| FAIR VALUE MEASUREMENTS |
NOTE 10—FAIR VALUE MEASUREMENTS: The following tables present fair value measurements of certain of the Company’s assets and liabilities measured at fair value and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair values as of September 30, 2024 and December 31, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at September 30, 2024 | | Total | | Level 1 | | Level 2 | | Level 3 | | Assets: | | | | | | | | | | | | | | | | | Debt securities available-for-sale | | | | | | | | | U.S. Treasury notes | $ | 20,810 | | | $ | 20,810 | | | $ | — | | | $ | — | | | Government agency debentures | 2,980 | | | — | | | 2,980 | | | — | | | Loans held for sale, at fair value | 242,225 | | | — | | | — | | | 242,225 | | | Loans held for investment, at fair value | 394,471 | | | — | | | — | | | 394,471 | | Other real estate owned 1 | 2,199 | | | — | | | — | | | 2,199 | | | Non-controlled/affiliate investments | 740 | | | — | | | — | | | 740 | | Servicing assets2 | 23,967 | | | — | | | — | | | 23,967 | | | Joint ventures | 55,750 | | | — | | | — | | | 55,750 | | Total assets measured at fair value | $ | 743,142 | | | $ | 20,810 | | | $ | 2,980 | | | $ | 719,352 | | | Liabilities: | | | | | | | | Equity warrants3 | $ | 108 | | | $ | — | | | $ | — | | | $ | 108 | | Derivative instruments,3,4 | 68 | | | — | | | 68 | | | — | | Total liabilities measured at fair value | $ | 176 | | | $ | — | | | $ | 68 | | | $ | 108 | |
1 Included in Other assets on the Consolidated Statements of Financial Condition. 2 $24.0 million of servicing assets at held at FV and $22.1 million of servicing assets are held at LCM. Refer to NOTE 7—SERVICING ASSETS. 3 Included in Accounts payable, accrued expenses, and other liabilities on the Consolidated Statements of Financial Condition. 4 Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.
| | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2023 | | Total | | Level 1 | | Level 2 | | Level 3 | | Assets: | | | | | | | | | Debt securities available-for-sale | | | | | | | | | U.S. Treasury notes | $ | 29,304 | | | $ | 29,304 | | | $ | — | | | $ | — | | | Government agency debentures | 2,867 | | | — | | | 2,867 | | | — | | | Loans held for sale, at fair value | 118,867 | | | — | | | — | | | 118,867 | | | Loans held for investment, at fair value | 469,801 | | | — | | | — | | | 469,801 | | Other real estate owned 1 | 1,110 | | | — | | | — | | | 1,110 | | | Non-controlled/affiliate investments | 728 | | | — | | | — | | | 728 | | Servicing assets2 | 29,336 | | | — | | | — | | | 29,336 | | | Joint ventures | 40,859 | | | — | | | — | | | 40,859 | | | Total assets measured at fair value | $ | 692,872 | | | $ | 29,304 | | | $ | 2,867 | | | $ | 660,701 | | | Liabilities: | | | | | | | | Equity warrants3 | $ | 141 | | | $ | — | | | $ | — | | | $ | 141 | | Derivative instruments3,4 | 630 | | | — | | | 630 | | | — | | Total liabilities measured at fair value | $ | 771 | | | $ | — | | | $ | 630 | | | $ | 141 | |
1 Included in Other assets on the Consolidated Statements of Financial Condition. 2 $29.3 million of servicing assets held at FV and $10.4 million of servicing assets are held at LCM. Refer to NOTE 7—SERVICING ASSETS 2 Included in Accounts payable, accrued expenses, and other liabilities on the Consolidated Statements of Financial Condition. 3 Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings. The following tables represents the changes in the investments, servicing assets and liabilities measured at fair value using Level 3 inputs for the nine months ended September 30, 2024 and 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended September 30, 2024 | | Loans HFI, at FV | | Loans HFS, at FV | | Joint Ventures | | Servicing Assets, at FV | | Non-Control Investments | | Warrant Liabilities2 | | Other Real Estate Owned1 | | Fair value, December 31, 2023 | $ | 469,801 | | | $ | 118,867 | | | $ | 40,859 | | | $ | 29,336 | | | $ | 728 | | | $ | 141 | | | $ | 1,110 | | | Reclasses between loans at FV and LCM | 263 | | | 2,508 | | | — | | | — | | | — | | | — | | | — | | Sales | (2,888) | | | (166,648) | | | — | | | — | | | — | | | — | | | (956) | | | Principal payments received | (54,656) | | | (9,375) | | | — | | | — | | | — | | | — | | | — | | | Foreclosed real estate acquired | (2,251) | | | — | | | — | | | — | | | — | | | — | | | 2,251 | | | SBA loans, funded | 122 | | | 12,966 | | | — | | | — | | | — | | | — | | | — | | ALP loans, funded | — | | | 191,440 | | | — | | | — | | | — | | | — | | | — | | Mortgage loans, funded | — | | | 79,432 | | | — | | | — | | | — | | | — | | | — | | Additions | — | | | — | | | — | | | 14 | | | — | | | — | | | — | | Purchases and repurchases of loans | 1,296 | | | — | | | — | | | — | | | — | | | — | | | — | | | Capital contributions/(distributions) | — | | | — | | | 5,457 | | | — | | | (116) | | | — | | | — | | Change in valuation due to: | | | | | | | | | | | | | | Changes in valuation inputs or assumptions | 2,614 | | | 13,058 | | | 9,434 | | | 805 | | | 128 | | | (33) | | | (206) | | Other factors | (19,830) | | | (23) | | | — | | | (6,188) | | | — | | | — | | | — | | | Fair value, September 30, 2024 | $ | 394,471 | | | $ | 242,225 | | | $ | 55,750 | | | $ | 23,967 | | | $ | 740 | | | $ | 108 | | | $ | 2,199 | |
1 Included in Other assets on the Consolidated Statements of Financial Condition. 2 Included in Accounts payable, accrued expenses, and other liabilities on the Consolidated Statements of Financial Condition.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended September 30, 2023 | | Loans HFI, at FV | | Loans HFS,
at FV | | Controlled Investments | | Joint Ventures | | Servicing Assets,
at FV | | Non-Control Investments | | Warrant Liabilities2 | | Other Real Estate Owned1 | | Fair value, December 31, 2022 | $ | 505,268 | | | $ | 19,168 | | | $ | 259,217 | | | $ | 23,022 | | | $ | 30,268 | | | $ | 1,360 | | | $ | — | | | $ | 3,529 | | | Net gain (loss) on loans under the fair value option | 12,132 | | | 456 | | | | | | | | | | | | | | Additions/(removal) of entities
consolidating after Conversion
to BHC | — | | | 69,745 | | | (259,217) | | | — | | | — | | | — | | | — | | | — | | Reclass of Loans HFS to HFI | 5,879 | | | (24,712) | | | — | | | — | | | — | | | — | | | — | | | — | | | Change in valuation due to: | | | | | | | | | | | | | | | | | Changes in valuation inputs or assumptions | — | | | — | | | — | | | 3,141 | | | 3,584 | | | — | | | — | | | — | | | Other factors | — | | | — | | | — | | | — | | | (5,150) | | | — | | | — | | | (240) | | | Realized gain (loss) | (18,032) | | | 13,700 | | | — | | | — | | | — | | | — | | | (117) | | | (457) | | | SBA investments, funded | 38,616 | | | 161,742 | | | — | | | — | | | — | | | — | | | — | | | — | | | ALP loans, funded | — | | | 44,660 | | | — | | | — | | | — | | | — | | | — | | | — | | | Foreclosed real estate acquired | (2,195) | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,195 | | | Purchases and repurchases of loans | 9,461 | | | 5,279 | | | — | | | 14,550 | | | — | | | — | | | — | | | — | | | Sales | — | | | (212,673) | | | — | | | — | | | — | | | — | | | — | | | (2,198) | | | Principal payments received | (58,142) | | | (6,898) | | | — | | | — | | | — | | | — | | | — | | | — | | | Additions | — | | | — | | | — | | | — | | | 2,590 | | | — | | | 311 | | | — | | | Fair Value, September 30, 2023 | $ | 492,987 | | | $ | 70,467 | | | $ | — | | | $ | 40,713 | | | $ | 31,292 | | | $ | 1,360 | | | $ | 194 | | | $ | 2,829 | |
