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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2023

Fair value of assets and liabilities

Schedule of Recurring Level III Assets

The following table represents recurring Level III assets as of the periods shown:

(Dollars in thousands)						Municipal Securities						Embedded Derivatives						Total
Balance at December 31, 2022						$	35,343					$	787					$	36,130
Realized loss included in earnings						—						(139)						(139)
Maturities/calls						(67)						—						(67)
Unrealized gain included in other comprehensive income (loss)						1,182						—						1,182
Balance at March 31, 2023						$	36,458					$	648					$	37,106
Balance at December 31, 2021						$	41,763					$	—					$	41,763
Realized and unrealized gain included in earnings						7						—						7
Purchase of securities						862						—						862
Maturities/calls						(2,290)						—						(2,290)
Unrealized loss included in other comprehensive income (loss)						(674)						—						(674)
Balance at March 31, 2022						$	39,668					$	—					$	39,668

Quantitative Information About the Level III Significant Unobservable Inputs for Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

The following tables present quantitative information about the Level III significant unobservable inputs for assets and liabilities measured at fair value as of the periods shown:

						Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)						Fair Value						Valuation Technique						Unobservable Input						Range
March 31, 2023
Nonrecurring measurements:
Collateral-dependent loans						$	6,532					Appraisal of collateral 1						Appraisal adjustments 2						0% - 20%
																		Liquidation expense 2						6%
Other real estate owned						$	958					Appraisal of collateral 1						Appraisal adjustments 2						0% - 20%
																		Liquidation expense 2						6%
Other debt securities						$	7,500					Net asset value						Cost minus impairment						0%
Equity securities						$	32,988					Net asset value						Cost minus impairment						0%
Recurring measurements:
Municipal securities 5						$	36,458					Appraisal of bond 3						Bond appraisal adjustment 4						5% - 15%
Embedded derivatives						$	648					Monte Carlo pricing model						Deferred payment						$0 - $49.1 million
																		Volatility						59%
																		Term						4.75 years
																		Risk free rate						3.59%
December 31, 2022
Nonrecurring measurements:
Impaired loans						$	14,117					Appraisal of collateral 1						Appraisal adjustments 2						0% - 20%
																		Liquidation expense 2						6%
Other real estate owned						$	1,194					Appraisal of collateral 1						Appraisal adjustments 2						0% - 20%
																		Liquidation expense 2						6%
Other debt securities						$	7,500					Net asset value						Cost minus impairment						0%
Equity securities						$	33,362					Net asset value						Cost minus impairment						0%
Recurring measurements:
Municipal securities 5						$	35,343					Appraisal of bond 3						Bond appraisal adjustment 4						5% - 15%
Embedded derivatives						$	787					Monte Carlo pricing model						Deferred payment						$0 - $51.9 million
																		Volatility						58%
																		Term						5 years
																		Risk free rate						3.95%

1 Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level III inputs that are not identifiable.

2 Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

3 Fair value is determined through independent analysis of liquidity, rating, yield and duration.

4 Appraisals may be adjusted for qualitative factors, such as local economic conditions, liquidity, marketability and legal structure.

5 Municipal securities classified as Level III instruments are comprised of TIF bonds related to certain local municipal securities.

Recurring

Fair value of assets and liabilities

Financial Assets and Liabilities Measured at Fair Value

The following tables present assets and liabilities reported on the consolidated statements of financial condition at their fair value on a recurring basis as of the periods shown by level within the fair value hierarchy:

						March 31, 2023
(Dollars in thousands)						Level I						Level II						Level III						Total
Assets:
United States government agency securities						$	—					$	39,988					$	—					$	39,988
United States sponsored mortgage-backed securities						—						56,773						—						56,773
United States treasury securities						99,354						—						—						99,354
Municipal securities						—						87,144						36,458						123,602
Corporate debt securities						—						11,548						—						11,548
Other securities						—						813						—						813
Equity securities						5,588						—						—						5,588
Interest rate swap						—						6,371						—						6,371
Fair value hedge						—						226						—						226
Bank-owned life insurance						—						43,499						—						43,499
Embedded derivative						—						—						648						648
Liabilities:
Interest rate swap						—						6,371						—						6,371

						December 31, 2022
(Dollars in thousands)						Level I						Level II						Level III						Total
Assets:
United States government agency securities						$	—					$	44,814					$	—					$	44,814
United States sponsored mortgage-backed securities						—						56,571						—						56,571
United States treasury securities						—						120,909						—						120,909
Municipal securities						—						103,293						35,343						138,636
Corporate debt securities						—						10,560						—						10,560
Other securities						—						824						—						824
Equity securities						5,382						—						—						5,382
Interest rate swap						—						8,427						—						8,427
Bank-owned life insurance						—						43,239						—						43,239
Embedded derivative						—						—						787						787
Liabilities:
Interest rate swap						—						8,427						—						8,427
Fair value hedge						—						572						—						572

Non-recurring

Fair value of assets and liabilities

Financial Assets and Liabilities Measured at Fair Value

The following table presents the fair value of these assets as of the periods shown:

						March 31, 2023
(Dollars in thousands)						Level I						Level II						Level III						Total
Collateral-dependent loans						$	—					$	—					$	6,532					$	6,532
Other real estate owned						—						—						958						958
Other debt securities						—						—						7,500						7,500
Equity securities						—						—						32,988						32,988

						December 31, 2022
(Dollars in thousands)						Level I						Level II						Level III						Total
Impaired loans						$	—					$	—					$	14,117					$	14,117
Other real estate owned						—						—						1,194						1,194
Other debt securities						—						—						7,500						7,500
Equity securities						—						—						33,362						33,362

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Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

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Tabular disclosure of assets measured at fair value measured on a recurring or nonrecurring basis. Includes, but is not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2.

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Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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