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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2023
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements We utilize fair value measurements to record or disclose the fair value on certain assets and liabilities. 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. The determination of fair values of financial instruments often requires the use of estimates. In cases where quoted market values in an active market are not available, we use present value techniques and other valuation methods to estimate the fair values of our financial instruments. These valuation models rely on market-based parameters when available, such as interest rate yield curves or credit spreads. Unobservable inputs may be based on management’s judgement assumptions and estimates related to credit quality, our future earnings, interest rates and other relevant inputs. These valuation methods require considerable judgement and the resulting estimates of fair value can be significantly affected by the assumptions made and the methods used. ASC Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The hierarchy is based on the transparency of the inputs used in the valuation process with the highest priority given to quoted prices available in active markets and the lowest priority to unobservable inputs where no active market exists. The three levels of inputs that may be used to measure fair value are as follows: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. Level 3: Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own beliefs about the assumptions that market participants would use in pricing the assets or liabilities. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input within the valuation hierarchy that is significant to the overall fair value measurement. Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period. The following table sets forth our assets and liabilities measured at fair value on a recurring basis as of:
| Level 1 |  | Level 2 |  | Level 3 |  |
| Quoted prices in active markets for identical assets |  | Significant other observable inputs |  | Significant unobservable inputs |  | Total Estimated Fair Value
September 30, 2023 |  |  |  |  |  |  |
Available-for-sale securities | $ | 52,853 |  |  | $ | 443,139 |  |  | $ | — |  |  | $ | 495,992 |
Loans held-for-sale | — |  |  | 51,465 |  |  | — |  |  | 51,465 |
Mortgage servicing rights | — |  |  | — |  |  | 81,036 |  |  | 81,036 |
Derivative financial instruments - assets | — |  |  | 50,815 |  |  | — |  |  | 50,815 |
Derivative financial instruments - liabilities | — |  |  | (31,593) |  |  | — |  |  | (31,593) |
Total | $ | 52,853 |  |  | $ | 513,826 |  |  | $ | 81,036 |  |  | $ | 647,715 |
December 31, 2022 |  |  |  |  |  |  |
Available-for-sale securities | $ | 56,649 |  |  | $ | 480,324 |  |  | $ | — |  |  | $ | 536,973 |
Loans held-for-sale | — |  |  | 57,323 |  |  | — |  |  | 57,323 |
Mortgage servicing rights | — |  |  | — |  |  | 74,097 |  |  | 74,097 |
Derivative financial instruments - assets | — |  |  | 40,287 |  |  | — |  |  | 40,287 |
Derivative financial instruments - liabilities | — |  |  | (24,527) |  |  | — |  |  | (24,527) |
Total | $ | 56,649 |  |  | $ | 553,407 |  |  | $ | 74,097 |  |  | $ | 684,153 |
For further details on our Level 3 inputs related to MSRs, see Note 5 - Mortgage Servicing Rights. The following table presents a reconciliation for our Level 3 assets measured at fair value on a recurring basis:
| For the three months ended September 30, |  | For the nine months ended September 30, |  |  |  |
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Balance, beginning of period | $ | 78,390 |  |  | $ | 66,047 |  |  | $ | 74,097 |  |  | $ | 47,392 |  |  |  |  |
Total (losses) gains included in earnings | (44) |  |  | 4,314 |  |  | (695) |  |  | 14,777 |  |  |  |  |
Purchases, issuances, sales and settlements: |  |  |  |  |  |  |  |  |  |  |
Issuances | 2,690 |  |  | 3,489 |  |  | 7,634 |  |  | 11,681 |  |  |  |  |
Balance, end of period | $ | 81,036 |  |  | $ | 73,850 |  |  | $ | 81,036 |  |  | $ | 73,850 |  |  |  |  |
