XML 29 R20.htm IDEA: XBRL DOCUMENT
v3.23.2

Fair Value Disclosures | 6 Months Ended
--- | ---
Jun. 30, 2023
Fair Value Disclosures [Abstract] |
Fair Value Disclosures | Fair Value Disclosures The Corporation determines the fair values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date and is based on exit prices. Fair value includes assumptions about risk, such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. The standard describes three levels of inputs that may be used to measure fair value. Level 1 — Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date. Level 2 — Level 2 inputs are inputs, other than quoted prices included with Level 1, that are observable for the asset or liability either directly or indirectly, 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 for substantially the full term of the assets or liabilities. Level 3 — Level 3 inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Corporation’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Assets and liabilities measured at fair value on a recurring basis, segregated by fair value hierarchy level, are summarized below:
|  | June 30, 2023
|  | Fair Value Measurements Using |  |
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Thousands)
Assets: |  |  |  |  |  |  |  |
Securities available-for-sale: |  |  |  |  |  |  |  |
U.S. treasuries |  | $ | — |  |  | $ | 8,598 |  |  | $ | — |  |  | $ | 8,598 |
U.S. government agency securities - government-sponsored enterprises |  | — |  |  | 28,629 |  |  | — |  |  | 28,629 |
Municipal securities |  | — |  |  | 35,764 |  |  | — |  |  | 35,764 |
Residential mortgage-backed securities - government issued |  | — |  |  | 31,008 |  |  | — |  |  | 31,008 |
Residential mortgage-backed securities - government-sponsored enterprises |  | — |  |  | 119,818 |  |  | — |  |  | 119,818 |
Commercial mortgage-backed securities - government issued |  | — |  |  | 2,808 |  |  | — |  |  | 2,808 |
Commercial mortgage-backed securities - government-sponsored enterprises |  | — |  |  | 27,001 |  |  | — |  |  | 27,001 |
Interest rate swaps |  | — |  |  | 70,440 |  |  | — |  |  | 70,440 |
Liabilities: |  |  |  |  |  |  |  |
Interest rate swaps |  | — |  |  | 61,147 |  |  | — |  |  | 61,147 |
|  | December 31, 2022
|  | Fair Value Measurements Using |  |
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Thousands)
Assets: |  |  |  |  |  |  |  |
Securities available-for-sale: |  |  |  |  |  |  |  |
U.S. treasuries |  | $ | — |  |  | $ | 4,445 |  |  | $ | — |  |  | $ | 4,445 |
U.S. government agency securities - government-sponsored enterprises |  | — |  |  | 13,205 |  |  | — |  |  | 13,205 |
Municipal securities |  | — |  |  | 39,311 |  |  | — |  |  | 39,311 |
Residential mortgage-backed securities - government issued |  | — |  |  | 19,431 |  |  | — |  |  | 19,431 |
Residential mortgage-backed securities - government-sponsored enterprises |  | — |  |  | 106,323 |  |  | — |  |  | 106,323 |
Commercial mortgage-backed securities - government issued |  | — |  |  | 2,932 |  |  | — |  |  | 2,932 |
Commercial mortgage-backed securities - government-sponsored enterprises |  | — |  |  | 26,377 |  |  | — |  |  | 26,377 |
Interest rate swaps |  | — |  |  | 68,581 |  |  | — |  |  | 68,581 |
Liabilities: |  |  |  |  |  |  |  |
Interest rate swaps |  | — |  |  | 61,419 |  |  | — |  |  | 61,419 |
For assets and liabilities measured at fair value on a recurring basis, there were no transfers between the levels during the three and six months ended June 30, 2023 or the year ended December 31, 2022 related to the above measurements. Assets and liabilities measured at fair value on a non-recurring basis, segregated by fair value hierarchy are summarized below:
|  | June 30, 2023
|  | Fair Value Measurements Using |  |
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Thousands)
Collateral-dependent loans |  | $ | — |  |  | $ | — |  |  | $ | 1,742 |  |  | $ | 1,742 |
Repossessed assets |  | — |  |  | — |  |  | 65 |  |  | 65 |
Loan servicing rights |  | — |  |  | — |  |  | 1,406 |  |  | 1,406 |
|  | December 31, 2022
|  | Fair Value Measurements Using |  |
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Thousands)
Impaired loans |  | $ | — |  |  | $ | — |  |  | $ | 1,022 |  |  | $ | 1,022 |
Repossessed assets |  | — |  |  | — |  |  | 95 |  |  | 95 |
Loan servicing rights |  | — |  |  | — |  |  | 1,491 |  |  | 1,491 |
