XML 31 R14.htm IDEA: XBRL DOCUMENT v3.25.0.1
Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
Note 5 — Fair Value of Financial Instruments
Fair value is the exchange price that is expected to 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. Certain assets and liabilities are recorded in the Company’s consolidated financial statements at fair value. Some are recorded on a recurring basis and some on a nonrecurring basis.
The Company utilizes fair value measurement to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. 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, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach to estimate the fair values of its financial instruments. Such valuation techniques are consistently applied.
A hierarchy for fair value has been established, which categorizes the valuation techniques into three levels used to measure fair value. The three levels are as follows:
Level 1 - Fair value is based on unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Fair value is based on significant other observable inputs that are generally determined based on a single price for each financial instrument provided to the Company by an unrelated third-party pricing service and is based on one or more of the following:
•Quoted prices for similar, but not identical, 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, such as interest rate and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and
•Other inputs derived from or corroborated by observable market inputs.
Level 3 - Prices or valuation techniques that require inputs that are both significant and unobservable in the market. These instruments are valued using the best information available, some of which is internally developed, and reflects the Company’s own assumptions about the risk premiums that market participants would generally require and the assumptions they would use. These estimates can be inherently uncertain.
There were no transfers between fair value reporting levels for any period presented.
Fair Values of Assets and Liabilities Recorded on a Recurring Basis
The following tables summarize financial assets and financial liabilities recorded at fair value on a recurring basis at December 31, 2024, and December 31, 2023, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value. There were no changes in the valuation techniques during 2024 or 2023.
December 31, 2024
(Dollars in thousands)Level 1Level 2Level 3Total
State and municipal securities$— $221,222 $34,754 $255,976 
Corporate bonds— 77,236 1,000 78,236 
U.S. government agency securities— 13,805 — 13,805 
Commercial mortgage-backed securities— 44,284 — 44,284 
Residential mortgage-backed securities— 540,834 — 540,834 
Commercial collateralized mortgage obligations— 28,566 — 28,566 
Residential collateralized mortgage obligations— 140,827 — 140,827 
Securities available for sale— 1,066,774 35,754 1,102,528 
Securities carried at fair value through income— — 6,512 6,512 
Loans held for sale— 10,494 — 10,494 
Rabbi Trust assets509 — — 509 
Other assets - derivatives— 15,595 — 15,595 
Total recurring fair value measurements - assets$509 $1,092,863 $42,266 $1,135,638 
Other liabilities - derivatives— (14,959)— (14,959)
Total recurring fair value measurements - liabilities$— $(14,959)$— $(14,959)
December 31, 2023
(Dollars in thousands)Level 1Level 2Level 3Total
State and municipal securities$— $232,679 $49,447 $282,126 
Corporate bonds— 82,635 1,000 83,635 
U.S. treasury securities55,480 — — 55,480 
U.S. government agency securities— 24,160 — 24,160 
Commercial mortgage-backed securities— 93,396 — 93,396 
Residential mortgage-backed securities— 506,502 — 506,502 
Commercial collateralized mortgage obligations— 35,183 — 35,183 
Residential collateralized mortgage obligations— 130,144 — 130,144 
Asset-backed securities— 43,005 — 43,005 
Securities available for sale55,480 1,147,704 50,447 1,253,631 
Securities carried at fair value through income— — 6,808 6,808 
Loans held for sale— 16,852 — 16,852 
Mortgage servicing rights— — 15,637 15,637 
Other assets - derivatives— 20,487 — 20,487 
Total recurring fair value measurements - assets$55,480 $1,185,043 $72,892 $1,313,415 
Other liabilities - derivatives— (18,300)— (18,300)
Total recurring fair value measurements - liabilities$— $(18,300)$— $(18,300)
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2024 and 2023, are summarized as follows:
(Dollars in thousands)MSR AssetSecurities Available for SaleSecurities at Fair Value Through Income
Balance at January 1, 2024$15,637 $50,447 $6,808 
Gain (loss) recognized in earnings:
Mortgage banking revenue450 — — 
Other noninterest income— — 3 
Gain recognized in AOCI— 272 — 
Purchases, issuances, sales and settlements:
Purchases— 5,396 — 
Sales(16,087)— — 
Settlements— (20,361)(299)
Balance at December 31, 2024
$— $35,754 $6,512 
(Dollars in thousands)MSR AssetSecurities Available for SaleSecurities at Fair Value Through Income
Balance at January 1, 2023$20,824 $55,769 $6,368 
Gain (loss) recognized in earnings:
Mortgage banking revenue(1)
(4,089)— — 
Other noninterest income— — 725 
Loss recognized in AOCI— (193)— 
Purchases, issuances, sales and settlements:
Originations708 — — 
Sales(1,806)— — 
Settlements— (5,129)(285)
Balance at December 31, 2023
$15,637 $50,447 $6,808 
___________________________
(1)Total mortgage banking revenue includes changes in fair value due to market changes and run-off.
