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Fair Value
12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value

21.     FAIR VALUE

Fair value is defined by U.S. GAAP as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP also 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 observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the factors that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair values for each category of financial asset noted below:

Securities: The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges, live trading desk pricing from brokerages, or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on their relationship to other benchmark quoted securities. In certain circumstances live trading desk pricing from brokerages and third party internal models are used to value debt securities that we classify as Level 3.

Collateral-dependent loans: A specific loss allowance is created for collateral dependent loans, representing the difference between the face value of the loan and the current appraised value of its associated collateral, less estimated disposition costs.

Foreclosed assets: Repossessed real estate (OREO) and other assets are carried at the lower of cost or fair value. Fair value is the appraised value less expected selling costs for OREO and some other assets such as mobile homes, and for all other assets fair value is represented by the estimated sales proceeds as determined using reasonably available sources. Foreclosed assets for which appraisals can be feasibly obtained are periodically measured for impairment using updated appraisals. Fair values for other foreclosed assets are adjusted as necessary, subsequent to a periodic re-evaluation of expected cash flows and the timing of resolution. If impairment is determined to exist, the book value of a foreclosed asset is immediately written down to its estimated impaired value through the income statement, thus the carrying amount is equal to the fair value and there is no valuation allowance.

Assets and liabilities measured at fair value on a recurring basis are summarized below (dollars in thousands):

Fair Value Measurements at December 31, 2022, using

    

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

    

Significant
Observable
Inputs
(Level 2)

    

Significant
Unobservable
Inputs
(Level 3)

    

Total

    

Realized
Gain/(Loss)

Securities:

U.S. government agencies

$

$

50,599

$

$

50,599

$

Mortgage-backed securities

122,532

122,532

State and political subdivisions

205,980

205,980

Corporate bonds

57,435

57,435

Collateralized loan obligations

498,377

498,377

Total available-for-sale securities

$

$

877,488

$

57,435

$

934,923

$

Fair Value Measurements at December 31, 2021, using

    

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

    

Significant
Observable
Inputs
(Level 2)

    

Significant
Unobservable
Inputs
(Level 3)

    

Total

    

Realized
Gain/(Loss)

Securities:

U.S. government agencies

$

$

1,574

$

$

1,574

$

Mortgage-backed securities

306,727

306,727

State and political subdivisions

304,268

304,268

Corporate bonds

999

27,530

28,529

Collateralized loan obligations

136,509

195,707

332,216

Total available-for-sale securities

$

$

750,077

$

223,237

$

973,314

$

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2022 and 2021 (dollars in thousands):

    

Collateralized Loan Obligations

    

Corporate Bonds

2022

2021

2022

2021

Balance of recurring Level 3 assets at January 1,

$

195,707

$

$

27,530

$

Purchases

195,707

29,905

27,530

Transfers out of Level 3

(195,707)

Balance of recurring Level 3 assets at December 31,

$

$

195,707

$

57,435

$

27,530

The following tables present quantitative information about recurring level 3 fair value measurements at December 31, 2022 (dollars in thousands):

Range

    

Fair Value

Valuation Technique(s)

    

Unobservable Input(s)

Min

Max

Weighted Average

Corporate Bonds

$

57,435

New issue pricing

Risk appetite

N/A

N/A

N/A

Secondary market pricing

Market volatility

Credit quality of issuer

Credit spread

The following table presents quantitative information about recurring level 3 fair value measurements at December 31, 2021 (dollars in thousands):

Range

    

Fair Value

Valuation Technique(s)

    

Unobservable Input(s)

Min

Max

Weighted Average

Corporate Bonds

$

27,530

New issue pricing

Risk appetite

N/A

N/A

N/A

Secondary market pricing

Market volatility

Credit quality of issuer

Credit spread

Collateralized Loan Obligations

195,707

New issue pricing

Constant prepayment rate

N/A

N/A

N/A

Secondary market pricing

Default rate

Credit quality of issuer

Recovery rate

Credit spread

$

223,237

Assets and liabilities measured at fair market value on a non-recurring basis are summarized below (dollars in thousands):

Year Ended December 31, 2022

    

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

    

Significant
Observable
Inputs
(Level 2)

    

Significant
Unobservable
Inputs
(Level 3)

    

Total

Collateral dependent loans

$

$

18,141

$

$

18,141

Foreclosed assets

$

$

$

$

Year Ended December 31, 2021

    

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

    

Significant
Observable
Inputs
(Level 2)

    

Significant
Unobservable
Inputs
(Level 3)

    

Total

Collateral dependent impaired loans

$

$

221

$

177

$

398

Foreclosed assets

$

$

93

$

$

93

The following table presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis at December 31, 2021 (dollars in thousands):

Range

    

Fair Value

Valuation Technique(s)

    

Unobservable Input(s)

Min

Max

Weighted Average

Impaired loans - commercial and industrial

$

177

Fair value of collateral

Collateral discount

50%

70%

56%

$

177

There were no assets measured at fair value on a non-recurring basis with level 3 fair value measurements at December 31, 2022.