FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2022

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 the dates noted (dollars in thousands):

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
March 31, 2022	(Level 1)		(Level 2)		(Level 3)		Balance
Investment securities available-for-sale:
U.S. Treasury debt	$	239	$	—	$	—	$	239
U.S. Government Agency		—		2,867		—		2,867
Corporate bonds		—		10,868		6,215		17,083
GNMA mortgage-backed securities - residential		—		23,542		—		23,542
FNMA mortgage-backed securities - residential		—		13,002		—		13,002
Government CMO and MBS		—		658		—		658
Corporate CMO and MBS		—		1,336		—		1,336
Total securities available-for-sale	$	239	$	52,273	$	6,215	$	58,727
Mortgage loans held for sale	$	—	$	33,663	$	—	$	33,663
Loans held at fair value	$	—	$	—	$	6,380	$	6,380
Forward commitments and FSC	$	—	$	1,478	$	—	$	1,478
Equity securities	$	676	$	122	$	—	$	798
Guarantee asset	$	—	$	—	$	206	$	206
IRLC, net	$	—	$	—	$	990	$	990
Equity warrants	$	—	$	—	$	402	$	402

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
December 31, 2021	(Level 1)		(Level 2)		(Level 3)		Balance
Investment securities available-for-sale:
U.S. Treasury debt	$	247	$	—	$	—	$	247
U.S. Government Agency		—		3,522		—		3,522
Corporate bonds		—		6,212		2,113		8,325
GNMA mortgage-backed securities - residential		—		26,650		—		26,650
FNMA mortgage-backed securities - residential		—		14,443		—		14,443
Government CMO and MBS		—		878		—		878
Corporate CMO and MBS		—		1,497		—		1,497
Total securities available-for-sale	$	247	$	53,202	$	2,113	$	55,562
Mortgage loans held for sale	$	—	$	30,620	$	—	$	30,620
Forward commitments and FSC	$	—	$	(65)	$	(9)	$	(74)
Equity securities	$	709	$	489	$	—	$	1,198
Guarantee asset	$	—	$	—	$	237	$	237
IRLC, net	$	—	$	—	$	1,473	$	1,473
Equity warrants	$	—	$	—	$	160	$	160

Schedule of loans measured at fair value under fair value option

	March 31, 2022
	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
Loans held for sale	$	33,663	$	33,713	$	(50)	$	—	$	—	$	—	$	—	$	—	$	—
Loans held for investment		6,380		6,368		12		—		—		—		—		—		—
	$	40,043	$	40,081	$	(38)	$	—	$	—	$	—	$	—	$	—	$	—

	December 31, 2021
	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
Loans held for sale	$	30,620	$	29,857	$	763	$	—	$	—	$	—	$	—	$	—	$	—
Loans held for investment		—		—		—		—		—		—		—		—		—
	$	30,620	$	29,857	$	763	$	—	$	—	$	—	$	—	$	—	$	—

Schedule of gain or loss on fair value of loans

	Three Months Ended
	March 31,
		2022		2021
Loans held for sale	$	(1,911)	$	125
Loans held for investment		—		—
	$	(1,911)	$	125

Summary of activity pertaining to loans under fair value option

	Three Months Ended
	March 31,
Loans held for sale		2022		2021
Balance at beginning of period	$	30,620	$	161,843
Loans originated		191,081		525,814
Loans acquired		—		—
Fair value changes		667		5,969
Sales		(188,666)		(514,556)
Settlements		(39)		(2,426)
Balance at end of period	$	33,663	$	176,644

	Three Months Ended
	March 31,
Loans held for investment		2022		2021
Balance at beginning of period	$	—	$	—
Loans originated		—		—
Loans acquired		6,380		—
Fair value changes		—		—
Sales		—		—
Settlements		—		—
Balance at end of period	$	6,380	$	—

Summary of assets measured at fair value on nonrecurring basis

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

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
March 31, 2022	(Level 1)		(Level 2)		(Level 3)		Balance
Impaired loans(1):
Commercial and Industrial	$	—	$	—	$	439	$	439

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
December 31, 2021	(Level 1)		(Level 2)		(Level 3)		Balance
Impaired loans(1):
Commercial and Industrial	$	—	$	—	$	439	$	439

______________________________________

⁽¹⁾ One immaterial Cash, Securities and Other loan was fully reserved for using a specific allowance as of March 31, 2022 and December 31, 2021.