Collateral-dependent loans were written down to the fair value of their underlying collateral less costs to sell of $1.7 million and $1.0 million at June 30, 2023 and December 31, 2022, respectively, through the establishment of specific reserves or by recording charge-offs when the carrying value exceeded the fair value of the underlying collateral of impaired loans. Valuation techniques consistent with the market approach, income approach, or cost approach were used to measure fair value. These techniques included observable inputs for the individual impaired loans being evaluated, such as current appraisals, recent sales of similar assets, or other observable market data, and unobservable inputs, typically when discounts are applied to appraisal values to adjust such values to current market conditions or to reflect net realizable values. The quantification of unobservable inputs for Level 3 impaired loan values range from 10% - 100% as of the measurement date of June 30, 2023. The weighted average of those unobservable inputs was 36%. The majority of the impaired loans are considered collateral dependent loans or are supported by an SBA guaranty. Repossessed assets, upon initial recognition, are remeasured and reported at fair value through a charge-off to the allowance for credit losses, if deemed necessary, based upon the fair value of the repossessed asset. The fair value of a repossessed asset, upon initial recognition, is estimated using a market approach or based on observable market data, typically a current appraisal, or based upon assumptions specific to the individual property or equipment, such as management applied discounts used to further reduce values to a net realizable value when observable inputs become stale. Loan servicing rights represent the asset retained upon sale of the guaranteed portion of certain SBA loans. When SBA loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. The servicing rights are subsequently measured using the amortization method, which requires amortization into interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. The Corporation periodically reviews this portfolio for impairment and engages a third-party valuation firm to assess the fair value of the overall servicing rights portfolio. Loan servicing rights do not trade in an active, open market with readily observable prices. While sales of loan servicing rights do occur, the precise terms and conditions typically are not readily available to allow for a “quoted price for similar assets” comparison. Accordingly, the Corporation utilizes an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of its loan servicing rights. The valuation model incorporates prepayment assumptions to project loan servicing rights cash flows based on the current interest rate scenario, which is then discounted to estimate an expected fair value of the loan servicing rights. The valuation model considers portfolio characteristics of the underlying serviced portion of the SBA loans and uses the following significant unobservable inputs: (1) constant prepayment rate (“CPR”) assumptions based on the SBA sold pools historical CPR as quoted in Bloomberg and (2) a discount rate. Due to the nature of the valuation inputs, loan servicing rights are classified in Level 3 of the fair value hierarchy. Fair Value of Financial Instruments The Corporation is required to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions, consistent with exit price concepts for fair value measurements, are set forth below:
|  | June 30, 2023
|  | Carrying Amount |  | Fair Value
|  |  |  | Total |  | Level 1 |  | Level 2 |  | Level 3
|  | (In Thousands)
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 112,809 |  |  | $ | 112,809 |  |  | $ | 112,809 |  |  | $ | — |  |  | $ | — |
Securities available-for-sale |  | 253,626 |  |  | 253,626 |  |  | — |  |  | 253,626 |  |  | — |
Securities held-to-maturity |  | 9,830 |  |  | 9,469 |  |  | — |  |  | 9,469 |  |  | — |
Loans held for sale |  | 2,191 |  |  | 2,355 |  |  | — |  |  | 2,355 |  |  | — |
Loans and lease receivables, net |  | 2,646,468 |  |  | 2,603,262 |  |  | — |  |  | — |  |  | 2,603,262 |
Federal Home Loan Bank stock |  | 14,482 |  |  | N/A |  | N/A |  | N/A |  | N/A
Accrued interest receivable |  | 11,209 |  |  | 11,209 |  |  | 11,209 |  |  | — |  |  | — |
Interest rate swaps |  | 70,440 |  |  | 70,440 |  |  | — |  |  | 70,440 |  |  | — |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Deposits |  | 2,528,852 |  |  | 2,522,771 |  |  | 1,880,462 |  |  | 642,309 |  |  | — |
Federal Home Loan Bank advances and other borrowings |  | 370,113 |  |  | 354,278 |  |  | — |  |  | 354,278 |  |  | — |