The Company obtains fair value measurements for securities available for sale and securities at fair value through income from an independent pricing service; therefore, quantitative unobservable inputs are unknown.
The following methodologies were used to measure the fair value of financial assets and liabilities valued on a recurring basis:
Securities Available for Sale
Securities classified as available for sale are reported at fair value utilizing Level 1, Level 2 or Level 3 inputs. For Level 1 securities, the Company obtains the fair value measurements for those identical assets from an independent pricing service. For Level 2 securities, the Company obtains fair value measurements from an independent pricing service. 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, market consensus prepayment speeds, credit information and the security's terms and conditions, among other things. In order to ensure the fair values are consistent with ASC 820, Fair Value Measurements and Disclosures, the Company periodically checks the fair value by comparing them to other pricing sources, such as Bloomberg LP. The third-party pricing service is subject to an annual review of internal controls in accordance with the Statement on Standards for Attestation Engagements No. 16, which was made available to the Company. In certain cases where Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. For Level 3 securities, the Company determines the fair value of the instruments based on their callability, putability and prepay optionality. Putable instruments are valued at book value, non-putable instruments are priced mainly using a present value calculation based on the spread to the yield curve.
Mortgage Servicing Rights (“MSR”)
The Company sold substantially all of its MSR asset and recorded a $410,000 gain on the sale during the year ended December 31, 2024. There were no MSR assets recognized or recorded during the year ended December 31, 2024, and the carrying value of the MSR asset is zero at December 31, 2024. At December 31, 2023, the carrying amounts of the MSR asset equal fair value, which are determined using a discounted cash flow valuation model. The significant assumptions used to value MSR assets were as follows:
December 31, 2023
Range
Weighted Average(1)
Prepayment speeds
7.49% - 8.50%
8.10 %
Discount rates
10.25% - 12.75%
10.31 %
__________________________
(1)The weighted average was calculated with reference to the principal balance of the underlying mortgages.
There were significant market-driven fluctuations in the assumptions listed above. Typically, loans with higher average coupon rates have a greater likelihood of prepayment during comparatively low interest rate environments, while loans with lower average coupon rates have a lower likelihood of prepayment. Estimating these assumptions within ranges that market participants would use in determining the fair value of the MSR asset requires significant management judgment.
Derivatives
Fair values for interest rate swap agreements and interest rate lock commitments are based upon the amounts that would be required to settle the contracts. Fair values for risk participations and loan sale commitments are based on the fair values of the underlying mortgage loans or securities and the probability of such commitments being exercised. Significant management judgment and estimation is required in determining these fair value measurements.
