XML 64 R27.htm IDEA: XBRL DOCUMENT v3.25.0.1
Fair Value Measurements
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Note 18 – Fair Value Measurements

Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time of our entire holdings of a particular financial instrument. Because no market exists for a significant portion of our 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 on- and off-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.

Assets Measured on a Recurring Basis

As required by accounting standards, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following measurements are made on a recurring basis.

Available-for-sale investment securities — Available-for-sale investment securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level I securities include those traded on an active exchange, such as the New York Stock Exchange and money market funds. Level II securities include mortgage-backed securities issued by government sponsored entities and private label entities, municipal bonds,
United States Treasury securities that are traded by dealers or brokers in inactive over-the-counter markets and corporate debt securities. Certain local municipal securities related to tax increment financing (“TIF”) are independently valued and classified as Level III instruments.

Equity securities — Certain equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The valuation methodologies utilized may include significant unobservable inputs.

Loans held-for-sale — The fair value of loans held-for-sale is determined, when possible, using quoted secondary market prices or investor commitments. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan, which would be used by other market participants. If the fair value at the reporting date exceeds the amortized cost of a loan, the loan is reported at amortized cost.

Interest rate swaps – Interest rate swaps are recorded at fair value based on third-party vendors who compile prices from various sources and may determine the fair value of identical or similar instruments by using pricing models that consider observable market data.

Fair value hedges – Treated like an interest rate swap, fair value hedges are recorded at fair value based on third-party vendors who compile prices from various sources and may determine fair value of identical or similar instruments by using pricing models that consider observable market data.

Embedded derivatives — Accounted for and recorded separately from the underlying contract as a derivative at fair value on a recurring basis. Fair values are determined using the Monte Carlo model valuation technique. The valuation methodology utilized includes significant unobservable inputs.
The following tables present the assets reported on the consolidated statements of financial condition at their fair value on a recurring basis as of December 31, 2024 and 2023 by level within the fair value hierarchy:
 December 31, 2024
(Dollars in thousands)Level ILevel IILevel IIITotal
Assets:
United States government agency securities$— $39,846 $— $39,846 
United States sponsored mortgage-backed securities— 147,580 — 147,580 
United States treasury securities— 103,975 — 103,975 
Municipal securities— 84,147 17,993 102,140 
Corporate debt securities— 9,918 — 9,918 
Other securities— 681 — 681 
Equity securities4,994 — — 4,994 
Interest rate swaps— 5,913 — 5,913 
Embedded derivative— — 648 648 
Liabilities:
Interest rate swaps— 5,913 — 5,913 
Fair value hedge— 112 — 112 
 December 31, 2023
(Dollars in thousands)Level ILevel IILevel IIITotal
Assets:
United States government agency securities$— $38,408 $— $38,408 
United States sponsored mortgage-backed securities— 82,382 — 82,382 
United States treasury securities— 100,356 — 100,356 
Municipal securities— 88,662 18,245 106,907 
Corporate debt securities— 8,942 — 8,942 
Other securities— 780 — 780 
Equity securities3,590 — — 3,590 
Loans held-for-sale— 629 — 629 
Interest rate swaps— 6,249 — 6,249 
Embedded derivative— — 648 648 
Liabilities:
Interest rate swaps— 6,249 — 6,249 
Fair value hedge— 6,111 — 6,111 

The following table represents recurring Level III assets as of the periods shown:
(Dollars in thousands)Municipal SecuritiesEmbedded DerivativesTotal
Balance at December 31, 2023$18,245 $648 $18,893 
Realized and unrealized gains included in earnings6 — 6 
Maturities/calls(369)— (369)
Unrealized gains included in other comprehensive loss111 — 111 
Balance at December 31, 2024$17,993 $648 $18,641 
Balance at December 31, 2022$35,343 $787 $36,130 
Realized and unrealized gains (losses) included in earnings47 (139)(92)
Purchase of securities246 — 246 
Maturities/calls(18,294)— (18,294)
Unrealized gains included in other comprehensive loss903 — 903 
Balance at December 31, 2023$18,245 $648 $18,893 
Assets Measured on a Nonrecurring Basis

We may be required, from time to time, to measure certain financial and non-financial assets and liabilities at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Certain non-financial assets measured at fair value on a non-recurring basis include foreclosed assets (upon initial recognition or subsequent impairment), non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test and intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment.

