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Fair Value Measurements
 9 Months Ended
Sep. 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 September 30, 2024, the fair value of these investments was $108.6 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
September 30, 2024
Measured on a Recurring BasisTotalLevel 1Level 2Level 3
(In thousands)
Securities available-for-sale:
Agency residential MBS$922,448 $— $922,448 $— 
Agency commercial MBS33,532 — 33,532 — 
Agency residential CMOs418,240 — 418,240 — 
Municipal securities597 — 597 — 
Corporate debt securities266,630 — 251,221 15,409 
Private label residential CMOs339,725 — 339,725 — 
Collateralized loan obligations284,973 — 284,973 — 
Private label commercial MBS13,622 — 13,622 — 
Asset-backed securities16,204 — 16,204 — 
SBA securities4,313 — 4,313 — 
Total securities available-for-sale$2,300,284 $— $2,284,875 $15,409 
Equity investments with readily determinable fair values$1 $1 $— $— 
Derivatives (1):
Equity warrants 3,297 — — 3,297 
Interest rate and economic contracts7,565 — 7,565 — 
Derivative liabilities 13,327 — 13,327 — 
Credit-linked notes119,624 — — 119,624 
Fair Value Measurements as of
December 31, 2023
Measured on a Recurring BasisTotalLevel 1Level 2Level 3
(In thousands)
Securities available-for-sale:
Agency residential MBS$1,187,609 $— $1,187,609 $— 
U.S. Treasury securities4,968 4,968 — — 
Agency commercial MBS253,306 — 253,306 — 
Agency residential CMOs284,334 — 284,334 — 
Municipal securities28,083 — 28,083 — 
Corporate debt securities267,232 — 226,983 40,249 
Private label residential CMOs158,412 — 158,412 — 
Collateralized loan obligations108,416 — 108,416 — 
Private label commercial MBS20,813 — 20,813 — 
Asset-backed securities19,952 — 19,952 — 
SBA securities13,739 — 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 contracts8,309 — 8,309 — 
Derivative liabilities 10,549 — 10,549 — 
Credit-linked notes123,116 — — 123,116 
____________________
(1)    For information regarding derivative instruments, see Note 10. Derivatives.
During the nine months ended September 30, 2024, there was a $20,000 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 $38.1 million transfer of corporate debt securities from Level 3 to Level 2 during the nine months ended September 30, 2024 and an $16.8 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:
September 30, 2024
Corporate Debt Securities
Input or
Weighted
Range
Average
Unobservable Inputsof Inputs
Input (1)
Spread to 10 Year Treasury
4.0% - 9.2%
5.6%
Discount rates
7.8% - 13.0%
9.4%
____________________
(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:
September 30, 2024
Equity Warrants
Weighted
RangeAverage
Unobservable Inputsof Inputs
Input (1)
Volatility
20.8% - 166.8%
25.7%
Risk-free interest rate
3.6% - 4.9%
3.7%
Remaining life assumption (in years)
0.08 - 4.98
3.18
____________________
(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 SecuritiesWarrantsNotes
(In thousands)
Balance, December 31, 2023$40,249 $3,689 $123,116 
Total included in earnings— 65 (1,624)
Total included in other comprehensive income (3,441)— 2,110 
Issuances— 347 — 
Principal payments— — (3,978)
Transfer from Level 216,750 — — 
Transfer to Level 2(38,149)— — 
Exercises and settlements — (784)— 
Transfers to Level 1 (equity investments with readily
determinable fair values)— (20)— 
Balance, September 30, 2024$15,409 $3,297 $119,624 
Unrealized net gains (losses) for the period included in other
comprehensive income for securities held at quarter-end$(4,341)
The following tables present assets measured at fair value on a non-recurring basis as of the dates indicated:
