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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2024
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS The Company uses fair value to measure certain assets and liabilities on a recurring basis, primarily securities available-for-sale, 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 other real estate owned 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 Company's Form 10-K. The Company also holds SBIC investments measured at fair value using the NAV per share practical expedient that are not required to be classified in the fair value hierarchy. At June 30, 2024, the fair value of these investments was $110.0 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, 2024
Measured on a Recurring Basis | Total |  | Level 1 |  | Level 2 |  | Level 3
| (In thousands)
Securities available-for-sale: |  |  |  |  |  |  |
Agency residential MBS | $ | 1,101,861 |  |  | $ | — |  |  | $ | 1,101,861 |  |  | $ | — |
Agency commercial MBS | 241,343 |  |  | — |  |  | 241,343 |  |  | — |
Agency residential CMOs | 278,260 |  |  | — |  |  | 278,260 |  |  | — |
Municipal securities | 33,057 |  |  | — |  |  | 33,057 |  |  | — |
Corporate debt securities | 281,962 |  |  | — |  |  | 267,843 |  |  | 14,119 |
Private label residential CMOs | 150,286 |  |  | — |  |  | 150,286 |  |  | — |
Collateralized loan obligations | 109,354 |  |  | — |  |  | 109,354 |  |  | — |
Private label commercial MBS | 18,076 |  |  | — |  |  | 18,076 |  |  | — |
Asset-backed securities | 17,444 |  |  | — |  |  | 17,444 |  |  | — |
SBA securities | 12,388 |  |  | — |  |  | 12,388 |  |  | — |
Total securities available-for-sale | $ | 2,244,031 |  |  | $ | — |  |  | $ | 2,229,912 |  |  | $ | 14,119 |
Equity investments with readily determinable fair values | $ | 1 |  |  | $ | 1 |  |  | $ | — |  |  | $ | — |
Derivatives (1): |  |  |  |  |  |  |
Equity warrants | 3,557 |  |  | — |  |  | — |  |  | 3,557 |
Interest rate and economic contracts | 10,727 |  |  | — |  |  | 10,727 |  |  | — |
Derivative liabilities | 7,609 |  |  | — |  |  | 7,609 |  |  | — |
Credit-linked notes | 124,434 |  |  | — |  |  | — |  |  | 124,434 |
| Fair Value Measurements as of
| December 31, 2023
Measured on a Recurring Basis | Total |  | Level 1 |  | Level 2 |  | Level 3
| (In thousands)
Securities available-for-sale: |  |  |  |  |  |  |
Agency residential MBS | $ | 1,187,609 |  |  | $ | — |  |  | $ | 1,187,609 |  |  | $ | — |
U.S. Treasury securities | 4,968 |  |  | 4,968 |  |  | — |  |  | — |
Agency commercial MBS | 253,306 |  |  | — |  |  | 253,306 |  |  | — |
Agency residential CMOs | 284,334 |  |  | — |  |  | 284,334 |  |  | — |
Municipal securities | 28,083 |  |  | — |  |  | 28,083 |  |  | — |
Corporate debt securities | 267,232 |  |  | — |  |  | 226,983 |  |  | 40,249 |
Private label residential CMOs | 158,412 |  |  | — |  |  | 158,412 |  |  | — |
Collateralized loan obligations | 108,416 |  |  | — |  |  | 108,416 |  |  | — |
Private label commercial MBS | 20,813 |  |  | — |  |  | 20,813 |  |  | — |
Asset-backed securities | 19,952 |  |  | — |  |  | 19,952 |  |  | — |
SBA securities | 13,739 |  |  | — |  |  | 13,739 |  |  | — |
Total securities available-for-sale | $ | 2,346,864 |  |  | $ | 4,968 |  |  | $ | 2,301,647 |  |  | $ | 40,249 |
Equity investments with readily determinable fair values | $ | 1 |  |  | $ | 1 |  |  | $ | — |  |  | $ | — |
Derivatives (1): |  |  |  |  |  |  |
Equity warrants | 3,689 |  |  | — |  |  | — |  |  | 3,689 |
Interest rate and economic contracts | 8,309 |  |  | — |  |  | 8,309 |  |  | — |
Derivative liabilities | 10,549 |  |  | — |  |  | 10,549 |  |  | — |
Credit-linked notes | 123,116 |  |  | — |  |  | — |  |  | 123,116 |
