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Fair Value
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value

6. FAIR VALUE

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Fair values represent the estimated price that would be received from selling an asset or paid to transfer a liability, otherwise known as an “exit price.” Securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write downs of individual assets. FASB ASC Topic 820, “Fair Value Measurements and Disclosures” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Fair Value Hierarchy

The Company groups financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

•
Level 1—Quoted prices in active markets for identical assets or liabilities.
•
Level 2—Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability.

The fair value disclosures below represent the Company’s estimates based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding current economic conditions, risk characteristics of the various instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in the above methodologies and assumptions could significantly affect the estimates.

The following tables present fair values for assets measured at fair value on a recurring basis:

 

 

December 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Available for sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

—

 

 

$

16,325

 

 

$

—

 

 

$

16,325

 

Collateralized mortgage obligations

 

 

—

 

 

 

212,990

 

 

 

—

 

 

 

212,990

 

Mortgage-backed securities

 

 

—

 

 

 

107,645

 

 

 

—

 

 

 

107,645

 

Derivative financial instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments

 

 

—

 

 

 

144

 

 

 

—

 

 

 

144

 

Forward mortgage-backed securities trades

 

 

—

 

 

 

75

 

 

 

—

 

 

 

75

 

Loan customer counterparty

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Financial institution counterparty

 

 

—

 

 

 

686

 

 

 

—

 

 

 

686

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments

 

$

—

 

 

$

1

 

 

$

—

 

 

$

1

 

Forward mortgage-backed securities trades

 

 

—

 

 

 

37

 

 

 

—

 

 

 

37

 

Loan customer counterparty

 

 

—

 

 

 

693

 

 

 

—

 

 

 

693

 

Financial institution counterparty

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Available for sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

—

 

 

$

21,787

 

 

$

—

 

 

$

21,787

 

Collateralized mortgage obligations

 

 

—

 

 

 

320,044

 

 

 

—

 

 

 

320,044

 

Mortgage-backed securities

 

 

—

 

 

 

96,757

 

 

 

—

 

 

 

96,757

 

Derivative financial instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments

 

 

—

 

 

 

218

 

 

 

—

 

 

 

218

 

Forward mortgage-backed securities trades

 

 

—

 

 

 

1

 

 

 

—

 

 

 

1

 

Loan customer counterparty

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Financial institution counterparty

 

 

—

 

 

 

3,876

 

 

 

—

 

 

 

3,876

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Forward mortgage-backed securities trades

 

 

—

 

 

 

161

 

 

 

—

 

 

 

161

 

Loan customer counterparty

 

 

—

 

 

 

3,899

 

 

 

—

 

 

 

3,899

 

Financial institution counterparty

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These instruments include other real estate owned, repossessed assets, held to maturity debt securities, loans held for sale, and impaired loans. For the year ended December 31, 2024, the Company had additions to other real estate owned of $9.2 million, of which $4.4 million were outstanding as of December 31, 2024. For the year ended December 31, 2024, the Company had additions to impaired loans of $53.7 million, of which $38.7 million were outstanding as of December 31, 2024. The remaining financial assets and liabilities measured at fair value on a non-recurring basis that were recorded in 2024 and remained outstanding at December 31, 2024 were not significant.

The following tables summarize the carrying values and estimated fair values of certain financial instruments not recorded at fair value on a recurring basis:

 

 

As of December 31,2024

 

 

 

Carrying

 

 

Estimated Fair Value

 

 

 

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(Dollars in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

1,972,175

 

 

$

1,972,175

 

 

$

—

 

 

$

—

 

 

$

1,972,175

 

Federal funds sold

 

 

292

 

 

 

292

 

 

 

—

 

 

 

—

 

 

 

292

 

Held to maturity securities

 

 

10,757,464

 

 

 

—

 

 

 

9,382,479

 

 

 

—

 

 

 

9,382,479

 

Loans held for sale

 

 

10,690

 

 

 

—

 

 

 

10,690

 

 

 

—

 

 

 

10,690

 

Loans held for investment, net of allowance

 

 

20,705,811

 

 

 

—

 

 

 

—

 

 

 

19,379,556

 

 

 

19,379,556

 

Loans held for investment - Warehouse Purchase Program

 

 

1,080,903

 

 

 

—

 

 

 

1,080,903

 

 

 

—

 

 

 

1,080,903

 

Other real estate owned

 

 

5,701

 

 

 

—

 

 

 

5,701

 

 

 

—

 

 

 

5,701

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

9,798,438

 

 

