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FAIR VALUE MEASURES | 12 Months Ended
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Dec. 31, 2024
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASURES | FAIR VALUE MEASURES The fair value of an asset or liability is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability. The accounting standard for disclosures about the fair value measures excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The Company's loans held for sale under the fair value option are comprised of the following:
| December 31,
(dollars in thousands) | 2024 |  | 2023
Mortgage loans held for sale | $ | 528,599 |  |  | $ | 281,332 |
SBA loans held for sale | — |  |  | — |
Total loans held for sale | $ | 528,599 |  |  | $ | 281,332 |
The Company has elected to record mortgage loans held for sale at fair value in order to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held for sale is recorded on an accrual basis in the consolidated statement of income under the heading interest income – interest and fees on loans. The servicing value is included in the fair value of the interest rate lock commitments with borrowers. The mark to market adjustments related to mortgage loans held for sale and the associated economic hedges are captured in mortgage banking activities. A net loss of $3.9 million, a net gain of $6.4 million and a net loss of $35.4 million resulting from fair value changes of these mortgage loans were recorded in income during the years ended December 31, 2024, 2023 and 2022, respectively. These amounts do not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal. A net gain of $9.5 million and net losses of $6.1 million and $7.3 million resulting from changes in the fair value of the related derivative financial instruments used to hedge exposure to the market-related risks associated with these mortgage loans were recorded in income during the years ended December 31, 2024, 2023 and 2022, respectively. The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of December 31, 2024 and 2023.
| December 31,
(dollars in thousands) | 2024 |  | 2023
Aggregate fair value of mortgage loans held for sale | $ | 528,599 |  |  | $ | 281,332 |
Aggregate unpaid principal balance of mortgage loans held for sale | 525,071 |  |  | 273,915 |
Past due loans of 90 days or more | — |  |  | 781 |
Nonaccrual loans | — |  |  | 781 |
Unpaid principal balance of nonaccrual loans | — |  |  | 774 |
As of December 31, 2024 and 2023, there were no SBA loans held for sale.
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale, loans held for sale and derivative financial instruments are recorded at fair value on a recurring basis. From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as collateral-dependent loans, loan servicing rights and OREO. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments. Fair Value Hierarchy The Company groups assets and liabilities 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 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; 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 following methods and assumptions were used by the Company in estimating the fair value of its assets and liabilities recorded at fair value and for estimating the fair value of its financial instruments: Cash and Due From Banks and Interest-Bearing Deposits in Banks: Cash and due from banks and interest-bearing deposits in banks are repriced on a short-term basis; as such, the carrying value approximates fair value approximates fair value. Debt Securities: The fair value of debt securities is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows, and are classified within Level 2 of the valuation hierarchy and includes certain U.S. agency bonds, mortgage-backed securities, collateralized mortgage and debt obligations, SBA pool securities and municipal securities. The Level 2 fair value pricing is provided by an independent third party and is based upon similar securities in an active market. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and may include certain residual municipal securities and other less liquid securities. Loans Held for Sale: The Company records mortgage and SBA loans held for sale at fair value under the fair value option. The fair value of loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy. Loans: The fair value for loans held for investment is estimated using an exit price methodology. An exit price methodology considers expected cash flows that take into account contractual loan terms, as applicable, prepayment expectations, probability of default, loss severity in the event of default, recovery lag and, in the case of variable rate loans, expectations for future interest rate movements. These cash flows are present valued at a risk adjusted discount rate, which considers the cost of funding, liquidity, servicing costs, and other factors. Because observable quoted prices seldom exist for identical or similar assets carried in loans held for investment, Level 3 inputs are primarily used to determine fair value exit pricing. The fair value of collateral-dependent loans is estimated based on discounted cash flows or underlying collateral values, where applicable. When foreclosure is probable, the fair value of collateral-dependent loans is determined based on collateral values less estimated costs to sell. The fair value of collateral dependent-loans for which foreclosure is not probable is measured either using discounted cash flows or estimated collateral value. Management has determined that the majority of collateral-dependent loans are Level 3 assets due to the extensive use of market appraisals. Other Real Estate Owned: The fair value of OREO is determined using certified appraisals and internal evaluations that value the property at its highest and best use by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that OREO should be classified as Level 3. Deposits: The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair value due to those products having no stated maturity. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities and is classified as Level 2. Other Borrowings: The carrying amount of variable rate other borrowings approximates fair value and is classified as Level 1. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar borrowing arrangements and is classified as Level 2. Subordinated Deferrable Interest Debentures: The fair value of the Company’s trust preferred securities is based on discounted cash flows using rates for securities with similar terms and remaining maturities and are classified as Level 2. Off-Balance-Sheet Instruments: Because commitments to extend credit and standby letters of credit are typically made using variable rates and have short maturities, the carrying value and fair value are immaterial for disclosure. Derivatives: The Company has entered into derivative financial instruments to manage interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves). The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees. Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of December 31, 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy. The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of December 31, 2024 and 2023.