____________________ (1) For information regarding derivative instruments, see Note 10. Derivatives. During the six months ended June 30, 2024, there was a $2,000 transfer from Level 3 equity warrants to Level 1 equity investments with readily determinable fair values measured on a recurring basis. There was also a $33.9 million transfer of corporate debt securities from Level 3 to Level 2 during the six months ended June 30, 2024 and an $8.8 million transfer of 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 available-for-sale measured at fair value on a recurring basis as of the date indicated:
| June 30, 2024
| Corporate Debt Securities
| Input or |  | Weighted
| Range |  | Average
Unobservable Inputs | of Inputs |  | Input (1)
Spread to 10 Year Treasury | 4.4% - 9.1% |  | 6.2%
Discount rates | 8.8% - 13.5% |  | 10.6%
____________________ (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:
| June 30, 2024
| Equity Warrants
|  |  | Weighted
| Range |  | Average
Unobservable Inputs | of Inputs |  | Input (1)
Volatility | 16.1% - 171.0% |  | 25.3%
Risk-free interest rate | 4.3% - 5.5% |  | 4.6%
Remaining life assumption (in years) | 0.08 - 5.00 |  | 3.27
____________________ (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 available-for-sale, equity warrants, and credit-linked notes measured at fair value on a recurring basis for the period indicated:
| Corporate |  | Equity |  | Credit-Linked
| Debt Securities |  | Warrants |  | Notes
| (In thousands)
Balance, December 31, 2023 | $ | 40,249 |  |  | $ | 3,689 |  |  | $ | 123,116 |
Total included in earnings | — |  |  | (146) |  |  | 2,775 |
Total included in other comprehensive income | (1,021) |  |  | — |  |  | 615 |
Issuances | — |  |  | 296 |  |  | — |
Principal payments | — |  |  | — |  |  | (2,072) |
Transfer from Level 2 | 8,750 |  |  | — |  |  | — |
Transfer to Level 2 | (33,859) |  |  | — |  |  | — |
Exercises and settlements | — |  |  | (280) |  |  | — |
Transfers to Level 1 (equity investments with readily |  |  |  |  |
determinable fair values) | — |  |  | (2) |  |  | — |
Balance, June 30, 2024 | $ | 14,119 |  |  | $ | 3,557 |  |  | $ | 124,434 |
Unrealized net gains (losses) for the period included in other |  |  |  |  |
comprehensive income for securities held at quarter-end | $ | (3,131) |  |  |  |  |
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, 2024
Measured on a Non-Recurring Basis | Total |  | Level 1 |  | Level 2 |  | Level 3
| (In thousands)
Individually evaluated loans and leases | $ | 29,027 |  |  | $ | — |  |  | $ | 23,373 |  |  | $ | 5,654 |
OREO | 2,800 |  |  | — |  |  | 2,800 |  |  | — |
Total non-recurring | $ | 31,827 |  |  | $ | — |  |  | $ | 26,173 |  |  | $ | 5,654 |
| Fair Value Measurement as of
| December 31, 2023
Measured on a Non-Recurring Basis | Total |  | Level 1 |  | Level 2 |  | Level 3
| (In thousands)
Individually evaluated loans and leases | $ | 6,402 |  |  | $ | — |  |  | $ | 4,051 |  |  | $ | 2,351 |
OREO | 3,422 |  |  | — |  |  | 3,422 |  |  | — |
Total non-recurring | $ | 9,824 |  |  | $ | — |  |  | $ | 7,473 |  |  | $ | 2,351 |
The following table presents losses recognized on assets measured on a nonrecurring basis for the periods indicated:
| Three Months Ended |  | Six Months Ended
Losses on Assets | June 30, |  | June 30,
Measured on a Non-Recurring Basis | 2024 |  | 2023 |  | 2024 |  | 2023
| (In thousands)
Individually evaluated loans and leases | $ | 2,680 |  |  | $ | 925 |  |  | $ | 11,232 |  |  | $ | 4,946 |
OREO | 340 |  |  | 158 |  |  | 579 |  |  | 158 |
Total losses | $ | 3,020 |  |  | $ | 1,083 |  |  | $ | 11,811 |  |  | $ | 5,104 |
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, 2024
|  |  |  | Valuation |  | Unobservable |  | Input or |  | Weighted
Asset |  | Fair Value |  | Technique |  | Inputs |  | Range |  | Average
|  | (In thousands)
Individually evaluated |  |  |  |  |  |  |  |  |  |
loans and leases |  | 5,654 |  | Third-party appraisals |  | No discounts |  |  |  |
