The fair value of an asset or liability is the exchange price that would be received to sell that asset or paid to transfer that liability (exit price) in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including both those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis and a non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value are discussed below.

In accordance with accounting guidance, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows:

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 instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, volatilities, etc.), or model-based valuation techniques where all significant assumptions are observable, either directly or indirectly, in the market.

Level 3 - Valuation is generated from model-based techniques where one or more significant inputs are not observable, either directly or indirectly, in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include use of matrix pricing, discounted cash flow models, and similar techniques.

Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding 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 fair values presented. Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent limitations in any estimation technique. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management maximizes the use of observable inputs and attempts to minimize the use of unobservable inputs when determining fair value measurements. Estimated fair values are disclosed for financial instruments for which it is practicable to estimate fair value. These estimates are made at a specific point in time based on relevant market data and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates.

Investment Securities – Investment securities are generally valued based upon quotes obtained from independent third-party pricing services, which use evaluated pricing applications and model processes. Observable market inputs, such as, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data are considered as part of the evaluation. The inputs are related directly to the security being evaluated, or indirectly to a similarly situated security. Market assumptions and market data are utilized in the valuation models. The Company reviews the market prices provided by the third-party pricing service for reasonableness based on the Company’s understanding of the market place and credit issues related to the securities. The Company has not made any adjustments to the market quotes provided by them and, accordingly, the Company categorized its investment portfolio within Level 2 of the fair value hierarchy.

Interest Rate Swaps – The Company originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank. These back-to-back swap agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The Company also enters into interest rate swap contracts with institutional counterparties to hedge against certain fixed-rate loans. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. The fair value of these derivatives is based on a market standard discounted cash flow approach. The Company incorporates credit value adjustments on derivatives to properly reflect the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The Company has determined that the observable nature of the majority of inputs used in deriving the fair value of these derivative contracts fall within Level 2 of the fair value hierarchy, and the credit valuation adjustments are not significant to the overall valuation of its derivative financial instruments. As a result, the valuation of interest rate swaps is classified as Level 2 of the fair value hierarchy.

Equity Warrant Assets – The Company acquired equity warrant assets as a result of acquisition of Opus. Opus received equity warrant assets through its lending activities as part of loan origination fees. The warrants provide the Bank the right to purchase a specific number of equity shares of the underlying company’s equity at a certain price before expiration and contain net settlement terms qualifying as derivatives under ASC Topic 815. The fair value of equity warrant assets is determined using a Black-Scholes option pricing model and are classified as Level 3 with the fair value hierarchy due to the extent of unobservable inputs. The key assumptions used in determining the fair value include the exercise price of the warrants, valuation of the underlying entity's outstanding stock, expected term, risk-free interest rate, marketability discount for private company warrants, and price volatility.


	September 30, 2021
	Fair Value Measurement Using
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Fair Value
Financial assets
Investment securities available-for-sale:
U.S. Treasury	$	—	$	79,342	$	—	$	79,342
Agency	—		530,093		—		530,093
Corporate	—		386,391		—		386,391
Municipal bonds	—		1,255,866		—		1,255,866
Collateralized mortgage obligations	—		662,231		—		662,231
Mortgage-backed securities	—		1,795,892		—		1,795,892
Total securities available-for-sale	$	—	$	4,709,815	$	—	$	4,709,815

Derivative assets:

Interest rate swaps	$	—	$	6,747	$	—	$	6,747
Equity warrants	—		—		1,895		1,895
Total derivative assets	$	—	$	6,747	$	1,895	$	8,642

Financial liabilities


Derivative liabilities	$	—	$	5,819	$	—	$	5,819


	December 31, 2020
	Fair Value Measurement Using
(Dollars in thousands)	Level 1		Level 2		Level 3		Total Fair Value
Financial assets
Investment securities available-for-sale:
U.S. Treasury	$	—	$	32,533	$	—	$	32,533
Agency	—		690,386		—		690,386
Corporate	—		415,308		—		415,308
Municipal bonds	—		1,446,019		—		1,446,019
Collateralized mortgage obligations	—		513,366		—		513,366
Mortgage-backed securities	—		833,503		—		833,503
Total securities available-for-sale	$	—	$	3,931,115	$	—	$	3,931,115

Derivative assets:
Interest rate swaps	$	—	$	12,053	$	—	$	12,053
Equity warrants	—		—		1,914		1,914
Total derivative assets	$	—	$	12,053	$	1,914	$	13,967

Financial liabilities
Derivative liabilities	$	—	$	12,066	$	—	$	12,066


	Three Months Ended		Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
(Dollars in thousands)	2021		2020		2021		2020
Beginning balance	$	1,903	$	1,952	$	1,914	$	5,162
Change in fair value (1)	(8)		(32)		(19)		(35)
Sales	—		—		—		(3,207)
Ending balance	$	1,895	$	1,920	$	1,895	$	1,920

September 30, 2021

Range

(Dollars in thousands)

Fair Value

Valuation Technique(s)

Unobservable Input(s)

Min

Max

Weighted Average

Equity warrants

1,895

Black-Scholes
option pricing
model

Volatility
Risk free interest rate
Marketability discount

30.00%

0.19%

5.50%

35.00%

0.76%

16.00%

31.15%

0.32%

13.59%

December 31, 2020

Range

(Dollars in thousands)

Fair Value

Valuation Technique(s)

Unobservable Input(s)

Min

Max

Weighted Average

Equity warrants

1,914

Black-Scholes
option pricing
model

Volatility
Risk free interest rate
Marketability discount

30.00%

0.13%

6.00%

35.00%

0.36%

16.00%

31.19%

0.18%

13.51%

Individually Evaluated Loans – A loan is individually evaluated for expected credit losses when it does not share similar risk characteristics with other loans. Individually evaluated loans are measured based on the fair value of the underlying collateral or the discounted expected future cash flows. Collateral generally consists of accounts receivable, inventory, fixed assets, real estate, and cash. The Company measures impairment on all nonaccrual loans for which it has reduced the principal balance to the value of the underlying collateral less the anticipated selling cost.

