Fair Value

9 Months Ended

Sep. 30, 2024

Fair Value

Fair Value

9) Fair Value

Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data (for example, interest rates and yield curves observable at commonly quoted intervals, prepayment speeds, credit risks, and default rates).

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Financial Assets and Liabilities Measured on a Recurring Basis

The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The fair value of interest-only (“I/O”) strip receivable assets is based on a valuation model used by a third party. The Company is able to compare the valuation model inputs and results to widely available published industry data for reasonableness (Level 2 inputs).

			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Balance		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Assets at September 30, 2024
Available-for-sale securities:
U.S. Treasury	$	184,162	$	184,162	$	—	$	—
Agency mortgage-backed securities		53,450		—		53,450		—
I/O strip receivables		95		—		95		—
Assets at December 31, 2023
Available-for-sale securities:
U.S. Treasury	$	382,369	$	382,369	$	—	$	—
Agency mortgage-backed securities		60,267		—		60,267		—
I/O strip receivables		117		—		117		—

There were no transfers between Level 1 and Level 2 during the period for assets measured at fair value on a recurring basis.

Assets and Liabilities Measured on a Non-Recurring Basis

The fair value of collateral dependent loans individually evaluated with specific allocations of the allowance for credit losses on loans is generally based on recent real estate appraisals. The appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. There were no material collateral dependent loans carried at fair value on a non-recurring basis at September 30, 2024 or December 31, 2023.

Foreclosed assets are valued at the time the loan is foreclosed upon and the asset is transferred to foreclosed assets. The fair value is based primarily on third-party appraisals, less costs to sell. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. At September 30, 2024 and December 31, 2023, there were no foreclosed assets on the balance sheet.

The carrying amounts and estimated fair values of the Company’s financial instruments at September 30, 2024 are as follows:

				Estimated Fair Value
						Significant
				Quoted Prices in		Other		Significant
				Active Markets for		Observable		Unobservable
	Carrying			Identical Assets		Inputs		Inputs
	Amounts			(Level 1)		(Level 2)		(Level 3)		Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	956,310		$	956,310	$	—	$	—	$	956,310
Securities available-for-sale		237,612			184,162		53,450		—		237,612
Securities held-to-maturity		604,193			—		531,533		—		531,533
Loans (including loans held-for-sale)		3,411,885	(1)		—		1,649		3,246,881		3,248,530
FHLB stock, FRB stock, and other
investments		32,553			—		—		—		N/A
Accrued interest receivable		15,220			604		3,020		11,596		15,220
I/O strips receivables		95			—		95		—		95
Liabilities:
Time deposits	$	523,396		$	—	$	525,656	$	—	$	525,656
Other deposits		4,206,137			—		4,206,137		—		4,206,137
Subordinated debt		39,615			—		33,215		—		33,215
Accrued interest payable		7,037			—		7,037		—		7,037

(1) Before allowance for credit losses on loans of $47,819,000.

The carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2023 are as follows:

				Estimated Fair Value
						Significant
				Quoted Prices in		Other		Significant
				Active Markets for		Observable		Unobservable
	Carrying			Identical Assets		Inputs		Inputs
	Amounts			(Level 1)		(Level 2)		(Level 3)		Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	408,129		$	408,129	$	—	$	—	$	408,129
Securities available-for-sale		442,636			382,369		60,267		—		442,636
Securities held-to-maturity		650,565			—		564,127		—		564,127
Loans (including loans held-for-sale)		3,352,583	(1)		—		2,205		3,172,512		3,174,717
FHLB stock, FRB stock, and other
investments		32,540			—		—		—		N/A
Accrued interest receivable		14,959			1,255		1,764		11,940		14,959
I/O strips receivables		117			—		117		—		117
Liabilities:
Time deposits	$	469,472		$	—	$	471,693	$	—	$	471,693
Other deposits		3,908,986			—		3,908,986		—		3,908,986
Subordinated debt		39,502			—		31,902		—		31,902
Accrued interest payable		4,688			—		4,698		—		4,698

(1) Before allowance for credit losses on loans of $47,958,000.