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Fair Value Measurements
 12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability 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 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1    Quoted prices in active exchange markets for identical assets or liabilities.
Level 2    Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets or other observable inputs that can be corroborated by observable market data; also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government and agency securities, corporate debt securities, derivative instruments and residential mortgage loans held for sale.
Level 3    Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for single dealer nonbinding quotes not corroborated by observable market data. This category generally includes certain private equity investments, retained interests from securitizations and certain collateralized debt obligations.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021:
(dollars in thousands)Quoted Prices
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant Other
Unobservable Inputs
(Level 3)		Total
(Fair Value)
December 31, 2022
Assets:        
Investment securities available-for-sale:        
U.S. treasury bonds$— $46,326 $— $46,326 
U.S. agency securities— 669,728 — 669,728 
Residential mortgage-backed securities— 820,502 — 820,502 
Corporate mortgage-backed securities— 50,214 — 50,214 
Municipal bonds— 10,088 — 10,088 
Corporate bonds— 1,808 — 1,808 
Loans held for sale— 6,734 — 6,734 
Interest rate caps— 31,039 — 31,039 
Mortgage banking derivatives— — 93 93 
Total assets measured at fair value on a recurring basis as of December 31, 2022$— $1,636,439 $93 $1,636,532 
Liabilities:
Interest rate swap derivatives$— $— $— $— 
Credit risk participation agreements— 2 — 2 
Interest rate caps— 30,065 — 30,065 
Total liabilities measured at fair value on a recurring basis as of December 31, 2022$— $30,067 $— $30,067 
December 31, 2021
Assets:
Investment securities available-for-sale:
U.S. treasury bonds$— $49,458 $— $49,458 
U.S. agency securities— 622,387 — 622,387 
Residential mortgage-backed securities— 1,677,673 — 1,677,673 
Municipal bonds— 145,431 — 145,431 
Corporate bonds— 118,459 10,000 128,459 
Loans held for sale— 47,218 — 47,218 
Interest rate caps— 5,197 — 5,197 
Mortgage banking derivatives— — 636 636 
Total assets measured at fair value on a recurring basis as of December 31, 2021$— $2,665,823 $10,636 $2,676,459 
Liabilities:
Interest rate swap derivatives$— $— $— $— 
Credit risk participation agreements— 47 — 47 
Interest rate caps— 5,147 — 5,147 
Total liabilities measured at fair value on a recurring basis as of December 31, 2021$— $5,194 $— $5,194 
Investment Securities
Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange and money market funds. Level 2 securities include U.S. agency debt securities, mortgage-backed securities issued by Government Sponsored Entities (“GSE’s”), U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and municipal bonds. Securities classified as Level 3 include securities in less liquid markets, the carrying amounts approximate the fair value.
Loans held for sale: The Company has elected to carry loans held for sale at fair value. This election reduces certain timing differences in the Consolidated Statement of Income and better aligns with the management of the portfolio from a business perspective. Fair value is derived from secondary market quotations for similar instruments. Gains and losses on sales of residential mortgage loans are recorded as a component of noninterest income in the Consolidated Statements of Income. Gains and losses on sales of multifamily FHA securities are recorded as a component of noninterest income in the Consolidated Statements of Income. As such, the Company classifies loans subjected to fair value adjustments as Level 2 valuation.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for loans held for sale measured at fair value as of December 31, 2022 and 2021.
December 31, 2022
(dollars in thousands)Fair ValueAggregate
Unpaid
Principal
Balance		Difference
Loans held for sale$6,734 $6,775 $(41)
December 31, 2021
(dollars in thousands)Fair ValueAggregate
Unpaid
Principal
Balance		Difference
Loans held for sale$47,218 $46,623 $595 
No residential mortgage loans held for sale were 90 or more days past due or on nonaccrual status as of December 31, 2022 or December 31, 2021.
Interest rate swap derivatives: These derivative instruments consist of interest rate swap agreements, which are accounted for as cash flow hedges under ASC 815. The Company’s derivative position is classified within Level 2 of the fair value hierarchy and is valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or non-binding broker-dealer quotations. The fair value of the derivatives is determined using discounted cash flow models. These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility. Derivative contracts are executed with a Credit Support Annex, which is a bilateral agreement that requires collateral postings when the market value exceeds certain threshold limits. These agreements protect the interests of the Company and its counterparties should either party suffer credit rating deterioration.