Total non-recurring Level 3 |  | $ | 5,654 |  |  |  |  |  |  |  |
The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated:
| June 30, 2024
| Carrying |  | Estimated Fair Value
| Amount |  | Total |  | Level 1 |  | Level 2 |  | Level 3
| (In thousands)
Financial Assets: |  |  |  |  |  |  |  |  |
Cash and due from banks | $ | 203,467 |  |  | $ | 203,467 |  |  | $ | 203,467 |  |  | $ | — |  |  | $ | — |
Interest-earning deposits in financial institutions | 2,495,343 |  |  | 2,495,343 |  |  | 2,495,343 |  |  | — |  |  | — |
Securities available-for-sale | 2,244,031 |  |  | 2,244,031 |  |  | — |  |  | 2,229,912 |  |  | 14,119 |
Securities held-to-maturity | 2,296,708 |  |  | 2,145,929 |  |  | 171,929 |  |  | 1,970,633 |  |  | 3,367 |
Investment in FRB and FHLB stock | 132,380 |  |  | 132,380 |  |  | — |  |  | 132,380 |  |  | — |
Loans held for sale | 1,935,455 |  |  | 1,936,118 |  |  | — |  |  | 1,936,118 |  |  | — |
Loans and leases held for investment, net | 22,981,147 |  |  | 21,809,106 |  |  | — |  |  | 23,373 |  |  | 21,785,733 |
Equity investments with readily determinable fair values | 1 |  |  | 1 |  |  | 1 |  |  | — |  |  | — |
Equity warrants | 3,557 |  |  | 3,557 |  |  | — |  |  | — |  |  | 3,557 |
Interest rate and economic contracts | 10,727 |  |  | 10,727 |  |  | — |  |  | 10,727 |  |  | — |
Servicing rights | 20,783 |  |  | 21,988 |  |  | — |  |  | — |  |  | 21,988 |
Financial Liabilities: |  |  |  |  |  |  |  |  |
Demand, checking, money market, and savings deposits | 22,012,326 |  |  | 22,012,326 |  |  | — |  |  | 22,012,326 |  |  | — |
Time deposits | 6,792,124 |  |  | 6,847,891 |  |  | — |  |  | 6,847,891 |  |  | — |
Borrowings | 1,440,875 |  |  | 1,441,407 |  |  | — |  |  | 1,316,973 |  |  | 124,434 |
Subordinated debt | 939,287 |  |  | 873,446 |  |  | — |  |  | 873,446 |  |  | — |
Derivative liabilities | 7,609 |  |  | 7,609 |  |  | — |  |  | 7,609 |  |  | — |
| December 31, 2023
| Carrying |  | Estimated Fair Value
| Amount |  | Total |  | Level 1 |  | Level 2 |  | Level 3
| (In thousands)
Financial Assets: |  |  |  |  |  |  |  |  |
Cash and due from banks | $ | 202,427 |  |  | $ | 202,427 |  |  | $ | 202,427 |  |  | $ | — |  |  | $ | — |
Interest-earning deposits in financial institutions | 5,175,149 |  |  | 5,175,149 |  |  | 5,175,149 |  |  | — |  |  | — |
Securities available-for-sale | 2,346,864 |  |  | 2,346,864 |  |  | 4,968 |  |  | 2,301,647 |  |  | 40,249 |
Securities held-to-maturity | 2,287,291 |  |  | 2,168,316 |  |  | 175,579 |  |  | 1,976,015 |  |  | 16,722 |
Investment in FRB and FHLB stock | 126,346 |  |  | 126,346 |  |  | — |  |  | 126,346 |  |  | — |
Loans held for sale | 122,757 |  |  | 126,646 |  |  | — |  |  | 126,646 |  |  | — |
Loans and leases held for investment, net | 25,208,000 |  |  | 23,551,725 |  |  | — |  |  | 4,051 |  |  | 23,547,674 |
Equity investments with readily determinable fair values | 1 |  |  | 1 |  |  | 1 |  |  | — |  |  | — |
Equity warrants | 3,689 |  |  | 3,689 |  |  | — |  |  | — |  |  | 3,689 |
Interest rate and economic contracts | 8,309 |  |  | 8,309 |  |  | — |  |  | 8,309 |  |  | — |
Servicing rights | 22,174 |  |  | 22,174 |  |  | — |  |  | — |  |  | 22,174 |
Financial Liabilities: |  |  |  |  |  |  |  |  |
Demand, checking, money market, and savings deposits | 23,768,896 |  |  | 23,768,896 |  |  | — |  |  | 23,768,896 |  |  | — |
Time deposits | 6,632,873 |  |  | 6,732,246 |  |  | — |  |  | 6,732,246 |  |  | — |
Borrowings | 2,911,322 |  |  | 2,908,527 |  |  | — |  |  | 2,785,411 |  |  | 123,116 |
Subordinated debt | 936,599 |  |  | 851,625 |  |  | — |  |  | 851,625 |  |  | — |
Derivative liabilities | 10,549 |  |  | 10,549 |  |  | — |  |  | 10,549 |  |  | — |
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, 2024, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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