| Recurring Basis Fair Value Measurements December 31, 2024
(dollars in thousands) | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Financial assets: |  |  |  |  |  |  |
U.S. Treasuries | $ | 796,464 |  |  | $ | 796,464 |  |  | $ | — |  |  | $ | — |
U.S. government-sponsored agencies | 994 |  |  | — |  |  | 994 |  |  | — |
State, county and municipal securities | 24,740 |  |  | — |  |  | 24,740 |  |  | — |
Corporate debt securities | 10,283 |  |  | — |  |  | 9,263 |  |  | 1,020 |
SBA pool securities | 70,482 |  |  | — |  |  | 70,482 |  |  | — |
Mortgage-backed securities | 768,297 |  |  | — |  |  | 768,297 |  |  | — |
Loans held for sale | 528,599 |  |  | — |  |  | 528,599 |  |  | — |
Derivative financial instruments | 8,717 |  |  | — |  |  | 8,717 |  |  | — |
Mortgage banking derivative instruments | 7,299 |  |  | — |  |  | 7,299 |  |  | — |
Total recurring assets at fair value | $ | 2,215,875 |  |  | $ | 796,464 |  |  | $ | 1,418,391 |  |  | $ | 1,020 |
Financial liabilities: |  |  |  |  |  |  |
Derivative financial instruments | $ | 8,718 |  |  | $ | — |  |  | $ | 8,718 |  |  | $ | — |
Risk participation agreement | 13 |  |  | — |  |  | 13 |  |  | — |
Total recurring liabilities at fair value | $ | 8,731 |  |  | $ | — |  |  | $ | 8,731 |  |  | $ | — |
| Recurring Basis Fair Value Measurements December 31, 2023
(dollars in thousands) | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Financial assets: |  |  |  |  |  |  |
U.S. Treasuries | $ | 720,877 |  |  | $ | 720,877 |  |  | $ | — |  |  | $ | — |
U.S. government-sponsored agencies | 985 |  |  | — |  |  | 985 |  |  | — |
State, county and municipal securities | 28,051 |  |  | — |  |  | 28,051 |  |  | — |
Corporate debt securities | 10,027 |  |  | — |  |  | 9,037 |  |  | 990 |
SBA pool securities | 51,516 |  |  | — |  |  | 51,516 |  |  | — |
Mortgage-backed securities | 591,488 |  |  | — |  |  | 591,488 |  |  | — |
Loans held for sale | 281,332 |  |  | — |  |  | 281,332 |  |  | — |
Derivative financial instruments | 5,937 |  |  | — |  |  | 5,937 |  |  | — |
Mortgage banking derivative instruments | 3,636 |  |  | — |  |  | 3,636 |  |  | — |
Total recurring assets at fair value | $ | 1,693,849 |  |  | $ | 720,877 |  |  | $ | 971,982 |  |  | $ | 990 |
Financial liabilities: |  |  |  |  |  |  |
Derivative financial instruments | $ | 6,203 |  |  | $ | — |  |  | $ | 6,203 |  |  | $ | — |
Risk participation agreement | 65 |  |  | — |  |  | 65 |  |  | — |
Mortgage banking derivative instruments | 5,790 |  |  | — |  |  | 5,790 |  |  | — |
Total recurring liabilities at fair value | $ | 12,058 |  |  | $ | — |  |  | $ | 12,058 |  |  | $ | — |
The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of December 31, 2024 and 2023.
| Nonrecurring Basis Fair Value Measurements
(dollars in thousands) | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
December 31, 2024 |  |  |  |  |  |  |
Collateral-dependent loans | $ | 45,697 |  |  | $ | — |  |  | $ | — |  |  | $ | 45,697 |
Other real estate owned | 1,010 |  |  | — |  |  | — |  |  | 1,010 |
Total nonrecurring assets at fair value | $ | 46,707 |  |  | $ | — |  |  | $ | — |  |  | $ | 46,707 |
December 31, 2023 |  |  |  |  |  |  |
Collateral-dependent loans | $ | 36,978 |  |  | $ | — |  |  | $ | — |  |  | $ | 36,978 |
Other real estate owned | 5,324 |  |  | — |  |  | — |  |  | 5,324 |
Total nonrecurring assets at fair value | $ | 42,302 |  |  | $ | — |  |  | $ | — |  |  | $ | 42,302 |
The inputs used to determine estimated fair value of collateral-dependent loans include market conditions, loan term, underlying collateral characteristics and discount rates. The inputs used to determine fair value of OREO include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates. For the years ended December 31, 2024 and 2023, there was not a change in the methods and significant assumptions used to estimate fair value. The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets.
