 185,802 — 185,802 
Long-term debt274,279 — 261,313 — 261,313 
Derivative liabilities(1)
2,799 — 2,799 — 2,799 
Accrued interest payable21,187 21,187 — — 21,187 
December 31, 2022
Financial assets
Cash and cash equivalents$228,896 $228,896 $— $— $228,896 
Securities held-to-maturity328,641 — 262,460 — 262,460 
Securities available-for-sale868,297 — 868,297 — 868,297 
Federal Home Loan Bank and other bank stock57,092 — 57,092 — 57,092 
Loans receivable, net of allowance for credit losses7,029,078 — — 6,526,916 6,526,916 
Accrued interest receivable37,942 37,942 — — 37,942 
Derivative assets
2,292 — 2,292 — 2,292 
Financial liabilities
Deposits7,120,921 5,931,500 1,175,857 — 7,107,357 
Advances from Federal Home Loan Bank727,348 — 699,730 — 699,730 
Long-term debt274,906 — 269,673 — 269,673 
Derivative liabilities(1)
2,251 — 2,251 — 2,251 
Accrued interest payable7,004 7,004 — — 7,004 

(1)Included in accrued expenses and other liabilities in the consolidated statements of financial condition.