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Fair Value Measurements

3 Months Ended

Mar. 31, 2026

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring

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 $112.5 million at March 31, 2026. The carrying value of the credit-linked notes at March 31, 2026 was the estimated fair value of $111.3 million. Interest expense on the credit-linked notes totaled $4.1 million and $4.5 million for the three months ended March 31, 2026 and 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 March 31,

Credit-Linked Notes	2026		2025
	(In thousands)
Changes in fair value - gains included in earnings	$	94	$	482
Changes in fair value - other comprehensive (loss) income	$	(111)	$	146

The following table provides information about the credit-linked notes carried at fair value as of the dates indicated:


Credit-Linked Notes	March 31, 2026		December 31, 2025
	(In thousands)

Carrying value reported on the consolidated balance sheets	$	111,250	$	113,634
Aggregate unpaid principal balance in excess of fair value	$	1,203	$	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 March 31, 2026, the fair value of these investments was $122.6 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 March 31, 2026
Measured on a Recurring Basis	Total		Level 1		Level 2		Level 3
	(In thousands)
Securities AFS:
Agency residential MBS	$	811,661	$	—	$	811,661	$	—

Agency commercial MBS	50,981		—		50,981		—
Agency residential CMOs	1,104,183		—		1,104,183		—

Corporate debt securities	231,958		—		229,708		2,250
Private label residential CMOs	233,184		—		233,184		—
Collateralized loan obligations	200,374		—		200,374		—
Private label commercial MBS	8,270		—		8,270		—
Asset-backed securities	12,661		—		12,661		—
SBA securities	3,060		—		3,060		—
Total securities AFS	$	2,656,332	$	—	$	2,654,082	$	2,250
Equity investments with readily determinable fair values	$	1,082	$	1,082	$	—	$	—
Derivatives (1):
Derivative assets
Cash flow hedges	5,818		—		5,818		—
Interest rate and foreign exchange contracts	4,362		—		4,362		—
Equity warrants	3,363		—		—		3,363
Derivative liabilities
Cash flow hedges	1,838		—		1,838		—
Interest rate and foreign exchange contracts	4,461		—		4,461		—
Credit-linked notes	111,250		—		—		111,250

___________________

(1) For information regarding derivative instruments, see "Note 9. Derivatives".


	Fair Value Measurements as of December 31, 2025
Measured on a Recurring Basis	Total		Level 1		Level 2		Level 3
	(In thousands)
Securities AFS:
Agency residential MBS	$	834,085	$	—	$	834,085	$	—

Agency commercial MBS	50,966		—		50,966		—
Agency residential CMOs	871,624		—		871,624		—

Corporate debt securities	241,596		—		239,226		2,370
Private label residential CMOs	228,975		—		228,975		—
Collateralized loan obligations	200,822		—		200,822		—
Private label commercial MBS	9,279		—		9,279		—
Asset-backed securities	13,249		—		13,249		—
SBA securities	3,462		—		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 contracts	4,124		—		4,124		—
Equity warrants	3,437		—		—		3,437
Derivative liabilities
Cash flow hedges	4,065		—		4,065		—
Interest rate and foreign exchange contracts	4,156		—		4,156		—
Credit-linked notes	113,634		—		—		113,634

____________________

(1) For information regarding derivative instruments, see "Note 9. Derivatives".

During the three months ended March 31, 2026, there were $1.1 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 three months ended March 31, 2026 and no 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 March 31, 2026

	Input or Range	Weighted Average
Unobservable Inputs	of Inputs	Input (1)
Spread to 10 Year Treasury	2.7% - 10.3%	4.8%
Discount rates	7.0% - 14.6%	9.2%

____________________

(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 March 31, 2026

	Range	Weighted Average
Unobservable Inputs	of Inputs	Input (1)
Volatility (1)	23.5% - 1,027.0%	24.7%
Risk-free interest rate	3.7% - 3.9%	3.8%
Remaining life assumption (in years)	0.08 - 4.99	3.24 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 Securities		Warrants		Notes
	(In thousands)
Balance, December 31, 2025	$	2,370	$	3,437	$	113,634
Total included in earnings	—		—		(94)
Total included in other comprehensive income	(120)		938		111

Issuances	—		143		—
Principal payments	—		—		(2,401)




