XML 40 R28.htm IDEA: XBRL DOCUMENT v3.25.0.1
Fair Value Measurement
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurement

Note 17—Fair Value Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In addition, the Company has the ability to obtain fair values for markets that are not accessible. These types of inputs create the following fair value hierarchy:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available. The Company’s own data used to develop unobservable inputs may be adjusted for market considerations when reasonably available.

The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to assets and liabilities.

The Company used the following methods and significant assumptions to estimate fair value for certain assets measured and carried at fair value on a recurring basis:

Securities available-for-sale—The Company obtains fair value measurements from an independent pricing service. Management reviews the procedures used by the third party, including significant inputs used in the fair value calculations. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. When market quotes are not readily accessible or available, alternative approaches are utilized, such as matrix or model pricing.

The Company’s methodology for pricing non-rated bonds focuses on three distinct inputs: equivalent rating, yield and other pricing terms. To determine the rating for a given non-rated municipal bond, the Company references a publicly issued bond by the same issuer if available as well as other additional key metrics to support the credit worthiness. Typically, pricing for these types of bonds would require a higher yield than a similar rated bond from the same issuer. A reduction in price is applied to the rating obtained from the comparable bond, as the Company believes if liquidated, a non-rated bond would be valued less than a similar bond with a verifiable rating. The reduction applied by the Company is one notch lower (i.e., a "AA" rating for a comparable bond would be reduced to "AA-" for the Company’s valuation). In 2024 and 2023, all of the ratings derived by the Company were "BBB-" or better with and without comparable bond proxies. The fair value measurement of municipal bonds is sensitive to the rating input, as a higher rating typically results in an increased valuation. The remaining pricing inputs used in the bond valuation are observable. Based on the rating determined, the Company obtains a corresponding current market yield curve available to market participants. Other terms including coupon, maturity date, redemption price, number of coupon payments per year, and accrual method are obtained from the individual bond term sheets.

Equity and other securities—The Company utilizes the same fair value measurement methodology for equity and other securities as detailed in the securities available-sale portfolio above. The fair value of equity securities subject to contractual sale restrictions is measured on the basis of the market price of the similar unrestricted equity securities. The fair value is only adjusted for the effect of the restriction when the restriction of the sale is a characteristic of the equity itself and not based on the holder of the security.

Servicing assets—Fair value is based on a loan-by-loan basis taking into consideration the original term to maturity, the current age of the loan and the remaining term to maturity. The valuation methodology utilized for the servicing assets begins with generating estimated future cash flows for each servicing asset, based on their unique characteristics and market-based assumptions for prepayment speeds and costs to service. The present value of the future cash flows are then calculated utilizing market-based discount rate assumptions.

 

Note 17—Fair Value Measurement (continued)

Derivative instruments—Interest rate derivatives are valued by a third party, using models that primarily use market observable inputs, such as yield curves, and are validated by comparison with valuations provided by the respective counterparties. Derivative financial instruments are included in other assets and other liabilities in the Consolidated Statements of Financial Condition.

The following tables summarize the Company’s financial assets and liabilities that were measured at fair value on a recurring basis at December 31, 2024 and 2023:

 

 

 

 

 

Fair Value Measurements Using

 

2024

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes

 

$

32,570

 

 

$

32,570

 

 

$

—

 

 

$

—

 

U.S. Government agencies

 

 

136,487

 

 

 

—

 

 

 

136,487

 

 

 

—

 

Obligations of states, municipalities, and political
   subdivisions

 

 

79,306

 

 

 

—

 

 

 

79,306

 

 

 

—

 

Mortgage-backed securities; residential

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

750,802

 

 

 

—

 

 

 

750,802

 

 

 

—

 

Non-Agency

 

 

137,880

 

 

 

—

 

 

 

137,880

 

 

 

—

 

Mortgage-backed securities; commercial

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

226,940

 

 

 

—

 

 

 

226,940

 

 

 

—

 

Corporate securities

 

 

38,462

 

 

 

—

 

 

 

38,462

 

 

 

