FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2021

FAIR VALUE

Schedule of fair value assets and liabilities measured on recurring basis

The following presents assets and liabilities measured on a recurring basis as of June 30, 2021 and December 31, 2020 (in thousands):

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
June 30, 2021	(Level 1)		(Level 2)		(Level 3)		Balance
Investment securities available-for-sale:
U.S. Treasury debt	$	251	$	—	$	—	$	251
Corporate bonds		—		6,142		—		6,142
GNMA mortgage-backed securities - residential		—		16,086		—		16,086
FNMA mortgage-backed securities - residential		—		1,160		—		1,160
Corporate CMO and MBS		—		1,893		—		1,893
Total securities available-for-sale	$	251	$	25,281	$	—	$	25,532
Equity securities	$	719	$	—	$	—	$	719
Guarantee asset	$	—	$	—	$	196	$	196
IRLC, net	$	—	$	—	$	2,808	$	2,808
Forward commitments and FSC	$	—	$	(140)	$	—	$	(140)
Mortgage loans held for sale	$	—	$	48,563	$	—	$	48,563

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
December 31, 2020	(Level 1)		(Level 2)		(Level 3)		Balance
Investment securities available-for-sale:
U.S. Treasury debt	$	254	$	—	$	—	$	254
Corporate bonds		—		6,044		—		6,044
GNMA mortgage-backed securities - residential		—		24,604		—		24,604
FNMA mortgage-backed securities - residential		—		1,677		—		1,677
Corporate CMO and MBS		—		4,087		—		4,087
Total securities available-for-sale	$	254	$	36,412	$	—	$	36,666
Equity securities	$	730	$	—	$	—	$	730
Guarantee asset	$	—	$	—	$	232	$	232
IRLC, net	$	—	$	—	$	9,841	$	9,841
Forward commitments and FSC	$	—	$	(2,534)	$	(89)	$	(2,623)
Mortgage loans held for sale	$	—	$	161,843	$	—	$	161,843

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 (in thousands):

Three Months Ended June 30, 2021	Guarantee Asset		IRLC		FSC
Beginning balance	$	188	$	2,105	$	(173)
Acquisitions		—		5,823		—
Originations		2		(5,981)		—
Gains (losses) in net income, net		6		861		173
Other settlements		—		—		—
Ending balance	$	196	$	2,808	$	—

Three Months Ended June 30, 2020	Guarantee Asset		IRLC		FSC
Beginning balance	$	—	$	4,025	$	(16)
Acquisitions		—		9,395		(84)
Originations		244		(6,574)		—
Gains (losses) in net income, net		16		720		16
Other settlements		(38)		—		—
Ending balance	$	222	$	7,566	$	(84)

Six Months Ended June 30, 2021	Guarantee Asset		IRLC		FSC
Beginning balance	$	232	$	9,841	$	(89)
Acquisitions		—		8,507		(173)
Originations		2		(12,997)		—
Gains (losses) in net income, net		(38)		(2,543)		262
Other settlements		—		—		—
Ending balance	$	196	$	2,808	$	—

Six Months Ended June 30, 2020	Guarantee Asset		IRLC		FSC
Beginning balance	$	—	$	1,184	$	—
Acquisitions		—		16,718		(100)
Originations		244		(10,983)		—
Gains (losses) in net income, net		16		647		16
Other settlements		(38)		—		—
Ending balance	$	222	$	7,566	$	(84)

Summary of assets measured at fair value on nonrecurring basis

The following presents quantitative information about Level 3 assets measured on a recurring basis as of June 30, 2021 and December 31, 2020 (dollars in thousands):

	Quantitative Information about Level 3 Fair Value Measurements as of June 30, 2021
			Valuation		Significant		Range
	Fair Value		Technique		Unobservable Input		(Weighted Average)
Guarantee asset	$	196		Discounted cash flow		Discount rate Prepayment rate		3% (3%) 24% (24%)
IRLC, net		2,808		Best execution model		Pull through		72% to 100% (88%)
FSC		—		Internal pricing model		Market Differential		3bps to 61bps (19bps)

	Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2020
			Valuation		Significant		Range
	Fair Value		Technique		Unobservable Input		(Weighted Average)
Guarantee asset	$	232		Discounted cash flow		Discount rate Prepayment rate		3% (3%) 25% (25%)
IRLC, net		9,841		Best execution model		Pull through		55% to 100% (86%)
FSC		(89)		Internal pricing model		Market Differential		-59bps to -17bps (-31bps)

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

The following presents quantitative information about the significant unobservable inputs used in the fair value measurement of nonrecurring assets categorized within Level 3 of the fair value hierarchy as of June 30, 2021 and December 31, 2020 (dollars in thousands):

	Quantitative Information about Level 3 Fair Value Measurements as of June 30, 2021
			Valuation		Significant		Range
	Fair Value		Technique		Unobservable Input		(Weighted Average)
Impaired loans(1):
Commercial and Industrial	$	1,289		Sales comparison, Market approach - guideline transaction method		Management discount for asset/property type		17% - 45% (31%)

	Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2020
			Valuation		Significant		Range
	Fair Value		Technique		Unobservable Input		(Weighted Average)
Other real estate owned:
Commercial properties	$	194		Sales contract		Commission, cost to sell, closing costs		5% (5%)
Impaired loans(1):
Commercial and Industrial	$	1,800		Sales comparison, Market approach - guideline transaction method		Management discount for asset/property type		17% - 35% (26%)

______________________________________

⁽¹⁾ Two immaterial Cash, Securities and Other loans were fully reserved for using a specific allowance as of June 30, 2021 and one immaterial Cash, Securities and Other loan was fully reserved for using a specific allowance as of December 31, 2020.

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 June 30, 2021 and December 31, 2020 (in thousands):

	Carrying		Fair Value Measurements Using:
June 30, 2021	Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	289,089	$	289,089	$	—	$	—
Loans, net		1,558,508		—		—		1,552,344
Accrued interest receivable		5,986		—		19		5,967
Liabilities:
Deposits		1,679,053		—		1,680,464		—
Borrowings:
FHLB borrowings – fixed rate		15,000		—		15,062		—
Federal Reserve borrowings – fixed rate		105,762		—		105,762		—
Subordinated notes – fixed-to-floating rate		24,261		—		—		23,895
Accrued interest payable	$	312	$	—	$	106	$	206

	Carrying		Fair Value Measurements Using:
December 31, 2020	Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	155,989	$	155,989	$	—	$	—
Loans, net		1,520,294		—		—		1,512,699
Accrued interest receivable		6,618		—		90		6,528
Liabilities:
Deposits		1,619,910		—		1,621,648		—
Borrowings:
FHLB borrowings – fixed rate		15,000		—		15,099		—
Federal Reserve borrowings – fixed rate		134,563		—		134,563		—
Subordinated notes – fixed-to-floating rate		24,291		—		—		25,750
Accrued interest payable	$	453	$	—	$	124	$	329