(dollars in thousands) | Fair Value |  | Valuation Technique |  | Unobservable Inputs |  | Range of Discounts |  | Weighted Average Discount
As of December 31, 2024 |  |  |  |  |  |  |  |  |
Recurring: |  |  |  |  |  |  |  |  |
Debt securities available-for-sale | $ | 1,020 |  |  | Discounted cash flows |  | Probability of Default |  | 10.3% |  | 10.3%
|  | Loss Given Default |  | 45% |  | 45%
Nonrecurring: |  |  |  |  |  |  |  |  |
Collateral-dependent loans | $ | 45,697 |  |  | Third-party appraisals and discounted cash flows |  | Collateral discounts and discount rates |  | 15% - 60% |  | 30%
Other real estate owned | $ | 1,010 |  |  | Third party appraisals and sales contracts |  | Collateral discounts and estimated costs to sell |  | 15% - 44% |  | 26.8%
As of December 31, 2023 |  |  |  |  |  |  |  |  |
Recurring: |  |  |  |  |  |  |  |  |
Debt securities available-for-sale | $ | 990 |  |  | Discounted cash flows |  | Probability of Default |  | 11% |  | 11%
Loss Given Default | 42% |  | 42%
Nonrecurring: |  |  |  |  |  |  |  |  |
Collateral-dependent loans | $ | 36,978 |  |  | Third-party appraisals and discounted cash flows |  | Collateral discounts and discount rates |  | 11% - 60% |  | 28%
Other real estate owned | $ | 5,324 |  |  | Third party appraisals and sales contracts |  | Collateral discounts and estimated costs to sell |  | 15% - 33% |  | 22%
The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial statements, were as follows.
|  |  | Fair Value Measurements December 31, 2024
(dollars in thousands) | Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial assets: |  |  |  |  |  |  |  |  |
Cash and due from banks | $ | 244,980 |  |  | $ | 244,980 |  |  | $ | — |  |  | $ | — |  |  | $ | 244,980 |
Interest-bearing deposits in banks | 975,397 |  |  | 975,397 |  |  | — |  |  | — |  |  | 975,397 |
Debt securities held-to-maturity | 164,677 |  |  | — |  |  | 144,028 |  |  | — |  |  | 144,028 |
Loans, net | 20,356,125 |  |  | — |  |  | — |  |  | 19,882,553 |  |  | 19,882,553 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Deposits | 21,722,448 |  |  | — |  |  | 21,721,421 |  |  | — |  |  | 21,721,421 |
Other borrowings | 291,788 |  |  | — |  |  | 291,213 |  |  | — |  |  | 291,213 |
Subordinated deferrable interest debentures | 132,309 |  |  | — |  |  | 142,202 |  |  | — |  |  | 142,202 |
|  |  | Fair Value Measurements December 31, 2023
(dollars in thousands) | Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial assets: |  |  |  |  |  |  |  |  |
Cash and due from banks | $ | 230,470 |  |  | $ | 230,470 |  |  | $ | — |  |  | $ | — |  |  | $ | 230,470 |
Interest-bearing deposits in banks | 936,834 |  |  | 936,834 |  |  | — |  |  | — |  |  | 936,834 |
Debt securities held-to-maturity | 141,512 |  |  | — |  |  | 122,731 |  |  |  |  | 122,731 |
Loans, net | 19,925,225 |  |  | — |  |  | — |  |  | 19,332,899 |  |  | 19,332,899 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Deposits | 20,708,509 |  |  | — |  |  | 20,707,463 |  |  | — |  |  | 20,707,463 |
Other borrowings | 509,586 |  |  | — |  |  | 501,723 |  |  | — |  |  | 501,723 |
Subordinated deferrable interest debentures | 130,315 |  |  | — |  |  | 141,407 |  |  | — |  |  | 141,407 |

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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/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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