1 Included in Other assets on the Consolidated Statements of Financial Condition. 2 Included in Accounts payable, accrued expenses, and other liabilities on the Consolidated Statements of Financial Condition. The following tables provide a summary of quantitative information about the Company’s Level 3 fair value measurements as of September 30, 2024 and December 31, 2023. In addition to the inputs noted in the table below, according to our valuation policy we may also use other valuation techniques and methodologies when determining our fair value measurements. The tables below are not intended to be all-inclusive, but rather provide information on the significant Level 3 inputs as they relate to the Company’s fair value measurements at September 30, 2024 and December 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value as of | | | | | | Weighted | | Range | | | September 30, 2024 | | | | Unobservable Input | | Average | | Minimum | | Maximum | | Assets: | | | | | | | | | | | | | Loans HFI, at FV - accrual | | $ | 334,872 | | | | | Market yields | | 6.55 | % | | 6.55 | % | | 6.55 | % | | | | | | | Cumulative prepayment rate | | 22.50 | % | | 22.50 | % | | 22.50 | % | | | | | | | Average cumulative default rate | | 19.00 | % | | 19.00 | % | | 19.00 | % | Loans HFI, at FV - non-accrual | | $ | 59,599 | | | | | Market yields | | 6.66 | % | | 6.66 | % | | 6.66 | % | | | | | | | Cumulative prepayment rate | | — | % | | — | % | | — | % | | | | | | | Average cumulative default rate | | 30.00 | % | | 30.00 | % | | 30.00 | % | Loans HFS, at FV | | $ | 242,225 | | | | | Market yields | | 7.03 | % | | 6.44 | % | | 7.61 | % | | | | | | | Cumulative prepayment rate | | 75.00 | % | | 75.00 | % | | 75.00 | % | | | | | | | Average cumulative default rate | | 12.50 | % | | 5.00 | % | | 20.00 | % | Joint ventures | | $ | 55,750 | | | | | Market yields | | 7.61 | % | | 7.61 | % | | 7.61 | % | | | | | | | Cost of equity | | 11.00 | % | | 8.00 | % | | 14.00 | % | | | | | | | Weighted average cost of capital | | 7.50 | % | | 6.00 | % | | 9.00 | % | | Non-control equity investments | | $ | 740 | | | | | Market yields | | 10.00 | % | | 8.00 | % | | 12.00 | % | | | | | | | Weighted average cost of capital | | 23.20 | % | | 23.20 | % | | 23.20 | % | Servicing assets1 | | $ | 23,967 | | | | | Market yields | | 12.50 | % | | 12.50 | % | | 12.50 | % | | | | | | | Cumulative prepayment rate | | 22.50 | % | | 22.50 | % | | 22.50 | % | | | | | | | Average cumulative default rate | | 19.00 | % | | 19.00 | % | | 19.00 | % | | Other real estate owned | | $ | 2,199 | | | | | Appraised value | | N/A | | N/A | | N/A | | | | | | | | | | | | | | Liabilities: | | | | | | | | | | | | | Equity warrants | | $ | 108 | | | | | Expected volatility | | 45.00 | % | | 45.00 | % | | 45.00 | % | | | | | | | Dividend yield | | 6.10 | % | | 6.10 | % | | 6.10 | % | | | | | | | Risk free rate | | 3.73 | % | | 3.73 | % | | 3.73 | % |
1 $24.0 million of servicing assets at held at FV and $22.1 million of servicing assets are held at LCM. Refer to NOTE 7—SERVICING ASSETS. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value as of | | | | | | Weighted | | Range | | | December 31, 2023 | | | | Unobservable Input | | Average | | Minimum | | Maximum | | Assets: | | | | | | | | | | | | | Loans HFI, at FV - accrual | | $ | 421,627 | | | | | Market yields | | 7.75 | % | | 7.75 | % | | 7.75 | % | | | | | | | Cumulative prepayment rate | | 22.50 | % | | 22.50 | % | | 22.50 | % | | | | | | | Average cumulative default rate | | 19.00 | % | | 19.00 | % | | 19.00 | % | Loans HFI, at FV - non-accrual | | $ | 48,174 | | | | | Market yields | | 7.39 | % | | 7.39 | % | | 7.39 | % | | | | | | | Cumulative prepayment rate | | — | % | | — | % | | — | % | | | | | | | Average cumulative default rate | | 30.00 | % | | 30.00 | % | | 30.00 | % | Loans HFS, at FV | | $ | 118,867 | | | | | Market yields | | 6.85 | % | | 6.50 | % | | 7.75 | % | | | | | | | Cumulative prepayment rate | | 61.03 | % | | 55.60 | % | | 75.00 | % | | | | | | | Average cumulative default rate | | 20.00 | % | | 20.00 | % | | 20.00 | % | Joint ventures | | $ | 40,859 | | | | | Market yields | | 8.00 | % | | 8.00 | % | | 8.00 | % | | | | | | | Cost of equity | | 12.00 | % | | 10.00 | % | | 14.00 | % | | | | | | | Weighted average cost of capital | | 8.50 | % | | 7.50 | % | | 9.50 | % | | Non-control equity investments | | $ | 368 | | | | | Market