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 March 31, 2022	Corporate Bonds		Loans Held at Fair Value		FSC		Guarantee Asset		IRLC		Equity Warrants
Beginning balance	$	2,113	$	6,380	$	(9)	$	237	$	1,473	$	160
Acquisitions		4,000		—		9		—		1,614		242
Originations		—		—		—		—		(1,354)		—
Losses in net income, net		—		—		—		(31)		(743)		—
Unrealized gains, net		102		—		—		—		—		—
Ending balance	$	6,215	$	6,380	$	—	$	206	$	990	$	402

Three Months Ended March 31, 2021	Corporate Bonds		Loans Held at Fair Value		FSC		Guarantee Asset		IRLC		Equity Warrants
Beginning balance	$	—	$	—	$	(89)	$	232	$	9,841	$	—
Acquisitions		—		—		—		—		2,684		—
Originations		—		—		—		—		(7,016)		—
Losses in net income, net		—		—		(84)		(44)		(3,404)		—
Unrealized gains/(losses), net		—		—		—		—		—		—
Ending balance	$	—	$	—	$	(173)	$	188	$	2,105	$	—

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 (dollars in thousands):

	Quantitative Information about Level 3 Fair Value Measurements as of March 31, 2022
			Valuation		Significant		Range
	Fair Value		Technique		Unobservable Input		(Weighted Average)
Recurring fair value
Corporate Bonds	$	6,215		Discounted cash flow		Discount rate		5% (5%)
Loans held at fair value		6,380		Discounted cash flow		Discount rate		19 bps (19 bps)
Guarantee asset		206		Discounted cash flow		Discount rate Prepayment rate		3% (3%) 11% (11%)
IRLC, net		990		Best execution model		Pull through		67% to 100% (93%)
Equity warrants		402		Black-Scholes option pricing model		Volatility Risk-free interest rate Remaining life		24% to 37% (32%) 0.30% to 1.10% (0.97%) 0 to 4 years
Nonrecurring fair value
Impaired loans(1):
Commercial and Industrial		439		Sales comparison, Market approach - guideline transaction method		Management discount for asset/property type		7% - 45% (38%)

	Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2021
			Valuation		Significant		Range
	Fair Value		Technique		Unobservable Input		(Weighted Average)
Recurring fair value
Corporate Bonds	$	2,113		Discounted cash flow		Discount rate		7% (7%)
FSC		(9)		Internal pricing model		Market Differential		-14bps to -2 bps (-6bps)
Guarantee asset		237		Discounted cash flow		Discount rate Prepayment rate		3% (3%) 18% (18%)
IRLC, net		1,473		Best execution model		Pull through		71% to 100% (88%)
Equity warrants		160		Black-Scholes option pricing model		Volatility Risk-free interest rate Remaining life		24% to 37% (32%) 0.30% to 1.10% (0.97%) 0 to 4 years
Nonrecurring fair value
Impaired loans(1):
Commercial and Industrial		439		Sales comparison, Market approach - guideline transaction method		Management discount for asset/property type		17% - 45% (39%)

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		Fair Value Measurements Using:
March 31, 2022	Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	454,099	$	454,099	$	—	$	—
Loans, net		1,909,940		—		—		1,902,433
Accrued interest receivable		6,969		2		299		6,668
Liabilities:
Deposits		2,272,112		—		2,273,766		—
Borrowings:
FHLB borrowings – fixed rate		15,000		—		14,817		—
Federal Reserve borrowings – fixed rate		12,576		—		12,576		—
Subordinated notes – fixed-to-floating rate		32,523		—		—		35,573
Accrued interest payable		312		—		130		182

	Carrying		Fair Value Measurements Using:
December 31, 2021	Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	386,983	$	386,983	$	—	$	—
Loans, net		1,935,405		—		—		1,919,625
Accrued interest receivable		7,151		2		203		6,946
Liabilities:
Deposits		2,205,703		—		2,207,452		—
Borrowings:
FHLB borrowings – fixed rate		15,000		—		14,990		—
Federal Reserve borrowings – fixed rate		23,629		—		23,629		—
Subordinated notes – fixed-to-floating rate		39,031		—		—		40,325
Accrued interest payable		355		—		156		199