Collateral-dependent loans – Certain loans receivable are evaluated individually for credit loss when the borrower is experiencing financial difficulties and repayment is expected to be provided substantially through the operation or sale of collateral. Estimated credit losses are based on the fair value of the collateral, adjusted for costs to sell. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. For a majority of collateral-dependent real estate related loans, we obtain a current external appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.

Other real estate owned – Other real estate owned, which is obtained through the Bank’s foreclosure process, is valued utilizing the appraised collateral value. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. At the time the foreclosure is completed, we obtain a current external appraisal. Upon acquisition, the foreclosed assets are measured at fair market value. Subsequent to their initial recognition, the foreclosed assets are remeasured at fair value through a write-down included in other noninterest expense.

Assets measured at fair value on a nonrecurring basis as of December 31, 2024 and 2023 are included in the table below:
December 31, 2024
(Dollars in thousands)Level ILevel IILevel IIITotal
Collateral-dependent loans— — 37,895 37,895 
Other real estate owned— — 2,827 2,827 
December 31, 2023
(Dollars in thousands)Level ILevel IILevel IIITotal
Collateral-dependent loans$— $— $2,891 $2,891 
Other real estate owned— — 825 825 

The carrying amount of equity securities without a readily determinable fair value and amounts of unrealized gains and losses recognized in earnings as of December 31, 2024 and 2023 are included in the table below:
(Dollars in thousands)Cumulative AdjustmentsAnnual Adjustments
December 31, 2024
Carrying value $37,589 $37,589 
Carrying value adjustments:
Upward changes for observable prices18,038 — 
Downward changes for observable prices(2,273)(259)
Net gain$15,765 $(259)
December 31, 2023
Carrying value$37,496 $37,496 
Carrying value adjustments:
Upward changes for observable prices18,038 671 
Downward changes for observable prices(2,014)(250)
Net gain$16,024 $421 

At December 31, 2024 equity securities consist of our Fintech investment portfolio, which is comprised of investments in nine companies with a carrying value of $36.5 million, and other equity security investments with a carrying value of $1.1 million. The equity securities included in the table above do not have readily determinable fair values and are recorded at cost and adjusted for observable price changes for underlying transactions for identical or similar investments. The net gain or loss in values of the equity securities is included in holding gain (loss) on equity securities in our consolidated statements of income.
The following tables presents quantitative information about the Level III significant unobservable inputs for assets and liabilities measured at fair value at December 31, 2024 and 2023:
 Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)Fair ValueValuation TechniqueUnobservable Input Range
December 31, 2024
Nonrecurring measurements:
Collateral-dependent loans$37,895 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
   
Liquidation expense 2
6%
Other real estate owned$2,827 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
   
Liquidation expense 2
6%
Recurring measurements:
Municipal securities 3
$17,993 
Appraisal of bond 4
Bond appraisal adjustment 5
5% - 15%
Embedded Derivatives$648 Monte Carlo pricing modelDeferred payment
$0 - $49.1 million
Volatility59%
Term4.75 years
Risk free rate3.59%
 Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)Fair ValueValuation TechniqueUnobservable Input Range
December 31, 2023
Nonrecurring measurements:
Collateral-dependent loans$2,891 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
   
Liquidation expense 2
6%
Other real estate owned$825 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
   
Liquidation expense 2
6%
Recurring measurements:
Municipal securities 3
$18,245 
Appraisal of bond 4
Bond appraisal adjustment 5
5% - 15%
Embedded Derivatives$648 Monte Carlo pricing modelDeferred payment
$0 - $49.1 million
Volatility59%
Term4.75 years
Risk free rate3.59%
1 Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level III inputs which 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 Municipal securities classified as Level III instruments are comprised of TIF bonds related to certain local municipal securities.
4 Fair value determined through independent analysis of liquidity, rating, yield and duration.
5 Appraisals may be adjusted for qualitative factors, such as local economic conditions, liquidity, marketability and legal structure.