XML 30 R18.htm IDEA: XBRL DOCUMENT v3.21.2
Fair Value
 9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Fair ValueFair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal and most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other 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.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The following table summarizes the Company’s financial assets that were measured at fair value on a recurring and nonrecurring basis at September 30, 2021.
($ in thousands)
Description of Financial AssetsFair Value at September 30, 2021Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)
Recurring
Securities available for sale:
Government-sponsored enterprise securities$68,608 — 68,608 — 
Mortgage-backed securities2,191,530 — 2,191,530 — 
Corporate bonds44,937 — 44,937 — 
Total available for sale securities$2,305,075 — 2,305,075 — 
Presold mortgages in process of settlement$16,746 16,746 — — 
Nonrecurring
Individually evaluated loans$12,279 — — 12,279 
Foreclosed real estate462 — — 462 

The following table summarizes the Company’s financial assets that were measured at fair value on a recurring and nonrecurring basis at December 31, 2020.
($ in thousands)
Description of Financial AssetsFair Value at December 31, 2020Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Recurring
Securities available for sale:
Government-sponsored enterprise securities$70,206 — 70,206 — 
Mortgage-backed securities1,337,706 — 1,337,706 — 
Corporate bonds45,220 — 45,220 — 
Total available for sale securities$1,453,132 — 1,453,132 — 
Presold mortgages in process of settlement$42,271 42,271 — — 
Nonrecurring
Impaired loans$22,142 — — 22,142 
  Foreclosed real estate1,484 — — 1,484 
The following is a description of the valuation methodologies used for assets measured at fair value.
Presold Mortgages in Process of Settlement - The fair value is based on the committed price that an investor has agreed to pay for the loan and is considered a Level 1 input.
Securities Available for Sale — When quoted market prices are available in an active market, the securities are classified as Level 1 in the valuation hierarchy. If quoted market prices are not available, but fair values can be estimated by observing quoted prices of securities with similar characteristics, the securities are classified as Level 2 on the valuation hierarchy. Most of the fair values for the Company’s Level 2 securities are determined by our third-party bond accounting provider using matrix pricing. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. For the Company, Level 2 securities include mortgage-backed securities, commercial mortgage-backed obligations, government-sponsored enterprise securities, and corporate bonds. In cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
The Company reviews the pricing methodologies utilized by the bond accounting provider to ensure the fair value determination is consistent with the applicable accounting guidance and that the investments are properly classified in the fair value hierarchy.
Individually evaluated loans — Fair values for individually evaluated loans are measured on a non-recurring basis and are based on the underlying collateral values securing the loans, adjusted for estimated selling costs, or the net present value of the cash flows expected to be received for such loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is generally determined by third-party appraisers using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the loans first became impaired, and thus the appraisals are not necessarily as of the period ends presented. Any fair value adjustments are recorded in the period incurred as provision for credit losses on the Consolidated Statements of Income.
Foreclosed real estate – Foreclosed real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value. Fair value is measured on a non-recurring basis and is based upon independent market prices or current appraisals that are generally prepared using an income or market valuation approach and conducted by an independent, licensed third party appraiser, adjusted for estimated selling costs (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the assets were acquired, and thus the appraisals are not necessarily as of the period ends presented. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. For any real estate valuations subsequent to foreclosure, any excess of the real estate recorded value over the fair value of the real estate is treated as a foreclosed real estate write-down on the Consolidated Statements of Income.
For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of September 30, 2021, the significant unobservable inputs used in the fair value measurements were as follows:
($ in thousands)
DescriptionFair Value at September 30, 2021Valuation
Technique		Significant Unobservable
Inputs		Range (Weighted Average)
Individually evaluated loans - collateral-dependent$7,973 Appraised valueDiscounts applied for estimated costs to sell10%
Individually evaluated loans - cash flow dependent4,306 PV of expected cash flowsDiscount rates used in the calculation of the present value ("PV") of expected cash flows
4%-11% (6.23%)
Foreclosed real estate462 Appraised valueDiscounts for estimated costs to sell10%
For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:
($ in thousands)
DescriptionFair Value at December 31, 2020Valuation
Technique		Significant Unobservable
Inputs		Range (Weighted Average)
Impaired loans - valued at collateral value$16,000 Appraised valueDiscounts applied for estimated costs to sell10%
Impaired loans - valued at PV of expected cash flows6,142 PV of expected cash flowsDiscount rates used in the calculation of PV of expected cash flows
4%-11% (6.21%)
Foreclosed real estate1,484 Appraised valueDiscounts for estimated costs to sell10%

The carrying amounts and estimated fair values of financial instruments not carried at fair value at September 30, 2021 and December 31, 2020 are as follows:
  September 30, 2021December 31, 2020
($ in thousands)Level in Fair
Value
Hierarchy		Carrying
Amount		Estimated
Fair Value		Carrying
Amount		Estimated
Fair Value
Cash and due from banks, noninterest-bearingLevel 1$80,090 80,090 93,724 93,724 
Due from banks, interest-bearingLevel 1314,103 314,103 273,566 273,566 
Securities held to maturityLevel 2367,893 369,953 167,551 170,734 
SBA loans held for saleLevel 21,518 1,766 6,077 7,465 
Total loans, net of allowanceLevel 34,806,213 4,799,181 4,678,927 4,661,197 
Accrued interest receivableLevel 119,422 19,422 20,272 20,272 
Bank-owned life insuranceLevel 1133,919 133,919 106,974 106,974 
SBA Servicing AssetLevel 35,895 6,954 5,788 6,569 
DepositsLevel 27,432,765 7,433,494 6,273,596 6,275,329 
BorrowingsLevel 260,764 53,962 61,829 53,321 
Accrued interest payableLevel 2609 609 904 904 
Commitments to extend creditLevel 3— 11,074 — 461 
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect 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 highly liquid market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial 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 assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.