Fair Values of Assets Recorded on a Recurring Basis for which the Fair Value Option has been Elected
Certain assets are measured at fair value on a recurring basis due to the Company’s election to adopt fair value accounting treatment for those assets. For most of these assets, this election allows for a more effective offset of the changes in fair values of the assets and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting under ASC Topic 815, Derivatives and Hedging. For interest-earning assets for which the fair value has been elected, the earned current contractual interest payment is recognized in interest income. Compensation (benefit) expense associated with the deferred compensation liabilities is offset by loss (gain) from the related security investments Rabbi Trust. The net effect of investment income or loss and related compensation expense or benefit has no impact on the Company’s net income or cash balances. At December 31, 2024, and December 31, 2023, there were no gains or losses recorded attributable to changes in instrument-specific credit risk. The following tables summarize the difference between the fair value and the unpaid principal balance, amortized cost or contributions, respectively, for financial instruments for which the fair value option has been elected:
December 31, 2024
(Dollars in thousands)Aggregate Fair ValuePrincipal Balance/Amortized Cost/ContributionsDifference
Loans held for sale(1)
$10,494 $10,228 $266 
Securities carried at fair value through income6,512 6,515 (3)
Rabbi Trust assets509 499 10 
Total$17,515 $17,242 $273 
____________________________
(1)There were no loans held for sale that were designated as nonaccrual or 90 days or more past due at December 31, 2024.
December 31, 2023
(Dollars in thousands)Aggregate Fair ValuePrincipal Balance/Amortized Cost/ContributionsDifference
Loans held for sale(1)
$16,852 $16,475 $377 
Securities carried at fair value through income6,808 6,815 (7)
Total$23,660 $23,290 $370 
____________________________
(1)There were no of loans held for sale that were designated as nonaccrual or 90 days or more past due at December 31, 2023.
Changes in the fair value of assets for which the Company elected the fair value option are classified in the Consolidated Statements of Income line items reflected in the following table:
(Dollars in thousands)Years Ended December 31,
Changes in fair value included in noninterest income:202420232022
Mortgage banking revenue (loans held for sale)(1)
$(111)$(66)$(517)
Other income:
Securities carried at fair value through income4 726 (854)
Total fair value option impact on noninterest income$(107)$660 $(1,371)
Changes in fair value included in noninterest expense:
Rabbi Trust assets$6 $— $— 
Deferred compensation liabilities related to Rabbi Trust assets(2)
(6)— — 
Total fair value option impact on noninterest expense$— $— $— 
____________________________
(1)For the years ended December 31, 2023 and 2022, the fair value option impact on noninterest income is offset by the derivative gain/loss recognized in noninterest income. Please see Note 9 — Mortgage Banking for more detail.
(2)Please see the Rabbi Trust section below for more detail on its impact on the Company’s net income.
The following methodologies were used to measure the fair value of financial assets valued on a recurring basis for which the fair value option was elected:
Loans Held for Sale
Fair values for loans held for sale are established using anticipated sale prices for loans allocated to a sale commitment, and those unallocated to a commitment are valued based on the interest rate and term for similar loans allocated. The Company believes the fair value approximates an exit price.
Securities at Fair Value through Income
Securities carried at fair value through income are valued using a discounted cash flow with a credit spread applied to each instrument based on the creditworthiness of each issuer. Credit spreads ranged from 83 to 227 basis points at both December 31, 2024, and 2023. The Company believes the fair value approximates an exit price.
Rabbi Trust
The Company maintains a Rabbi Trust to fund obligations under the Origin Bank Nonqualified Deferred Compensation Plan (the “DCP”). Investments within the Rabbi Trust consist of various mutual funds based on the participants individual investment elections. The Company has elected the fair value option for these investments to align their valuation with the related deferred compensation liabilities. Fair values for the Rabbi Trust investments are valued at the daily closing price as reported by the mutual fund. These assets are included in accrued interest receivable and other assets in the Company’s Consolidated Balance Sheet, while the offsetting deferred compensation liabilities are included in accrued expenses and other liabilities. Changes in the fair value of the Rabbi Trust assets and changes in the deferred compensation obligation are recognized in salaries and employee benefits in the accompanying Consolidated Statements of Income, but because the fair value adjustments for the assets and the change in the liabilities offset each other, the net impact to the Company’s net income is zero.
