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FAIR VALUE (Tables)

12 Months Ended

Dec. 31, 2023

Schedule of fair value assets and liabilities measured on recurring basis

The following tables present assets and liabilities measured on a recurring basis as of the dates noted (dollars in thousands):


December 31, 2023	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Reported Balance
Financial Assets
Mortgage loans held for sale	$	—	$	7,254	$	—	$	7,254
Loans held at fair value	$	—	$	—	$	13,726	$	13,726
Equity securities	$	636	$	122	$	—	$	758
Guarantee asset	$	—	$	—	$	189	$	189
IRLC, net	$	—	$	—	$	345	$	345
Equity warrants	$	—	$	—	$	795	$	795
Swap derivative asset	$	—	$	763	$	—	$	763
Financial Liabilities
Forward commitments and FSC	$	—	$	351	$	—	$	351
Swap derivative liabilities	$	—	$	740	$	—	$	740


December 31, 2022	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Reported Balance
Financial Assets
Mortgage loans held for sale	$	—	$	8,839	$	—	$	8,839
Loans held for sale	$	1,965	$	—	$	—	$	1,965
Loans held at fair value	$	—	$	—	$	23,321	$	23,321
Forward commitments and FSC	$	—	$	46	$	—	$	46
Equity securities	$	627	$	122	$	—	$	749
Guarantee asset	$	—	$	—	$	143	$	143
IRLC, net	$	—	$	—	$	229	$	229
Equity warrants	$	—	$	—	$	825	$	825

Schedule of information about the fair value carrying amount and unpaid principal outstanding of loans

The following tables provide more information about the fair value carrying amount and unpaid principal outstanding of loans accounted for under the fair value option as of the dates noted:


	December 31, 2023
	Total Loans						Non Accruals						90 Days or More Past Due
(Dollars in thousands)	Fair Value Carrying Amount		Unpaid Principal Balance		Difference		Fair Value Carrying Amount		Unpaid Principal Balance		Difference		Fair Value Carrying Amount		Unpaid Principal Balance		Difference
Mortgage loans held for sale	$	7,254	$	7,106	$	148	$	—	$	—	$	—	$	—	$	—	$	—
Loans held for investment, fair value option	13,726		14,129		(403)		210		220		(10)		210		220		(10)
	$	20,980	$	21,235	$	(255)	$	210	$	220	$	(10)	$	210	$	220	$	(10)


	December 31, 2022
	Total Loans						Non Accruals						90 Days or More Past Due
(Dollars in thousands)	Fair Value Carrying Amount		Unpaid Principal Balance		Difference		Fair Value Carrying Amount		Unpaid Principal Balance		Difference		Fair Value Carrying Amount		Unpaid Principal Balance		Difference
Mortgage loans held for sale	$	8,839	$	8,750	$	89	$	—	$	—	$	—	$	—	$	—	$	—
Loans held for sale	1,965		1,984		(19)		—		—		—		—		—		—
Loans held for investment, fair value option	23,321		23,415		(94)		139		140		(1)		139		140		(1)
	$	34,125	$	34,149	$	(24)	$	139	$	140	$	(1)	$	139	$	140	$	(1)

Schedule of changes in fair value of loans

The following table presents the changes in fair value of loans accounted for under the fair value option as of the dates noted (dollars in thousands):


	Year Ended
	December 31,
Changes in Fair Value		2023	2022
Mortgage loans held for sale			$	59	$	(673)
Loans held for sale			(20)		(20)
Loans held for investment			(309)		(94)
			$	(270)	$	(787)

The following summarizes the activity pertaining to loans accounted for under the fair value option as of the dates noted (dollars in thousands):


	Year Ended
	December 31,
Mortgage loans held for sale		2023	2022
Balance at beginning of period			$	8,839	$	30,620
Loans originated			276,045		439,682

Fair value changes			59		(673)
Sales			(277,683)		(460,514)
Settlements			(6)		(276)
Balance at end of period			$	7,254	$	8,839


	Year Ended
	December 31,
Loans held for sale		2023	2022
Balance at beginning of period			$	1,965	$	—
Loans transferred from held for investment			39,221		1,985

Fair value changes			(20)		(20)
Sales			(40,761)		—
Settlements			(405)		—
Balance at end of period			$	—	$	1,965


	Year Ended
	December 31,
Loans held for investment, fair value option		2023	2022
Balance at beginning of period			$	23,321	$	—
Loans acquired			1,173		35,616

Fair value changes			(309)		(94)
Net charge-offs			(1,700)		—
Settlements			(8,759)		(12,201)


Balance at end of period			$	13,726	$	23,321

Summary of assets measured at fair value on nonrecurring basis

The following table presents assets measured at fair value on a nonrecurring basis as of the dates noted (dollars in thousands):


December 31, 2023	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Reported Balance
Collateral dependent loans
Consumer and Other	$	—	$	—	$	7,500	$	7,500
1-4 Family Residential	—		—		2,438		2,438
Commercial and Industrial	—		—		25,738		25,738
Owner Occupied CRE	—		—		3,980		3,980
Total	$	—	$	—	$	39,656	$	39,656

Summary of assets and liability for level 3 instruments measured at fair value on recurring basis

The following presents a reconciliation for Level 3 instruments measured at fair value on a recurring basis as of the dates noted (dollars in thousands):


Year Ended December 31, 2023	Corporate Bonds		Loans Held at Fair Value		FSC		Guarantee Asset		IRLC		Equity Warrants
Beginning balance	$	—	$	23,321	$	—	$	143	$	229	$	825
Acquisitions	—		1,173		—		—		1,997		—
Originations	—		—		—		32		(3,272)		—

Gains (losses) in net income, net	—		(309)		—		38		1,391		(30)
Transfer to held-to-maturity	—		—		—		—		—		—
Net charge-offs	—		(1,700)		—		—		—		—
Settlements	—		(8,759)		—		(24)		—		—
Ending balance	$	—	$	13,726	$	—	$	189	$	345	$	795


Year Ended December 31, 2022	Corporate Bonds		Loans Held at Fair Value		FSC		Guarantee Asset		IRLC		Equity Warrants
Beginning balance	$	2,113	$	—	$	(9)	$	237	$	1,473	$	160
Acquisitions	4,000		35,616		9		—		3,213		344
Originations	—		—		—		1		(5,048)		—

Gains (losses) in net income, net	—		(94)		—		(75)		591		321
Unrealized gains, net	102		—		—		—		—		—
Transfer to held-to-maturity	(6,215)		—		—		—		—		—
Other settlements	—		(12,201)		—		(20)		—		—
Ending balance	$	—	$	23,321	$	—	$	143	$	229	$	825

Summary of assets and liabilities measured at fair value on a recurring or nonrecurring, the significant unobservable inputs

The following presents quantitative information about Level 3 assets measured on a recurring and nonrecurring basis as of the dates noted:

Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2023

(Dollars in thousands)

Fair Value

Valuation
Technique

Significant
Unobservable Input

Range
(Weighted Average)

Recurring fair value

Loans held for investment at fair value

13,726

Discounted cash flow

Discount rate

7% to 8% (8%)

Guarantee asset

189

Discounted cash flow

Discount rate
Prepayment rate

5% (5%)

IRLC, net

345

Best execution model

Pull through

48% to 100% (86%)

Equity Warrants

795

Black-Scholes option pricing model

Volatility
Risk-free interest rate
Remaining life

20.1% to 23.0% (22.4%)

4.62% (4.62%)

2.00 to 2.03 years

Nonrecurring fair value

Collateral dependent loans:

Consumer and Other

7,500

Credit enhancement - guarantee asset value

Market rate adjustments

46% (8%)

1-4 Family Residential

2,438

Credit enhancement - guarantee asset value

Market rate adjustments

46% (8%)

Commercial and Industrial

24,792

Credit enhancement - guarantee asset value

Market rate adjustments

46% (8%)

Commercial and Industrial

148

Sales comparison,
Market approach -
guideline transaction
method

Loss given default

14% to 62% (20%)

Commercial and Industrial

799

Credit enhancement - guarantee asset value

Market rate adjustments

21% (11%)

Owner Occupied CRE

3,980

Credit enhancement - guarantee asset value

Market rate adjustments

46% (8%)

Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2022

(Dollars in thousands)

Fair Value

Valuation
Technique

Significant
Unobservable Input

Range
(Weighted Average)

Recurring fair value

Loans held for investment at fair value

23,321

Discounted cash flow

Discount rate

4% to 18% (8%)

Guarantee asset

143

Discounted cash flow

Discount rate
Prepayment rate

5% (5%) 4% (4%)

IRLC, net

229

Best execution model

Pull through

73% to 100% (91%)

Equity warrants

825

Black-Scholes option pricing model

Volatility
Risk-free interest rate
Remaining life

32.7% to 88.9% (34.8)% 4.04% to 4.14% (4.05)% 0 to 4 years

Schedule of carrying amounts and estimated fair value of financial instruments not carried at fair value

The following presents carrying amounts and estimated fair values for financial instruments not carried at fair value as of the dates noted (dollars in thousands):


	Carrying Amount		Fair Value Measurements Using:
December 31, 2023			Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	254,442	$	254,442	$	—	$	—
Held-to-maturity securities, net of ACL	74,102		243		58,229		8,144
Loans, net(1)	2,493,258		—		—		2,395,468
Accrued interest receivable	11,428		11,428		—		—
Liabilities:
Term deposits(2)	496,452		414,613		—		82,564
Non-term deposits	2,032,587		2,032,587		—		—
Borrowings:
FHLB borrowings – fixed rate	41,175		—		41,372		—
FHLB borrowings – floating rate	50,000		—		49,986		—
Federal Reserve borrowings – fixed rate	34,536		3,539		30,936		—
Subordinated notes – fixed-to-floating rate	52,340		—		—		48,228
Accrued interest payable	3,793		3,793		—		—


	Carrying Amount		Fair Value Measurements Using:
December 31, 2022			Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	196,512	$	196,512	$	—	$	—
Held-to-maturity securities	81,056		234		67,433		7,051
Loans, net(1)	2,428,909		—		—		2,356,085
Accrued interest receivable	10,445		10,445		—		—
Liabilities:
Term deposits(2)	224,090		181,036				43,586
Non-term deposits	2,181,139		2,181,139		—		—
Borrowings:
FHLB borrowings – fixed rate	141,498		—		141,867		—
Federal Reserve borrowings – fixed rate	5,388		5,388				—
Subordinated notes – fixed-to-floating rate	52,132		—		—		60,384
Accrued interest payable	1,125		1,125		—		—

(1) Excludes loans accounted for under the fair value option of $13.7 million and $23.3 million as of December 31, 2023 and December 31, 2022, respectively, as these are carried at fair value.

(2) Term deposits due within one year totaling $414.6 million and $181.0 million as of December 31, 2023 and December 31, 2022, respectively, are classified under Level 1 fair value measurement.