Credit risk participation agreements: The Company enters into RPAs with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower’s performance related to interest rate derivative contracts. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. Accordingly, RPAs fall within Level 2.
Interest rate caps: The Company entered into an interest rate cap agreement (“cap”) with an institutional counterparty, under which the Company will receive cash if and when market rates exceed the cap’s strike rate. The fair value of the cap is calculated by determining the total expected asset or liability exposure of the derivatives. Total expected exposure incorporates both the current and potential future exposure of the derivative, derived from using observable inputs, such as yield curves and volatilities. Accordingly, the cap falls within Level 2.
The following is a reconciliation of activity for assets and liabilities measured at fair value based on Significant Other Unobservable Inputs (Level 3):
(dollars in thousands)Investment
Securities		Mortgage Banking
Derivatives		Total
Assets:      
Beginning balance at January 1, 2022$10,000 $636 $10,636 
Realized loss included in earnings— (543)(543)
Reclassified to investment securities held-to-maturity(10,000)— (10,000)
Principal redemption— — — 
Ending balance at December 31, 2022$— $93 $93 
(dollars in thousands)Investment
Securities		Mortgage Banking
Derivatives		Total
Assets:      
Beginning balance at January 1, 2021$1,500 $5,213 $6,713 
Realized loss included in earnings— (4,577)(4,577)
Reclass Level 2 to 310,000 — 10,000 
Principal redemption(1,500)— (1,500)
Ending balance at December 31, 2021$10,000 $636 $10,636 
Liabilities:
Beginning balance at January 1, 2021$— $— $— 
Realized gain included in earnings— — — 
Ending balance at December 31, 2021$— $— $— 
Level 3 assets measured at fair value on a recurring or nonrecurring basis as of December 31, 2022 and 2021, the significant unobservable inputs used in the fair value measurements were as follows:
December 31, 2022
December 31, 2021
(dollars in thousands)Valuation TechniqueDescriptionRange
Weighted Average (1)
Fair Value
Weighted Average (1)
Fair Value
Mortgage banking derivativesPricing ModelPull Through Rate
84% - 100%
83.80 %$93 86.40 %$636 
(1) Unobservable inputs for mortgage banking derivatives were weighted by loan amount.
Mortgage banking derivatives for loans settled on a mandatory basis: The Company relied on a third-party pricing service to value its mortgage banking derivative financial assets and liabilities, which the Company classifies as a Level 3 valuation. The external valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms and rate lock expiration dates of the loan commitment groups. The Company also relies on an external valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e., an estimate of what the Company would receive or pay to terminate the
forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing.
Mortgage banking derivative for loans settled best efforts basis: The significant unobservable input (Level 3) used in the fair value measurement of the Company's interest rate lock commitments is the pull through ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. An increase in the pull through ratio (i.e. higher percentage of loans are estimated to close) will increase the gain or loss. The pull through ratio is largely dependent on the loan processing stage that a loan is currently in. The pull through rate is computed by the Company's secondary marketing consultant using historical data and the ratio is periodically reviewed by the Company for reasonableness.
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Company measures certain assets at fair value on a nonrecurring basis and the following is a general description of the methods used to value such assets.
Loans
The fair value of individually assessed loans is estimated using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those individually assessed loans not requiring a specific allowance represent loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. At December 31, 2022, substantially all of the Company’s individually assessed loans were evaluated based upon the fair value of the collateral. In accordance with ASC 820, individually assessed loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.
Other real estate owned: OREO is initially recorded at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral, which the Company classifies as a Level 3 valuation.
Assets measured at fair value on a nonrecurring basis are included in the table below: There were no liabilities measured at fair value on a non-recurring basis at December 31, 2022 and 2021.