Certain financial assets and financial liabilities are regularly 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. Financial assets measured at fair value on a non-recurring basis during the reported periods include certain collateral dependent loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral and other real estate owned and foreclosed assets, which, upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for credit losses, and subsequent to their initial recognition, were remeasured at fair value through a write-down included in other non-interest expense. The following table sets forth our assets and liabilities that were measured at fair value on a non-recurring basis as of:
| Level 3
| September 30, 2023 |  | December 31, 2022
Collateral dependent loans: |  |  |
Commercial and industrial | $ | 7,197 |  |  | $ | 5,229 |
Commercial real estate | 500 |  |  | 607 |
Residential real estate | 1,230 |  |  | 802 |
Consumer | — |  |  | 3 |
Total collateral dependent loans | $ | 8,927 |  |  | $ | 6,641 |
Other real estate owned and foreclosed assets, net: |  |  |
Commercial real estate | $ | 7,428 |  |  | $ | 5,391 |
Residential real estate | 967 |  |  | 967 |
Total other real estate owned and foreclosed assets, net: | $ | 8,395 |  |  | $ | 6,358 |
The fair value of the financial assets in the table above utilize the market approach valuation technique, with discount adjustments for differences between comparable sales. Fair value of financial instruments not carried at fair value: The carrying amounts and estimated fair values of financial instruments not carried at fair value are as follows as of:
|  |  | Estimated Fair Value
| Carrying Value |  | Total |  | Level 1 |  | Level 2 |  | Level 3
September 30, 2023 |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 443,887 |  |  | $ | 443,887 |  |  | $ | 443,887 |  |  | $ | — |  |  | $ | — |
Securities held-to-maturity | 37,410 |  |  | 30,792 |  |  | — |  |  | 30,792 |  |  | — |
Loans (excluding collateral dependent loans at fair value) | 6,170,595 |  |  | 6,036,398 |  |  | — |  |  | — |  |  | 6,036,398 |
Restricted equity securities | 35,396 |  |  | 35,396 |  |  | — |  |  | 35,396 |  |  | — |
Accrued interest receivable | 37,218 |  |  | 37,218 |  |  | — |  |  | 2,328 |  |  | 34,890 |
Liabilities: |  |  |  |  |  |  |  |  |
Deposits (excluding demand deposits) | $ | 4,288,352 |  |  | $ | 4,273,238 |  |  | $ | 2,511,783 |  |  | $ | 1,761,455 |  |  | $ | — |
Securities sold under agreements to repurchase | 25,868 |  |  | 25,868 |  |  | — |  |  | 25,868 |  |  | — |
FHLB advances | 330,000 |  |  | 330,000 |  |  | — |  |  | 330,000 |  |  | — |
Subordinated debt, net | 75,180 |  |  | 70,934 |  |  | — |  |  | 70,934 |  |  | — |
Accrued interest payable | 9,862 |  |  | 9,862 |  |  | — |  |  | 9,862 |  |  | — |
December 31, 2022 |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 343,526 |  |  | $ | 343,526 |  |  | $ | 343,526 |  |  | $ | — |  |  | $ | — |
Securities held-to-maturity | 38,901 |  |  | 33,218 |  |  | — |  |  | 33,218 |  |  | — |
Loans (excluding impaired loans) | 5,871,274 |  |  | 5,756,197 |  |  | — |  |  | — |  |  | 5,756,197 |
Restricted equity securities | 50,215 |  |  | 50,215 |  |  | — |  |  | 50,215 |  |  | — |
Accrued interest receivable | 28,543 |  |  | 28,543 |  |  | — |  |  | 2,049 |  |  | 26,494 |
Liabilities: |  |  |  |  |  |  |  |  |
Deposits (excluding demand deposits) | $ | 3,732,215 |  |  | $ | 3,696,438 |  |  | $ | — |  |  | $ | 3,696,438 |  |  | $ | — |
Securities sold under agreements to repurchase | 36,721 |  |  | 36,721 |  |  | — |  |  | 36,721 |  |  | — |
FHLB advances | 643,885 |  |  | 643,885 |  |  | — |  |  | 643,885 |  |  | — |
Convertible notes payable, net | 5,355 |  |  | 5,329 |  |  | — |  |  | 5,329 |  |  | — |
Subordinated debt, net | 74,880 |  |  | 71,618 |  |  | — |  |  | 71,618 |  |  | — |
Accrued interest payable | 5,798 |  |  | 5,798 |  |  | — |  |  | 5,798 |  |  | — |

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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/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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