Accrued interest payable |  | 8,348 |  |  | 8,348 |  |  | 8,348 |  |  | — |  |  | — |
Interest rate swaps |  | 61,147 |  |  | 61,147 |  |  | — |  |  | 61,147 |  |  | — |
Off-balance sheet items: |  |  |  |  |  |  |  |  |  |
Standby letters of credit |  | 137 |  |  | 137 |  |  | — |  |  | — |  |  | 137 |
N/A = The fair value is not applicable due to restrictions placed on transferability
|  | December 31, 2022
|  | Carrying Amount |  | Fair Value
|  |  |  | Total |  | Level 1 |  | Level 2 |  | Level 3
|  | (In Thousands)
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 102,682 |  |  | $ | 102,682 |  |  | $ | 102,682 |  |  | $ | — |  |  | $ | — |
Securities available-for-sale |  | 212,024 |  |  | 212,024 |  |  | — |  |  | 212,024 |  |  | — |
Securities held-to-maturity |  | 12,635 |  |  | 12,270 |  |  | — |  |  | 12,270 |  |  | — |
Loans held for sale |  | 2,632 |  |  | 2,829 |  |  | — |  |  | 2,829 |  |  | — |
Loans and lease receivables, net |  | 2,418,836 |  |  | 2,394,702 |  |  | — |  |  | — |  |  | 2,394,702 |
Federal Home Loan Bank stock |  | 17,812 |  |  | N/A |  | N/A |  | N/A |  | N/A
Accrued interest receivable |  | 9,403 |  |  | 9,403 |  |  | 9,403 |  |  | — |  |  | — |
Interest rate swaps |  | 68,581 |  |  | 68,543 |  |  | — |  |  | 68,543 |  |  | — |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Deposits |  | 2,168,206 |  |  | 2,167,444 |  |  | 1,827,215 |  |  | 340,229 |  |  | — |
Federal Home Loan Bank advances and other borrowings |  | 456,808 |  |  | 440,242 |  |  | — |  |  | 440,242 |  |  | — |
Accrued interest payable |  | 4,053 |  |  | 4,053 |  |  | 4,053 |  |  | — |  |  | — |
Interest rate swaps |  | 61,419 |  |  | 61,419 |  |  | — |  |  | 61,419 |  |  | — |
Off-balance sheet items: |  |  |  |  |  |  |  |  |  |
Standby letters of credit |  | 184 |  |  | 184 |  |  | — |  |  | — |  |  | 184 |
N/A = The fair value is not applicable due to restrictions placed on transferability Disclosure of fair value information about financial instruments, for which it is practicable to estimate that value, is required whether or not recognized in the unaudited Consolidated Balance Sheets. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not necessarily represent the underlying value of the Corporation. Securities: The fair value measurements of investment securities are determined by a third-party pricing service which considers observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, trade execution data, market consensus prepayment speeds, credit information, and the securities’ terms and conditions, among other things. The fair value measurements are subject to independent verification by another pricing source on a quarterly basis to review for reasonableness. Any significant differences in pricing are reviewed with appropriate members of management who have the relevant technical expertise to assess the results. The Corporation has determined that these valuations are classified in Level 2 of the fair value hierarchy. When the independent pricing service does not provide a fair value measurement for a particular security, the Corporation will estimate the fair value based on specific information about each security. Fair values derived in this manner are classified in Level 3 of the fair value hierarchy. Loans Held for Sale: Loans held for sale, which consist of the guaranteed portions of SBA 7(a) loans, are carried at the lower of cost or estimated fair value. The estimated fair value is based on what secondary markets are currently offering for portfolios with similar characteristics. Interest Rate Swaps: The carrying amount and fair value of existing derivative financial instruments are based upon independent valuation models, which use widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative contract. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Corporation incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation considers the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Limitations: Fair value estimates are made at a discrete 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 Corporation’s entire holding of a particular financial instrument. Because no market exists for a significant portion of the Corporation’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 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. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and are not considered in the estimates.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration