Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2023

Fair value of assets and liabilities

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


(Dollars in thousands)	Municipal Securities		Embedded Derivatives		Total
Balance at June 30, 2023	$	34,418	$	648	$	35,066
Realized and unrealized income included in earnings	45		—		45
Purchase of securities	250		—		250
Maturities/calls	(17,389)		—		(17,389)
Unrealized loss included in other comprehensive income (loss)	(184)		—		(184)
Balance at September 30, 2023	$	17,140	$	648	$	17,788

Balance at December 31, 2022	$	35,343	$	787	$	36,130
Realized and unrealized income (loss) included in earnings	46		(139)		(93)
Purchase of securities	250		—		250
Maturities/calls	(18,156)		—		(18,156)

Unrealized loss included in other comprehensive income (loss)	(343)		—		(343)
Balance at September 30, 2023	$	17,140	$	648	$	17,788

Balance at June 30, 2022	$	37,035	$	—	$	37,035
Realized and unrealized gain included in earnings	—		—		—
Purchase of securities	—		—		—
Maturities/calls	(66)		—		(66)
Unrealized loss included in other comprehensive income (loss)	(1,840)		—		(1,840)
Balance at September 30, 2022	$	35,129	$	—	$	35,129

Balance at December 31, 2021	$	41,763	$	—	$	41,763
Realized and unrealized gains included in earnings	8		—		8
Purchase of securities	1,048		—		1,048
Maturities/calls	(3,141)		—		(3,141)
Unrealized loss included in other comprehensive income	(4,550)		—		(4,550)
Balance at September 30, 2022	$	35,129	$	—	$	35,129

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
September 30, 2023
Nonrecurring measurements:
Collateral-dependent loans	$	3,113	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%

Other real estate owned	$	906	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%

Other debt securities	$	7,500	Net asset value	Cost, less impairment	0%

Equity securities	$	36,188	Net asset value	Cost, less impairment	0%

Recurring measurements:
Municipal securities 5	$	17,140	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, less impairment	0%

Equity securities	$	33,362	Net asset value	Cost, less 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:


	September 30, 2023
(Dollars in thousands)	Level I		Level II		Level III		Total
Assets:
United States government agency securities	$	—	$	37,140	$	—	$	37,140
United States sponsored mortgage-backed securities	—		60,481		—		60,481
United States treasury securities	98,100		—		—		98,100
Municipal securities	—		81,484		17,140		98,624
Corporate debt securities	—		8,901		—		8,901

Other securities	—		791		—		791
Equity securities	4,647		—		—		4,647
Loans held-for-sale	—		7,603		—		7,603
Interest rate swaps	—		12,974		—		12,974
Fair value hedge	—		204		—		204
Bank-owned life insurance	—		44,109		—		44,109
Embedded derivative	—		—		648		648
Liabilities:
Interest rate swaps	—		10,609		—		10,609


	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 swaps	—		8,427		—		8,427
Bank-owned life insurance	—		43,239		—		43,239
Embedded derivative	—		—		787		787
Liabilities:
Interest rate swaps	—		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:


	September 30, 2023
(Dollars in thousands)	Level I		Level II		Level III		Total
Collateral-dependent loans	$	—	$	—	$	3,113	$	3,113
Other real estate owned	—		—		906		906
Other debt securities	—		—		7,500		7,500
Equity securities	—		—		36,188		36,188


	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