The fair value of individually evaluated loans were determined using Level 3 assumptions, and represents individually evaluated loan balances for which a specific reserve has been established or on which a write down has been taken. For real estate loans, generally, the Company obtains third party appraisals (or property valuations) and/or collateral audits in conjunction with internal analysis based on historical experience on its individually evaluated loans and other real estate owned to determine fair value. In determining the net realizable value of the underlying collateral for individually evaluated loans, the Company will then discount the valuation to cover both market price fluctuations and selling costs, typically ranging from 7% to 10% of the collateral value, that the Company expected would be incurred in the event of foreclosure. In addition to the discounts taken, the Company’s calculation of net realizable value considered any other senior liens in place on the underlying collateral. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions, and management’s expertise and knowledge of the client and client’s business.

At September 30, 2021, the Company’s individually evaluated collateral dependent loans were evaluated based on the fair value of their underlying collateral based upon the most recent appraisals available to management. The Company completed partial charge-offs on certain individually evaluated loans based on recent real estate or property appraisals and released the related reserves during the nine months ended September 30, 2021.


	September 30, 2021
					Range
(Dollars in thousands)	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Min	Max	Weighted Average
Investor loans secured by real estate
CRE non-owner-occupied	$	7,045	Fair value of collateral	Collateral discount and cost to sell	7.00%	7.00%	7.00%


SBA secured by real estate (1)	976		Fair value of collateral	Collateral discount and cost to sell	10.00%	10.00%	10.00%






Commercial loans
Commercial and industrial	240		Fair value of collateral	Collateral discount and cost to sell	20.00%	20.00%	20.00%
Franchise non-real estate secured	1,087		Fair value of collateral	Collateral discount and cost to sell	—%	100.00%	10.32%






Total individually evaluated loans	$	9,348


	December 31, 2020
					Range
(Dollars in thousands)	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Min	Max	Weighted Average
Investor loans secured by real estate
CRE non-owner-occupied	$	198	Fair value of collateral	Collateral discount and cost to sell	10.00%	10.00%	10.00%


SBA secured by real estate (1)	746		Fair value of collateral	Collateral discount and cost to sell	10.00%	10.00%	10.00%

Business loans secured by real estate


SBA secured by real estate (2)	386		Fair value of collateral	Collateral discount and cost to sell	7.00%	10.00%	9.09%

Commercial loans
Commercial and industrial	2,040		Fair value of collateral	Collateral discount and cost to sell	7.00%	10.00%	9.06%

SBA non-real estate secured	707		Fair value of collateral	Collateral discount and cost to sell	7.00%	7.00%	7.00%





Total individually evaluated loans	$	4,077


	At September 30, 2021
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Assets
Cash and cash equivalents	$	322,320	$	322,320	$	—	$	—	$	322,320
Interest-bearing time deposits with financial institutions	2,708		2,708		—		—		2,708
Investments held-to-maturity	170,576		—		169,154		—		169,154
Investment securities available-for-sale	4,709,815		—		4,709,815		—		4,709,815
Loans held for sale	8,100		—		8,899		—		8,899
Loans held for investment, net	13,982,861		—		—		14,121,193		14,121,193

Derivative assets	8,642		—		6,747		1,895		8,642
Accrued interest receivable	63,228		63,228		—		—		63,228

Liabilities
Deposit accounts	$	17,469,999	$	16,356,929	$	1,167,405	$	—	$	17,524,334
FHLB advances	150,000		—		150,000		—		150,000

Subordinated debentures	330,408		—		367,515		—		367,515
Derivative liabilities	5,819		—		5,819		—		5,819
Accrued interest payable	5,065		5,065		—		—		5,065


	At December 31, 2020
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Assets
Cash and cash equivalents	$	880,766	$	880,766	$	—	$	—	$	880,766
Interest-bearing time deposits with financial institutions	2,845		2,845		—		—		2,845
Investments held-to-maturity	23,732		—		25,013		—		25,013
Investment securities available-for-sale	3,931,115		—		3,931,115		—		3,931,115
Loans held for sale	601		—		645		—		645
Loans held for investment, net	13,236,433		—		—		13,351,092		13,351,092
Derivative assets	13,967		—		12,053		1,914		13,967
Accrued interest receivable	74,574		74,574		—		—		74,574

Liabilities
Deposit accounts	$	16,214,177	$	14,587,335	$	1,631,047	$	—	$	16,218,382
FHLB advances	31,000		—		31,564		—		31,564

Subordinated debentures	501,511		—		544,436		—		544,436
Derivative liabilities	12,066		—		12,066		—		12,066
Accrued interest payable	6,569		6,569		—		—		6,569