FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

Schedule of fair value assets and liabilities measured on recurring basis

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

September 30, 2024	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	$	—	$	12,324	$	—	$	12,324
Loans held for sale	$	—	$	473	$	—	$	473
Loans held at fair value	$	—	$	—	$	8,646	$	8,646
Forward commitments and FSC	$	—	$	85	$	—	$	85
Equity securities	$	649	$	122	$	—	$	771
Guarantee asset	$	—	$	—	$	270	$	270
IRLC, net	$	—	$	—	$	1,078	$	1,078
Equity warrants	$	—	$	—	$	795	$	795
Swap derivative assets	$	—	$	1,441	$	—	$	1,441
Financial Liabilities
Forward commitments and FSC	$	—	$	112	$	1	$	113
Swap derivative liabilities	$	—	$	1,712	$	—	$	1,712

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
Forward commitments and FSC	$	—	$	7	$	—	$	7
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	$	—	$	358	$	—	$	358
Swap derivative liabilities	$	—	$	740	$	—	$	740

Schedule of loans measured at fair value under fair value option

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 (dollars in thousands):

	September 30, 2024
	Total Loans						Non Accruals						90 Days or More Past Due
	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	$	12,324	$	12,099	$	225	$	—	$	—	$	—	$	—	$	—	$	—
Loans held for sale	473		594		(121)		473		594		(121)		473		594		(121)
Loans held for investment	8,646		8,883		(237)		153		158		(5)		153		158		(5)
	$	21,443	$	21,576	$	(133)	$	626	$	752	$	(126)	$	626	$	752	$	(126)

	December 31, 2023
	Total Loans						Non Accruals						90 Days or More Past Due
	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	13,726		14,129		(403)		210		220		(10)		210		220		(10)
	$	20,980	$	21,235	$	(255)	$	210	$	220	$	(10)	$	210	$	220	$	(10)

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:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2024		2023		2024		2023
Mortgage loans held for sale	$	(346)	$	(163)	$	16	$	(35)
Loans held for sale	—		—		—		(20)
Loans held for investment	66		110		166		(547)
	$	(280)	$	(53)	$	182	$	(602)

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

	Three Months Ended September 30,				Nine Months Ended September 30,
Mortgage loans held for sale	2024		2023		2024		2023
Balance at beginning of period	$	26,856	$	19,746	$	7,254	$	8,839
Loans originated	97,878		66,586		270,136		217,774
Fair value changes	(346)		(163)		16		(35)
Sales	(112,033)		(74,064)		(265,034)		(214,467)
Settlements	(31)		—		(48)		(6)
Balance at end of period	$	12,324	$	12,105	$	12,324	$	12,105

	Three Months Ended September 30,				Nine Months Ended September 30,
Loans held for sale	2024		2023		2024		2023
Balance at beginning of period	$	—	$	—	$	—	$	1,965
Loans transferred from held for investment	993		—		3,722		39,221
Fair value changes	—		—		—		(20)
Sales	(520)		—		(3,249)		(40,761)
Settlements	—		—		—		(405)
Balance at end of period	$	473	$	—	$	473	$	—

	Three Months Ended September 30,				Nine Months Ended September 30,
Loans held for investment, fair value option	2024		2023		2024		2023
Balance at beginning of period	$	10,190	$	17,523	$	13,726	$	23,321
Loans acquired	—		—		—		1,162
Fair value changes	66		110		166		(547)
Net charge-offs	(299)		(363)		(1,016)		(1,371)
Settlements	(1,311)		(1,806)		(4,230)		(7,101)
Balance at end of period	$	8,646	$	15,464	$	8,646	$	15,464

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):

Three Months Ended September 30, 2024	Loans Held at Fair Value		Guarantee Asset		IRLC		Equity Warrants
Beginning balance	$	10,190	$	228	$	912	$	795
Acquisitions	—		—		1,078		—
Originations	—		21		(1,345)		—
Gains/(losses) in net income, net	66		39		433		—
Net charge-offs	(299)		—		—		—
Settlements	(1,311)		(18)		—		—
Ending balance	$	8,646	$	270	$	1,078	$	795