Fair Value of Assets Recorded on a Nonrecurring Basis
Non-marketable equity securities held in other financial institutions
The Company’s non-marketable equity securities held in other financial institutions are within Level 2 of the fair value hierarchy and do not have readily determinable fair values. Securities with limited marketability, such as stock in the FRBD or the FHLB, are carried at cost, less impairment, if any, and total $28.2 million and $29.3 million at December 31, 2024 and 2023, respectively. The Company’s remaining equity investments in other financial institutions, excluding FRBD and FHLB, totaling $43.4 million and $25.9 million at December 31, 2024 and 2023, respectively, qualify for the practicability exception under Accounting Standards Update (“ASU”) 2016-01 due to having illiquid markets and are carried at cost, less impairment, plus or minus any observable price changes. We believe these amounts approximate the fair value of these securities. To date, no impairment has been recorded on the Company's investments in equity securities that do not have readily determinable fair values. During the years ended December 31, 2024, and 2023, the Company observed a price change in multiple orderly transactions for identical equity securities in one of the Company’s equity securities and adjusted the Company’s basis upwards by $5.2 million and $10.1 million, respectively.
Individually Evaluated Loans with Credit Losses
Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured to determine if any credit loss exists. Allowable methods for determining the amount of credit loss include estimating the fair value using the fair value of the collateral for collateral-dependent loans and a discounted cash flow methodology for other evaluated loans that are not collateral dependent. If the loan is identified as collateral-dependent, the fair value method of measuring the amount of credit loss is utilized. Evaluating the fair value of the collateral for collateral-dependent loans requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. If the loan is not collateral-dependent, the discounted cash flow method is utilized, which involves assumptions and judgments as to credit risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate. Loans that have experienced a credit loss with specific allocated losses are within Level 3 of the fair value hierarchy when the credit loss is determined using the fair value method. The fair value of collateral-dependent loans that have specific allocated reserves was approximately $4.5 million and $3.8 million at December 31, 2024, and December 31, 2023, respectively.
Non-Financial Assets
Held for sale OREO properties, which include foreclosed assets and bank-owned real estate which the Company is no longer utilizing and intends to sell, are the only non-financial assets valued on a nonrecurring basis that are initially recorded by the Company at fair value, less estimated costs to sell. At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the Company’s recorded investment in the related loan, a write-down is recognized through a charge to the ALCL. Similarly, real estate-based properties that were formerly operating as bank offices are evaluated at the time the decision is made to sell, and if the fair value, less estimated costs to sell, of the property is less than the Company’s net book value, a write-down is recognized. Additionally, valuations are periodically performed by management, and any subsequent reduction in value is recognized by a charge to income. The carrying value and fair value of foreclosed assets and bank-owned real estate held for sale was estimated using Level 3 inputs based on observable market data and was $3.6 million and $3.9 million at December 31, 2024, and December 31, 2023, respectively. At December 31, 2024, and December 31, 2023, the Company had $5.1 million and zero, respectively, principal amounts of residential mortgage loans in the process of foreclosure.
Fair Values of Financial Instruments Not Recorded at Fair Value
The carrying value and estimated fair values of financial instruments not recorded at fair value are as follows:
(Dollars in thousands)December 31, 2024December 31, 2023
Financial assets:
Level 1 inputs:
Carrying
Value		Estimated
Fair Value		Carrying
Value		Estimated
Fair Value
Cash and cash equivalents$470,249 $470,249 $280,441 $280,441 
Level 2 inputs:
Non-marketable equity securities held in other financial institutions
71,643 71,643 55,190 55,190 
Accrued interest and loan fees receivable38,901 38,901 41,688 41,688 
Level 3 inputs:
Securities held to maturity11,095 10,456 11,615 10,848 
LHFI, net7,482,653 7,209,866 7,564,076 7,177,720 
Financial liabilities:
Level 2 inputs:
Deposits8,223,120 8,217,564 8,251,125 8,240,520 
FHLB advances, repurchase agreements and other borrowings12,460 12,203 83,598 83,187 
Subordinated indebtedness159,943 159,928 194,279 186,251 
Accrued interest payable8,033 8,033 12,272 12,272