$

—

 

 

$

9,798,438

 

 

$

—

 

 

$

9,798,438

 

Interest-bearing

 

 

18,582,900

 

 

 

—

 

 

 

18,559,227

 

 

 

—

 

 

 

18,559,227

 

Other borrowings

 

 

3,200,000

 

 

 

—

 

 

 

3,200,000

 

 

 

—

 

 

 

3,200,000

 

Securities sold under repurchase agreements

 

 

221,913

 

 

 

—

 

 

 

221,902

 

 

 

—

 

 

 

221,902

 

 

 

As of December 31,2023

 

 

 

Carrying

 

 

Estimated Fair Value

 

 

 

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(Dollars in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

458,153

 

 

$

458,153

 

 

$

—

 

 

$

—

 

 

$

458,153

 

Federal funds sold

 

 

260

 

 

 

260

 

 

 

—

 

 

 

—

 

 

 

260

 

Held to maturity securities

 

 

12,365,308

 

 

 

—

 

 

 

10,984,598

 

 

 

—

 

 

 

10,984,598

 

Loans held for sale

 

 

5,734

 

 

 

—

 

 

 

5,734

 

 

 

—

 

 

 

5,734

 

Loans held for investment, net of allowance

 

 

20,020,197

 

 

 

—

 

 

 

—

 

 

 

18,321,054

 

 

 

18,321,054

 

Loans held for investment - Warehouse Purchase Program

 

 

822,245

 

 

 

—

 

 

 

822,245

 

 

 

—

 

 

 

822,245

 

Other real estate owned

 

 

1,708

 

 

 

—

 

 

 

1,708

 

 

 

—

 

 

 

1,708

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

9,776,572

 

 

$

—

 

 

$

9,776,572

 

 

$

—

 

 

$

9,776,572

 

Interest-bearing

 

 

17,403,237

 

 

 

—

 

 

 

17,371,523

 

 

 

—

 

 

 

17,371,523

 

Other borrowings

 

 

3,725,000

 

 

 

—

 

 

 

3,725,000

 

 

 

—

 

 

 

3,725,000

 

Securities sold under repurchase agreements

 

 

309,277

 

 

 

—

 

 

 

309,245

 

 

 

—

 

 

 

309,245

 

Entities may choose to measure eligible financial instruments at fair value at specified election dates. The fair value measurement option (1) may be applied instrument by instrument, with certain exceptions, (2) is generally irrevocable and (3) is applied only to entire instruments and not to portions of instruments. Unrealized gains and losses on items for which the fair value measurement option has been elected must be reported in earnings at each subsequent reporting date. During the reported periods, the Company had no financial instruments measured at fair value under the fair value measurement option.

The fair value estimates presented herein are based on pertinent information available to management as of the dates indicated. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value, non-financial assets and non-financial liabilities, and for estimating fair value for financial instruments not recorded at fair value:

Loans held for sale—Loans held for sale are carried at the lower of cost or estimated fair value. Fair value for consumer mortgages held for sale is based on commitments on hand from investors or prevailing market prices. As such, the Company classifies loans held for sale subjected to nonrecurring fair value adjustments as Level 2.

Loans held for investment—The Company does not record loans at fair value on a recurring basis. As such, valuation techniques discussed herein for loans are primarily for estimating fair value disclosures. The Company’s discounted cash flow calculation to determine fair value considers internal and market-based information such as prepayment risk, cost of funds and liquidity. From time to time, the Company records nonrecurring fair value adjustments to impaired loans to reflect (1) partial write downs that are based on the observable market price or current appraised value of the collateral, or (2) the full charge-off of the loan carrying value. Where appraisals are not available, estimated cash flows are discounted using a rate commensurate with the credit risk associated with those cash flows. Assumptions regarding credit risk, cash flows and discount rates are judgmentally determined using available market information and specific borrower information.

The Company classifies the estimated fair value of loans held for investment as Level 3.

Other real estate owned—Other real estate owned is primarily foreclosed properties securing residential loans and commercial real estate loans. Foreclosed assets are adjusted to fair value less estimated costs to sell upon transfer of the loans to other real estate owned. Subsequently, these assets are carried at the lower of carrying value or fair value less estimated costs to sell. Other real estate carried at fair value based on an observable market price or a current appraised value is classified by the Company as Level 2. When management determines that the fair value of other real estate requires additional adjustments, either as a result of a non-current appraisal or when there is no observable market price, the Company classifies the other real estate as Level 3.

The fair value estimates presented herein are based on information available to management at December 31, 2024. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.