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 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.

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 prepayments 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, CLO, 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 loans held for sale at fair value under the fair value option per ASC Topic 825, Financial Instruments. Electing to measure originated 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 loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions. Accordingly, originated 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 loans held for sale:


	At March 31, 2024						At December 31, 2023
(In thousands)	Fair Value		UPB		Difference		Fair Value		UPB		Difference
Originated loans held for sale	$	323	$	316	$	7	$	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 March 31, 2024, and December 31, 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 March 31, 2024, and December 31, 2023, equity investments with a readily determinable fair value had a total carrying amount of $1.2 million and $0.9 million, respectively, with no remaining unfunded commitment. During the three months ended March 31, 2024, there were total write-ups in fair value of $0.3 million associated with these alternative investments.

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 March 31, 2024, and December 31, 2023, these alternative investments had a total carrying amount of $38.6 million and $35.9 million, respectively, and a remaining unfunded commitment of $27.9 million and $29.8 million, respectively.

Contingent Consideration. The Company recorded $16.0 million of contingent consideration at fair value related to two earn-out agreements associated with the acquisition of interLINK on January 11, 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 counterparty 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.


	At March 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 %	1.63	6.40 %	$	182
(ii) Deposit program growth	$	12,500	100.0 %	0.75	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 (1)	$	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 three months ended March 31, 2024, to settle a portion of its contingent consideration obligation with StoneCastle Partners LLC in accordance with the purchase agreement.

Contingent consideration liabilities are included within Accrued expenses and other liabilities on the accompanying Condensed Consolidated Balance Sheets. Any fair value adjustments to contingent consideration liabilities are included in Other expense on the accompanying Condensed Consolidated Statements of Income.

The following tables summarize the fair values of assets and liabilities measured at fair value on a recurring basis:


	At March 31, 2024
(In thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:
Available-for-sale securities:

Government agency debentures	$	—	$	262,488	$	—	$	262,488
Municipal bonds and notes	—		1,207,350		—		1,207,350
Agency CMO	—		46,236		—		46,236
Agency MBS	—		3,364,414		—		3,364,414
Agency CMBS	—		2,321,230		—		2,321,230
CMBS	—		731,851		—		731,851

Corporate debt	—		617,209		—		617,209
Private label MBS	—		41,308		—		41,308
Other	—		9,055		—		9,055
Total available-for-sale securities	—		8,601,141		—		8,601,141
Gross derivative instruments, before netting (1)	594		362,948		—		363,542
Originated loans held for sale	—		323		—		323
Investments held in Rabbi Trusts	12,545		—		—		12,545
Alternative investments	1,221		—		—		1,221
Alternative investments measured at NAV (2)	—		—		—		38,620
Total financial assets	$	14,360	$	8,964,412	$	—	$	9,017,392
Financial Liabilities:
Gross derivative instruments, before netting (1)	$	160	$	407,233	$	—	$	407,393
Contingent consideration	—		—		11,750		11,750
Total financial liabilities	$	160	$	407,233	$	11,750	$	419,143


	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 Trusts	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
Total financial liabilities	$	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 12: Derivative Financial Instruments.

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 March 31, 2024, and December 31, 2023, the carrying amount of these alternative investments was $55.3 million and $53.1 million, respectively, of which $1.4 million and $7.9 million, respectively, were considered to be measured at fair value. During the three months ended March 31, 2024, there was $1.7 million in total
write-ups due to observable price changes and $0.5 million of total write-downs due to impairment.

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 into held for sale classification, 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 March 31, 2024, and December 31, 2023, there were $239.3 million and $3.9 million loans that were transferred to held for sale on the Condensed Consolidated Balance Sheet, 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 March 31, 2024, and December 31, 2023, the total carrying value of OREO and repossessed assets was $5.6 million and $9.1 million, respectively. In addition, the amortized cost of consumer loans secured by residential real estate property that were in process of foreclosure at March 31, 2024, was $9.1 million.

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 comprises 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 comprises 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 Other Borrowings. The fair value of securities sold under agreements to repurchase and other borrowings that mature within 90 days approximates their carrying value. The fair value of securities sold under agreements to repurchase and other borrowings 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 other borrowings 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.


	At March 31, 2024				At December 31, 2023
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Level 1
Cash and cash equivalents	$	1,545,228	$	1,545,228	$	1,715,795	$	1,715,795
Level 2
Held-to-maturity investment securities, net	7,679,891		6,782,867		7,074,588		6,264,623
Level 3
Loans and leases, net	50,457,200		48,348,067		50,090,315		48,048,106
Mortgage servicing rights	1,514		3,973		8,523		24,495
Liabilities:
Level 2
Deposit liabilities	$	53,810,423	$	53,810,423	$	52,319,825	$	52,319,825
Time deposits	6,937,320		6,902,736		8,464,459		8,426,708
Securities sold under agreements to repurchase and other borrowings	361,886		361,867		458,387		458,380
FHLB advances	3,659,930		3,657,612		2,360,018		2,358,381
Long-term debt (1)	914,520		852,877		1,048,820		999,918