—

 

Asset-backed securities

 

 

13,249

 

 

 

—

 

 

 

13,249

 

 

 

—

 

Equity and other securities, at fair value

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

 

2,505

 

 

 

2,505

 

 

 

—

 

 

 

—

 

Equity securities

 

 

7,360

 

 

 

—

 

 

 

7,072

 

 

 

288

 

Servicing assets

 

 

18,952

 

 

 

—

 

 

 

—

 

 

 

18,952

 

Derivative assets

 

 

44,401

 

 

 

—

 

 

 

44,401

 

 

 

—

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

17,785

 

 

 

—

 

 

 

17,785

 

 

 

—

 

 

 

 

 

 

 

Fair Value Measurements Using

 

2023

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes

 

$

115,434

 

 

$

115,434

 

 

$

—

 

 

$

—

 

U.S. Government agencies

 

 

130,695

 

 

 

—

 

 

 

130,695

 

 

 

—

 

Obligations of states, municipalities, and political
   subdivisions

 

 

82,275

 

 

 

—

 

 

 

82,275

 

 

 

 

Mortgage-backed securities; residential

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

695,803

 

 

 

—

 

 

 

695,803

 

 

 

—

 

Non-Agency

 

 

100,260

 

 

 

—

 

 

 

100,260

 

 

 

—

 

Mortgage-backed securities; commercial

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

147,204

 

 

 

—

 

 

 

147,204

 

 

 

—

 

Corporate securities

 

 

36,171

 

 

 

—

 

 

 

36,171

 

 

 

—

 

Asset-backed securities

 

 

34,638

 

 

 

—

 

 

 

34,638

 

 

 

—

 

Equity and other securities, at fair value

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

 

2,554

 

 

 

2,554

 

 

 

—

 

 

 

—

 

Equity securities

 

 

6,189

 

 

 

—

 

 

 

5,908

 

 

 

281

 

Servicing assets

 

 

19,844

 

 

 

—

 

 

 

—

 

 

 

19,844

 

Derivative assets

 

 

56,923

 

 

 

—

 

 

 

56,923

 

 

 

—

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

19,345

 

 

 

—

 

 

 

19,345

 

 

 

—

 

 

Note 17—Fair Value Measurement (continued)

The Company has originated, and has acquired through a business combination, servicing assets classified as Level 3 of the fair value hierarchy. The Company acquired single‑issuer trust preferred securities which are categorized as Level 3 of the fair value hierarchy. These securities are classified as equity securities consistent with accounting guidance.

The Company did not have any transfers to or from Level 1 and Level 2 of the fair value hierarchy during the years ended December 31, 2024 and 2023.

The following table presents additional information about financial assets measured at fair value on recurring basis for which the Company used significant unobservable inputs (Level 3):

 

Years Ended December 31,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

Investment Securities

 

 

Servicing Assets

 

Balance, beginning of period

$

281

 

 

$

666

 

 

$

19,844

 

 

$

19,172

 

Additions, net

 

—

 

 

 

—

 

 

 

5,812

 

 

 

5,761

 

Maturities

 

—

 

 

 

(400

)

 

 

—

 

 

 

—

 

Accretion

 

—

 

 

 

82

 

 

 

—

 

 

 

—

 

Change in fair value

 

7

 

 

 

(67

)

 

 

(6,704

)

 

 

(5,089

)

Balance, end of period

$

288

 

 

$

281

 

 

$

18,952

 

 

$

19,844

 

The following table presents additional information about the unobservable inputs used in the fair value measurements on recurring basis that were categorized within Level 3 of the fair value hierarchy as of December 31, 2024:

Financial Instruments

 

Valuation Technique

 

Unobservable Inputs

 

Range of
Inputs

 

Weighted
Average
Input

 

Impact to
Valuation from an
Increased or
Higher Input Value

Single issuer trust preferred

 

Discounted cash flow

 

Discount rate

 

7.9%

 

7.9%

 

Decrease

Servicing assets

 

Discounted cash flow

 

Prepayment speeds

 

