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Note 8 - FAIR VALUE
 6 Months Ended
Jun. 30, 2024
FAIR VALUE  
FAIR VALUE

NOTE 8 – FAIR VALUE

​

Accounting guidance on fair value measurement uses a hierarchy intended to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy includes three levels and is based upon the valuation techniques used to measure assets and liabilities. The three levels are as follows:

●Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in markets;
●Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and
●Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Assets and liabilities measured at fair value on a recurring basis comprise the following at June 30, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurements at Reporting Date Using

​

​

​

​

​

Quoted Prices

​

Significant

​

​

​

​

​

​

​

​

in Active

​

Other

​

Significant

​

​

​

​

​

Markets for

​

Observable

​

Unobservable

​

​

​

​

​

Identical Assets

​

Inputs

​

Inputs

​

    

Fair Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

​

​

(dollars in thousands)

June 30, 2024:

 

​

  

 

​

  

 

​

  

 

​

  

Securities AFS:

 

​

  

 

​

  

 

​

  

 

​

  

U.S. treasuries and govt. sponsored agency securities

​

$

20,101

​

$

—

​

$

20,101

​

$

—

Residential mortgage-backed and related securities

​

 

54,708

​

 

—

​

 

54,708

​

 

—

Municipal securities

​

 

165,268

​

 

—

​

 

165,268

​

 

—

Asset-backed securities

​

​

12,721

​

​

—

​

​

12,721

​

​

—

Other securities

​

 

37,414

​

 

—

​

 

37,414

​

 

—

Securities trading

​

​

22,362

​

​

—

​

​

—

​

​

22,362

Derivatives

​

 

194,354

​

 

—

​

 

194,354

​

 

—

Total assets measured at fair value

​

$

506,928

​

$

—

​

$

484,566

​

$

22,362

​

​

 

  

​

 

  

​

 

  

​

 

  

Derivatives

​

$

221,798

​

$

—

​

$

221,798

​

$

—

Total liabilities measured at fair value

​

$

221,798

​

$

—

​

$

221,798

​

$

—

​

​

 

  

​

 

  

​

 

  

​

 

  

​

​

 

  

​

 

  

​

 

  

​

 

  

December 31, 2023:

​

 

  

​

 

  

​

 

  

​

 

  

Securities AFS:

​

 

  

​

 

  

​

 

  

​

 

  

U.S. govt. sponsored agency securities

​

$

14,973

​

$

—

​

$

14,973

​

$

—

Residential mortgage-backed and related securities

​

 

59,196

​

 

—

​

 

59,196

​

 

—

Municipal securities

​

 

170,987

​

 

—

​

 

170,987

​

 

—

Asset-backed securities

​

​

15,423

​

​

—

​

​

15,423

​

​

—

Other securities

​

 

39,076

​

 

—

​

 

39,076

​

 

—

Securities trading

​

​

22,369

​

​

—

​

​

—

​

​

22,369

Derivatives

​

 

187,341

​

 

—

​

 

187,341

​

 

—

Total assets measured at fair value

​

$

509,365

​

$

—

​

$

486,996

​

$

22,369

​

​

 

  

​

 

  

​

 

  

​

 

  

Derivatives

​

$

215,735

​

$

—

​

$

215,735

​

$

—

Total liabilities measured at fair value

​

$

215,735

​

$

—

​

$

215,735

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The securities AFS portfolio consists of securities whereby the Company obtains fair values from an independent pricing service. The fair values are determined by pricing models that consider observable market data, such as interest rate volatilities, SOFR yield curve, credit spreads and prices from market makers and live trading systems (Level 2 inputs).

Trading securities consist of retained beneficial interests from securitizations and are classified as a Level 3 in the fair value hierarchy.  Fair values are estimated using the discounted cash flow method, including discount rates which are deemed to be significant unobservable inputs. As of June 30, 2024, the discount rates ranged from 5.85% to 7.62%.

Interest rate caps, swaps and collars are used for the purpose of hedging interest rate risk on various financial assets and liabilities, further described in Note 4 to the Consolidated Financial Statements. Interest rate swaps are also executed for select commercial customers.  The fair values are determined by pricing models that consider observable market data for derivative instruments with similar structures (Level 2 inputs).

Certain financial assets are measured at fair value on a non-recurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when a loan/lease is collaterally dependent).

Assets measured at fair value on a non-recurring basis comprised the following at June 30, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Fair Value Measurements at Reporting Date Using

​

​

​

​

​

Quoted Prices

​

Significant

​

​

​

​

​

​

​

​

in Active

​

Other

​

Significant

​

​

​

​

​

Markets for

​

Observable

​

Unobservable

​

​

​

​

​

Identical Assets

​

Inputs

​

Inputs

​

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 2024:

 

​

  

 

​

  

 

​

  

 

​

  

Loans/leases evaluated individually

​

$

33,910

​

$

—

​

$

—

​

$

33,910

Loans receivable held for sale in preparation for securitization

​

​

243,193

​

​

—

​

​

—

​

​

243,193

OREO

​

​

399

​

​

—

​

​

—

​

​

399

Other repossessed assets

​

 

576

​

 

—

​

 

—

​

 

576

​

​

$

278,078

​

$

—

​

$

—

​

$

278,078

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023:

​

 

  

​

 

  

​

 

  

​

 

  

Loans/leases evaluated individually

​

$

33,656

​

$

—

​

$

—

​

$

33,656

OREO

​

 

1,455

​

 

—

​

 

—

​

 

1,455

​

​

$

35,111

​

$

—

​

$

—

​

$

35,111

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans/leases evaluated individually are valued at the lower of cost or fair value and are classified as Level 3 in the fair value hierarchy. Fair value is measured based on the value of the collateral securing these loans/leases. Collateral may be comprised of real estate and/or business assets, including equipment, inventory and/or accounts receivable, and is determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values are discounted based on management's historical knowledge, changes in market conditions from the time of valuation, and/or management's expertise and knowledge of the client and client's business.