yields | | 10.00 | % | | 8.00 | % | | 12.00 | % | | | $ | 360 | | | | | Cost | | N/A | | N/A | | N/A | Servicing assets1 | | $ | 29,336 | | | | | Market yields | | 13.50 | % | | 13.50 | % | | 13.50 | % | | | | | | | Cumulative prepayment rate | | 22.50 | % | | 22.50 | % | | 22.50 | % | | | | | | | Average cumulative default rate | | 19.00 | % | | 19.00 | % | | 19.00 | % | | Other real estate owned | | $ | 1,110 | | | | | Appraised value | | N/A | | N/A | | N/A | | | | | | | | | | | | | | | Liabilities: | | | | | | | | | | | | | | Equity warrants | | $ | 141 | | | | | Expected volatility | | 43.00 | % | | 43.00 | % | | 43.00 | % | | | | | | | Dividend yield | | 5.20 | % | | 5.20 | % | | 5.20 | % | | | | | | | Risk free rate | | 3.88 | % | | 3.88 | % | | 3.88 | % |
1 $29.3 million of servicing assets held at FV and $10.4 million of servicing assets are held at LCM. Refer to NOTE 7—SERVICING ASSETS Estimated Fair Value of Other Financial Instruments
GAAP also requires disclosure of the fair value of financial instruments carried at book value on the Consolidated Statements of Financial Condition. The carrying amounts and estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 2024 | | | | Carrying Amount | | Fair Value Amount by Level: | | Total Fair Value | | | Level 1 | | Level 2 | | Level 3 | | | Financial Assets: | | | | | | | | | | | Cash and due from banks | $ | 9,688 | | | $ | 9,688 | | | $ | — | | | $ | — | | | $ | 9,688 | | | Restricted cash | 27,929 | | | 27,929 | | | — | | | — | | | 27,929 | | | Interest bearing deposits in banks | 152,805 | | | 152,805 | | | — | | | — | | | 152,805 | | | Debt securities available-for-sale, at FV | 23,790 | | | 20,810 | | | 2,980 | | | — | | | 23,790 | | | Loans HFS, at FV | 242,225 | | | — | | | — | | | 242,225 | | | 242,225 | | | Loans HFS, at LCM | 60,203 | | | — | | | — | | | 60,256 | | | 60,256 | | | Loans HFI, at FV | 394,471 | | | — | | | — | | | 394,471 | | | 394,471 | | | Total loans HFI, at amortized cost, net of deferred fees and costs | 518,489 | | | — | | | — | | | 554,506 | | | 554,506 | | | Federal Home Loan Bank and Federal Reserve Bank stock | 3,608 | | | — | | | 3,608 | | | — | | | 3,608 | | | Joint ventures, at FV | 55,750 | | | — | | | — | | | 55,750 | | | 55,750 | | | Non-control investments | 740 | | | — | | | — | | | 740 | | | 740 | | | Financial Liabilities: | | | | | | | | | | | Time deposits | 256,774 | | | — | | | 277,569 | | | — | | | 277,569 | | | Borrowings | 655,834 | | | — | | | 301,213 | | | 361,273 | | | 662,486 | | | | | | | | | | | | | December 31, 2023 | | | | Carrying Amount | | Fair Value Amount by Level: | | Total Fair Value | | | Level 1 | | Level 2 | | Level 3 | | | Financial Assets: | | | | | | | | | | | Cash and due from banks | $ | 15,398 | | | $ | 15,398 | | | $ | — | | | $ | — | | | $ | 15,398 | | | Restricted cash | 30,919 | | | 30,919 | | | — | | | — | | | 30,919 | | | Interest bearing deposits in banks | 137,689 | | | 137,689 | | | — | | | — | | | 137,689 | | | Debt securities available-for-sale, at FV | 32,171 | | | 29,305 | | | 2,866 | | | — | | | 32,171 | | | Loans HFS, at FV | 118,867 | | | — | | | — | | | 118,867 | | | 118,867 | | | Loans HFS, at LCM | 56,607 | | | — | | | — | | | 56,733 | | | 56,733 | | | Loans HFI, at FV | 469,801 | | | — | | | — | | | 469,801 | | | 469,801 | | | Total loans HFI, at amortized cost, net of deferred fees and costs | 336,305 | | | — | | | — | | | 337,133 | | | 337,133 | | | Federal Home Loan Bank and Federal Reserve Bank stock | 3,635 | | | — | | | 3,635 | | | — | | | 3,635 | | | Joint ventures, at FV | 40,859 | | | — | | | — | | | 40,859 | | | 40,859 | | | Non-control investments | 728 | | | — | | | — | | | 728 | | | 728 | | | Financial Liabilities: | | | | | | | | | | | Time deposits | 167,041 | | | — | | | 168,542 | | | — | | | 168,542 | | | Borrowings | 644,122 | | | — | | | 187,555 | | | 454,239 | | | 641,794 | |
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