0.0%—34.9%

 

16.9%

 

Decrease

 

 

 

Discount rate

 

4.7%—55.9%

 

11.9%

 

Decrease

 

 

 

Expected weighted
average loan life

 

0.1—7.3 years

 

3.6 years

 

Increase

The Company used the following methods and significant assumptions to estimate fair value for certain assets measured and carried at fair value on a non-recurring basis:

Individually Evaluated Loans—The Company individually evaluates loans that do not share similar risk characteristics, including non-accrual loans. Specific allowance for credit losses is measured based on a discounted cash flow of ongoing operations, discounted at the loan’s original effective interest rate, or a calculation of the fair value of the underlying collateral less estimated selling costs. Valuations of individually assessed loans that are collateral dependent are supported by third party appraisals in accordance with the Bank’s credit policy. Accordingly, individually evaluated loans are classified as Level 3.

Assets held for sale—Assets held for sale consist of former branch locations and real estate previously purchased for expansion. Assets are considered held for sale when management has approved to sell the assets following a branch closure or other events. The properties are being actively marketed and transferred to assets held for sale based on the lower of carrying value or its fair value, less estimated costs to sell.

Other real estate owned—Certain assets held within other real estate owned represent real estate or other collateral that has been adjusted to its estimated fair value, less cost to sell, as a result of transferring from the loan portfolio at the time of foreclosure or repossession and based on management’s periodic impairment evaluation. From time to time, non-recurring fair value adjustments to other real estate owned are recorded to reflect partial write-downs based on an observable market price or current appraised value of property.

Note 17—Fair Value Measurement (continued)

Adjustments to fair value based on such non-recurring transactions generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment. The following tables summarize the Company’s assets that were measured at fair value on a non-recurring basis, as of December 31, 2024 and 2023:

 

 

 

 

 

Fair Value Measurements Using

 

2024

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Non-recurring

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

$

29,568

 

 

$

—

 

 

$

—

 

 

$

29,568

 

Residential real estate

 

 

1,298

 

 

 

—

 

 

 

—

 

 

 

1,298

 

Commercial and industrial

 

 

24,063

 

 

 

—

 

 

 

—

 

 

 

24,063

 

Assets held for sale

 

 

2,025

 

 

 

—

 

 

 

—

 

 

 

2,025

 

Other real estate owned

 

 

5,170

 

 

 

—

 

 

 

—

 

 

 

5,170

 

 

 

 

 

 

 

Fair Value Measurements Using

 

2023

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Non-recurring

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

$

51,978

 

 

$

—

 

 

$

—

 

 

$

51,978

 

Residential real estate

 

 

3,593

 

 

 

—

 

 

 

—

 

 

 

3,593

 

Construction, land development, and other land

 

 

813

 

 

 

—

 

 

 

—

 

 

 

813

 

Commercial and industrial

 

 

29,869

 

 

 

—

 

 

 

—

 

 

 

29,869

 

Assets held for sale

 

 

4,484

 

 

 

—

 

 

 

—

 

 

 

4,484

 

Other real estate owned

 

 

1,200

 

 

 

—

 

 

 

—

 

 

 

1,200

 

The following methods and assumptions were used by the Company in estimating fair values of other assets and liabilities for disclosure purposes:

Cash and due from banks and interest bearing deposits with other banks—For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities held-to-maturity—The Company obtains fair value measurements from an independent pricing service. Management reviews the procedures used by the third party, including significant inputs used in the fair value calculations. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. When market quotes are not readily accessible or available, alternative approaches are utilized, such as matrix or model pricing.

Restricted stock—The fair value has been determined to approximate cost.

Loans held for sale—The fair value of loans held for sale are based on quoted market prices, where available, and determined by discounted estimated cash flows using interest rates approximating the Company’s current origination rates for similar loans adjusted to reflect the inherent credit risk.