Loans receivable held for sale in preparation for securitization are valued at the lower of cost or fair value in the aggregate by type and are classified as Level 3 in the fair value hierarchy.  Fair value is estimated considering the loans have a floating interest rate with a spread that is commensurate with current market pricing, in addition to factoring in a discount for credit risk.

OREO in the table above consists of property acquired through foreclosures and settlement of loans.  Property acquired is carried at the estimated fair value of the property, less disposal costs, and is classified as a Level 3 in the fair value hierarchy.  The estimated fair value of the property acquired is generally determined based on appraisals by qualified licensed appraisers hired by the Company.  Appraised and reported values are discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the property.

Other repossessed assets in the table above consists of equipment acquired through repossession and settlement of loans.  Property acquired is carried at the estimated fair value of the property, less disposal costs, and is classified as a Level 3 in

the fair value hierarchy.  The estimated fair value of the property acquired is generally determined based on current average auction prices database used by a national auction company hired by the Company.  

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quantitative Information about Level Fair Value Measurements

 

​

​

Fair Value

​

Fair Value

​

​

​

​

​

​

​

​

​

​

 

​

​

June 30, 

​

December 31, 

​

​

​

​

​

​

​

​

​

​

 

​

    

2024

    

2023

    

Valuation Technique

    

Unobservable Input

    

Range

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans/leases evaluated individually

​

$

33,910

​

$

33,656

​

Appraisal of collateral

​

Appraisal adjustments

​

-10.00

%

to

​

-30.00

%

Loans receivable held for sale in preparation for securitization

​

​

243,193

​

​

—

​

Market prices for similar loans

​

Market price adjustments

​

​

​

n/a

​

​

​

OREO

​

​

399

​

​

1,455

​

Appraisal of collateral

​

Appraisal adjustments

​

0.00

%  

to

 

-35.00

%

Other repossessed assets

​

 

576

​

 

—

 

Average auction prices

 

Market price adjustments

 

​

​

n/a

​

​

​

​

For the loans/leases evaluated individually and OREO, the Company records carrying value at fair value less disposal or selling costs. The amounts reported in the tables above are fair values before the adjustment for disposal or selling costs.

For loans receivable held for sale in preparation for securitization, the Company records carrying value at fair value factoring in a discount for credit risk.

There have been no changes in valuation techniques used for any assets or liabilities measured at fair value during the three and six months ended June 30, 2024 and 2023.

The following table presents the carrying values and estimated fair values of financial assets and liabilities carried on the Company's consolidated balance sheets, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value

​

As of June 30, 2024

​

As of December 31, 2023

​

​

Hierarchy

​

Carrying

​

Estimated

​

Carrying

​

Estimated

​

    

Level

    

Value

    

Fair Value

    

Value

    

Fair Value

​

​

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from banks

 

Level 1

​

$

92,173

​

$

92,173

​

$

97,123

​

$

97,123

Federal funds sold

 

Level 2

​

 

8,150

​

 

8,150

​

 

35,450

​

 

35,450

Interest-bearing deposits at financial institutions

 

Level 2

​

 

94,112

​

 

94,112

​

 

104,919

​

 

104,919

Investment securities:

 

  

​

 

​

​

 

​

​

 

​

​

 

​

HTM

 

Level 2

​

 

720,625

​

 

696,447

​

 

683,504

​

 

680,279

AFS

 

Level 2

​

 

290,212

​

 

290,212

​

 

299,655

​

 

299,655

Trading

​

Level 3

​

​

22,362

​

​

22,362

​

​

22,369

​

​

22,369

Loans/leases receivable, net

 

Level 3

​

 

31,398

​

 

33,910

​

 

31,163

​

 

33,656

Loans/leases receivable, net

 

Level 2

​

 

6,735,282

​

 

6,468,550

​

 

6,425,053

​

 

6,125,433

Derivatives

 

Level 2

​

 

194,354

​

 

194,354

​

 

187,341

​

 

187,341

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits:

 

  

​

 

​

​

 

​

​

 

​

​

 

​

Nonmaturity deposits

 

Level 2

​

 

5,688,913

​

 

5,688,913

​

 

5,504,323

​

 

5,504,323

Time deposits

 

Level 2

​

 

1,075,754

​

 

1,071,579

​

 

1,009,682

​

 

996,746

Short-term borrowings

 

Level 2

​

 

1,600

​

 

1,600

​

 

1,500

​

 

1,500

FHLB advances

 

Level 2

​

 

485,000

​

 

485,231

​

 

435,000

​

 

437,178

Subordinated notes

​

Level 2

​

​

233,276

​

​

239,136

​

​

233,064

​

​

240,235

Junior subordinated debentures

 

Level 2

​

 

48,795

​

 

40,718

​

 

48,731

​

 

40,397

Derivatives

 

Level 2

​

 

221,798

​

 

221,798

​

 

215,735

​

 

215,735

​