Exercises and settlements	—		(51)		—

Transfers to Level 1 (equity investments with readily determinable fair values)	—		(1,104)		—
Balance, March 31, 2026	$	2,250	$	3,363	$	111,250

Unrealized net loss for the period included in other
comprehensive income for securities held at quarter-end	$	(750)

The following tables present assets measured at fair value on a non-recurring basis as of the dates indicated:


	Fair Value Measurement as of March 31, 2026
Measured on a Nonrecurring Basis	Total		Level 1		Level 2		Level 3
	(In thousands)
Individually evaluated loans and leases	$	50,721	$	—	$	24,129	$	26,592

OREO	290		—		290		—
Total non-recurring	$	51,011	$	—	$	24,419	$	26,592


	Fair Value Measurement as of December 31, 2025
Measured on a Nonrecurring Basis	Total		Level 1		Level 2		Level 3
	(In thousands)
Individually evaluated loans and leases	$	52,443	$	—	$	48,401	$	4,042
OREO	248		—		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 March 31,
Loss on Assets Measured on a Non‑Recurring Basis	2026		2025
	(In thousands)
Individually evaluated loans and leases	$	5,023	$	11,285

OREO	44		266
Total losses	$	5,067	$	11,551

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:

March 31, 2026

Valuation

Unobservable

Input or

Weighted

Asset

Fair Value

Technique

Inputs

Range

Average

(In thousands)

Individually evaluated loans and leases

26,592

Third party appraisal

Discount from appraisal

7.75% - 7.75%

7.75%

Total non-recurring Level 3

26,592

The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated:


	March 31, 2026
	Carrying		Estimated Fair Value
	Amount		Total		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and due from banks	$	214,120	$	214,120	$	214,120	$	—	$	—
Interest-earning deposits in financial institutions	2,003,149		2,003,149		2,003,149		—		—
Securities AFS	2,656,332		2,656,332		—		2,654,082		2,250
Securities HTM	2,313,548		2,227,000		184,111		2,038,915		3,974
Investment in FRB and FHLB stock	170,342		170,342		—		170,342		—
Loans HFS	259,049		259,429		—		259,429		—
Loans and leases HFI, net	24,538,747		23,526,921		—		24,129		23,502,792
Equity investments with readily determinable fair values	1,082		1,082		1,082		—		—
Equity warrants	3,363		3,363		—		—		3,363
Cash flow hedges	5,818		5,818		—		5,818		—
Interest rate and foreign exchange contracts	4,362		4,362		—		4,362		—
Servicing rights	16,968		18,653		—		—		18,653

Financial Liabilities:
Demand, checking, money market, and savings deposits	22,610,386		22,610,386		—		22,610,386		—
Time deposits	4,711,748		4,699,767		—		4,699,767		—
Borrowings	2,551,250		2,552,604		440,000		2,001,354		111,250
Subordinated debt	954,072		934,399		—		934,399		—
Cash flow hedges	1,838		1,838		—		1,838		—
Interest rate and foreign exchange contracts	4,461		4,461		—		4,461		—


	December 31, 2025
	Carrying		Estimated Fair Value
	Amount		Total		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and due from banks	$	181,103	$	181,103	$	181,103	$	—	$	—
Interest-earning deposits in financial institutions	2,126,862		2,126,862		2,126,862		—		—
Securities AFS	2,454,058		2,454,058		—		2,451,688		2,370
Securities HTM	2,308,636		2,246,526		185,088		2,057,189		4,249
Investment in FRB and FHLB stock	160,442		160,442		—		160,442		—
Loans HFS	182,936		183,083		—		183,083		—
Loans and leases HFI, net	24,787,067		23,871,794		—		48,401		23,823,393
Equity investments with readily determinable fair values	2		2		2		—		—
Equity warrants	3,437		3,437		—		—		3,437

Interest rate and foreign exchange contracts	4,124		4,124		—		4,124		—
Servicing rights	17,480		19,427		—		—		19,427

Financial Liabilities:
Demand, checking, money market, and savings deposits	23,156,094		23,156,094		—		23,156,094		—
Time deposits	4,687,263		4,684,099		—		4,684,099		—
Borrowings	2,063,819		2,069,076		275,185		1,680,257		113,634
Subordinated debt	952,740		934,819		—		934,819		—
Cash flow hedges	4,065		4,065		—		4,065		—
Interest rate and foreign exchange contracts	4,156		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 March 31, 2026, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different.