Three Months Ended September 30, 2023	Loans Held at Fair Value		Guarantee Asset		IRLC		Equity Warrants
Beginning balance	$	17,523	$	166	$	453	$	825
Acquisitions	—		—		312		—
Originations	—		6		(606)		—
Gains/(losses) in net income, net	110		(8)		160		—
Net charge-offs	(363)		—		—		—
Settlements	(1,806)		(6)		—		—
Ending balance	$	15,464	$	158	$	319	$	825

Nine Months Ended September 30, 2024	Loans Held at Fair Value		Guarantee Asset		IRLC		Equity Warrants
Beginning balance	$	13,726	$	189	$	345	$	795
Acquisitions	—		—		2,803		—
Originations	—		68		(3,458)		—
Gains/(losses) in net income, net	166		50		1,388		—
Net charge-offs	(1,016)		—		—		—
Settlements	(4,230)		(37)		—		—
Ending balance	$	8,646	$	270	$	1,078	$	795

Nine Months Ended September 30, 2023	Loans Held at Fair Value		Guarantee Asset		IRLC		Equity Warrants
Beginning balance	$	23,321	$	143	$	229	$	825
Acquisitions	1,162		—		1,652		—
Originations	—		20		(2,784)		—
Gains/(losses) in net income, net	(547)		11		1,222		—
Net charge-offs	(1,371)		—		—		—
Settlements	(7,101)		(16)		—		—
Ending balance	$	15,464	$	158	$	319	$	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 September 30, 2024
(dollars in thousands)	Fair Value		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)
Recurring fair value
Loans held for investment at fair value	$	8,646	Discounted cash flow	Discount rate	8% (8%)
Guarantee asset	270		Discounted cash flow	Discount rate Prepayment rate	5% (5%) 8.5% (8.5%)
IRLC, net	1,078		Best execution model	Pull through	66% to 100% (84%)
Equity warrants	795		Black-Scholes option pricing model	Volatility Risk-free interest rate Remaining life	23.0% to 59.6% (30.4%) 4.06% (4.06%) 0 to 1.25 years
Nonrecurring fair value
OREO:
1-4 Family Residential	$	11,421	Appraisal value	Commission, cost to sell, closing costs	5% (5.0 %)
Commercial and Industrial	25,615		Appraisal value	Commission, cost to sell, closing costs	6.0% (6.0%)
Collateral dependent loans, net of ACL:
Commercial and Industrial	691		Sales Comparison-Market Value Approach	Market Rate Adjustments	11% (11%)
Commercial and Industrial	144		Sales comparison, Market approach - guideline transaction method	Loss given default	8% to 62% (42%)

	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%) 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	Sales Comparison-Market Value Approach	Market rate adjustments	46% (8%)
1-4 Family Residential	2,438		Sales Comparison-Market Value Approach	Market rate adjustments	46% (8%)
Commercial and Industrial	24,791		Sales Comparison-Market Value Approach	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		Sales Comparison-Market Value Approach	Market rate adjustments	21% (11%)
Owner Occupied CRE	3,980		Sales Comparison-Market Value Approach	Market rate adjustments	46% (8%)

Summary of carrying amounts and estimated fair values of financial instruments

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:
September 30, 2024			Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	276,222	$	276,222	$	—	$	—
Held-to-maturity securities, net of ACL	76,745		247		62,829		7,750
Loans, net(1)	2,355,757		—		—		2,286,056
Accrued interest receivable	10,455		10,455		—		—
Liabilities:
Term deposits(2)	533,452		480,413		—		54,016
Non-term deposits	1,969,602		1,969,602		—		—
Borrowings:
FHLB borrowings – floating rate	50,000		—		49,993		—
Federal Reserve borrowings – fixed rate	12,373		2,373		9,979		—
Subordinated notes – fixed-to-floating rate	52,508		—		—		47,727
Accrued interest payable	3,339		3,339		—		—

	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		242		58,231		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		—		—

(1) Excludes loans accounted for under the fair value option of $8.6 million and $13.7 million as of September 30, 2024 and December 31, 2023, respectively, as these are carried at fair value.

(2) Term deposits due within one year totaling $480.4 million and $414.6 million as of September 30, 2024 and December 31, 2023, respectively, are classified under Level 1 fair value measurement.