(dollars in thousands)Quoted  Prices 
(Level 1)		Significant Other
Observable Inputs 
(Level 2)		Significant Other 
Unobservable Inputs 
(Level 3)		Total 
(Fair Value)
December 31, 2022        
Individually assessed loans:        
Commercial$— $— $1,790 $1,790 
Income producing - commercial real estate— — 3,131 3,131 
Owner occupied - commercial real estate— — 19,187 19,187 
Real estate mortgage - residential— — 1,404 1,404 
Consumer— — 3 3 
Other real estate owned— — 1,962 1,962 
Total assets measured at fair value on a nonrecurring basis as of December 31, 2022$— $— $27,477 $27,477 
(dollars in thousands)Quoted Prices 
(Level 1)		Significant Other
Observable Inputs 
(Level 2)		Significant Other 
Unobservable Inputs 
(Level 3)		Total 
(Fair Value)
December 31, 2021        
Individually assessed loans:        
Commercial$— $— $8,121 $8,121 
Income producing - commercial real estate— — 17,415 17,415 
Owner occupied - commercial real estate— — 42 42 
Real estate mortgage - residential— — 1,779 1,779 
Construction - commercial and residential— — 3,093 3,093 
Home equity— — 366 366 
PPP loans1,365 1,365 
Other real estate owned— — 1,635 1,635 
Total assets measured at fair value on a nonrecurring basis as of December 31, 2021$— $— $33,816 $33,816 
Fair Value of Financial Instruments
The Company discloses fair value information about financial instruments for which it is practicable to estimate the value, whether or not such financial instruments are recognized on the balance sheet. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by quoted market price, if one exists.
Quoted market prices, if available, are shown as estimates of fair value. Because no quoted market prices exist for a portion of the Company’s financial instruments, the fair value of such instruments has been derived based on management’s assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. Different assumptions could significantly affect these estimates. Accordingly, the net realizable value could be materially different from the estimates presented below. In addition, the estimates are only indicative of individual financial instrument values and should not be considered an indication of the fair value of the Company taken as a whole.
Estimated fair values of the Company’s financial instruments at December 31, 2022 and 2021 are as follows:
Fair Value Measurements
(dollars in thousands)Carrying
Value		Fair ValueQuoted Prices
(Level 1)		Significant Other 
Observable Inputs
(Level 2)		Significant Other Unobservable 
Inputs (Level 3)
December 31, 2022          
Assets          
Cash and due from banks$12,655 $12,655 $12,655 $— 
Federal funds sold33,927 33,927 — 33,927 — 
Interest bearing deposits with other banks265,272 265,272 — 265,272 — 
Investment securities available-for-sale1,598,666 1,598,666 — 1,598,666 — 
Investment securities held-to-maturity1,093,374 967,940 — 967,940 — 
Federal Reserve and Federal Home Loan Bank stock65,067 N/A— — — 
Loans held for sale6,734 6,734 — 6,734 — 
Loans7,635,632 7,501,484 — 7,501,484 
Bank owned life insurance110,998 110,998 — 110,998 — 
Annuity investment13,869 13,869 — 13,869 — 
Mortgage banking derivatives 93 93 — 93 
Interest rate caps31,039 31,039 — 31,039 — 
Liabilities
Noninterest bearing deposits3,150,751 3,150,751 — 3,150,751 — 
Interest bearing deposits4,778,932 4,778,932 — 4,778,932 — 
Time deposits783,499 790,418 — 790,418 — 
Customer repurchase agreements35,100 35,100 — 35,100 — 
Borrowings1,044,795 1,049,459 — 1,049,459 — 
Credit risk participation agreements2 2 — 2 — 
Interest rate caps30,065 30,065 — 30,065 — 
December 31, 2021
Assets
Cash and due from banks$12,886 $12,886 $12,886 $— $— 
Federal funds sold20,391 20,391 — 20,391 — 
Interest bearing deposits with other banks1,680,945 1,680,945 — 1,680,945 — 
Investment securities available-for-sale2,623,408 2,623,408 — 2,611,408 10,000 
Federal Reserve and Federal Home Loan Bank stock34,153 N/A— — — 
Loans held for sale47,218 47,218 — 47,218 — 
Loans7,065,598 6,930,929 — — 6,930,929 
Mortgage banking derivatives636 636 — — 636 
Interest rate swap derivatives5,197 5,197 — 5,197 — 
Liabilities
Noninterest bearing deposits3,277,956 3,277,956 — 3,277,956 — 
Interest bearing deposits5,974,502 5,974,502 — 5,974,502 — 
Time deposits729,082 736,001 — 736,001 — 
Customer repurchase agreements23,918 23,918 — 23,918 — 
Borrowings369,670 374,326 — 374,326 — 
Credit risk participation agreements,47 47 — 47 — 
Interest rate caps5,147 5,147 — 5,147 —