Loan and lease receivables, net—For certain variable rate loans that reprice frequently and with no significant changes in credit risk, fair value is estimated at carrying value. The fair value of other types of loans is estimated using an exit price notion for 2024 and 2023 values. It is estimated by discounting future cash flows, using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits—The fair value of demand deposits, savings accounts, and money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting future cash flows, using rates currently offered for deposits of similar remaining maturities.

Note 17—Fair Value Measurement (continued)

Federal Home Loan Bank advances—The fair value of FHLB advances is estimated by discounting the agreements based on maturities using rates currently offered for FHLB advances of similar remaining maturities adjusted for prepayment penalties that would be incurred if the borrowings were paid off on the measurement date.

Securities sold under agreements to repurchase—The carrying amount approximates fair value due to maturities of less than ninety days.

Term loan—The carrying amount approximates fair value, given the variable interest rate and repricing of interest.

Line of credit—The carrying amount approximates fair value, given the variable interest rate and repricing of interest.

Subordinated notes—The fair value is based on available market prices.

Junior subordinated debentures—The fair value of junior subordinated debentures, in the form of trust preferred securities, is determined using rates currently available to the Company for debt with similar terms and remaining maturities.

Accrued interest receivable and payable—The carrying amount approximates fair value.

Commitments to extend credit and letters of credit—The fair values of these off-balance sheet commitments to extend credit and commercial and letters of credit are not considered practicable to estimate because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.

The estimated fair values of financial instruments not carried at fair value and levels within the fair value hierarchy at December 31, 2024 and 2023 are as follows:

 

Fair Value

 

 

2024

 

 

2023

 

 

Hierarchy
Level

 

 

Carrying
Amount

 

 

Estimated
Fair Value

 

 

Carrying
Amount

 

 

Estimated
Fair Value

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

1

 

 

$

58,759

 

 

$

58,759

 

 

$

60,431

 

 

$

60,431

 

Interest bearing deposits with other banks

 

2

 

 

 

504,379

 

 

 

504,379

 

 

 

165,705

 

 

 

165,705

 

Securities held-to-maturity

 

2

 

 

 

605

 

 

 

605

 

 

 

1,157

 

 

 

1,149

 

Restricted stock

 

2

 

 

 

27,452

 

 

 

27,452

 

 

 

16,304

 

 

 

16,304

 

Loans held for sale

 

3

 

 

 

3,200

 

 

 

3,236

 

 

 

18,005

 

 

 

19,136

 

Loans and lease receivables, net (less individually
  evaluated loans of fair value $54,929 
  and $86,253, as of December 31,
  2024 and 2023, respectively)

 

3

 

 

 

6,753,905

 

 

 

6,603,019

 

 

 

6,496,367

 

 

 

6,326,413

 

Accrued interest receivable

 

3

 

 

 

40,652

 

 

 

40,652

 

 

 

43,922

 

 

 

43,922

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest-bearing deposits

 

2

 

 

 

1,756,098

 

 

 

1,756,098

 

 

 

1,905,876

 

 

 

1,905,876

 

Interest-bearing deposits

 

2

 

 

 

5,702,530

 

 

 

5,702,018

 

 

 

5,271,123

 

 

 

5,268,926

 

Accrued interest payable

 

2

 

 

 

21,114

 

 

 

21,114

 

 

 

22,233

 

 

 

22,233

 

Federal Home Loan Bank advances

 

2

 

 

 

575,000

 

 

 

575,000

 

 

 

325,000

 

 

 

325,000

 

Securities sold under repurchase agreement

 

2

 

 

 

32,106

 

 

 

32,106

 

 

 

40,607

 

 

 

40,607

 

Term loan

 

2

 

 

 

11,667

 

 

 

11,667

 

 

 

18,333

 

 

 

18,333

 

Line of credit

 

2

 

 

 

—

 

 

 

—

 

 

 

11,250

 

 

 

11,250

 

Subordinated notes

 

2

 

 

 

74,040

 

 

 

73,750

 

 

 

73,866

 

 

 

76,063

 

Junior subordinated debentures

 

3

 

 

 

70,890

 

 

 

75,172

 

 

 

70,452

 

 

 

72,701