Fair Value Measurement as of
September 30, 2024
Measured on a Non-Recurring BasisTotalLevel 1Level 2Level 3
(In thousands)
Individually evaluated loans and leases $55,519 $— $34,204 $21,315 
OREO4,479 — 4,479 — 
Total non-recurring$59,998 $— $38,683 $21,315 

Fair Value Measurement as of
December 31, 2023
Measured on a Non-Recurring BasisTotalLevel 1Level 2Level 3
(In thousands)
Individually evaluated loans and leases $6,402 $— $4,051 $2,351 
OREO3,422 — 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 EndedNine Months Ended
Losses on Assets September 30,September 30,
Measured on a Non-Recurring Basis2024202320242023
(In thousands)
Individually evaluated loans and leases$8,945 $6,108 $29,192 $11,083 
OREO207 16 336 16 
Total losses$9,152 $6,124 $29,528 $11,099 
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:
September 30, 2024
ValuationUnobservableInput or
Weighted
Asset
Fair Value
TechniqueInputsRange
Average
(In thousands)
Individually evaluated
loans and leases (1)
$13,957Discounted cash flowsDiscount rates
8.50% - 8.50%
8.50%
Individually evaluated
loans and leases7,358Third-party appraisalsNo discounts
Total non-recurring Level 3$21,315
__________________
(1)    Relates to one loan at September 30, 2024.
The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated:
September 30, 2024
Carrying
Estimated Fair Value
AmountTotalLevel 1Level 2Level 3
(In thousands)
Financial Assets:
Cash and due from banks$251,869 $251,869 $251,869 $— $— 
Interest-earning deposits in financial institutions2,302,358 2,302,358 2,302,358 — — 
Securities available-for-sale2,300,284 2,300,284 — 2,284,875 15,409 
Securities held-to-maturity2,301,263 2,229,482 180,427 2,045,576 3,479 
Investment in FRB and FHLB stock145,123 145,123 — 145,123 — 
Loans held for sale28,639 29,355 — 29,355 — 
Loans and leases held for investment, net23,273,432 22,198,131 — 34,204 22,163,927 
Equity investments with readily determinable fair values1 1 1 — — 
Equity warrants3,297 3,297 — — 3,297 
Interest rate and economic contracts7,565 7,565 — 7,565 — 
Servicing rights20,102 20,661 — — 20,661 
Financial Liabilities:
Demand, checking, money market, and savings deposits22,383,666 22,383,666 — 22,383,666 — 
Time deposits4,444,603 4,513,879 — 4,513,879 — 
Borrowings1,591,833 1,564,364 — 1,444,740 119,624 
Subordinated debt942,151 886,815 — 886,815 — 
Derivative liabilities13,327 13,327 — 13,327 — 
December 31, 2023
Carrying
Estimated Fair Value
AmountTotalLevel 1Level 2Level 3
(In thousands)
Financial Assets:
Cash and due from banks$202,427 $202,427 $202,427 $— $— 
Interest-earning deposits in financial institutions5,175,149 5,175,149 5,175,149 — — 
Securities available-for-sale2,346,864 2,346,864 4,968 2,301,647 40,249 
Securities held-to-maturity2,287,291 2,168,316 175,579 1,976,015 16,722 
Investment in FRB and FHLB stock126,346 126,346 — 126,346 — 
Loans held for sale122,757 126,646 — 126,646 — 
Loans and leases held for investment, net25,208,000 23,551,725 — 4,051 23,547,674 
Equity investments with readily determinable fair values1 1 1 — — 
Equity warrants3,689 3,689 — — 3,689 
Interest rate and economic contracts8,309 8,309 — 8,309 — 
Servicing rights22,174 22,174 — — 22,174 
Financial Liabilities:
Demand, checking, money market, and savings deposits23,768,896 23,768,896 — 23,768,896 — 
Time deposits6,632,873 6,732,246 — 6,732,246 — 
Borrowings2,911,322 2,908,527 — 2,785,411 123,116 
Subordinated debt936,599 851,625 — 851,625 — 
Derivative liabilities10,549 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 September 30, 2024, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different.