v3.25.2
Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
The Company measures and discloses certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (that is, not a forced liquidation or distressed sale). GAAP establishes a consistent framework for measuring fair value and disclosure requirements about fair value measurements. Among other things, the standard requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s estimates for market assumptions. These two types of inputs create the following fair value hierarchy.
Level 1 – Quoted prices in active markets for identical instruments. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
Level 2 – Observable inputs other than Level 1 including quoted prices in active markets for similar instruments, quoted prices in less active markets for identical or similar instruments, or other observable inputs that can be corroborated by observable market data.
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 from nonbinding single dealer quotes not corroborated by observable market data. In developing Level 3 measurements, management incorporates whatever market data might be available and uses discounted cash flow models where appropriate. These calculations include projections of future cash flows, including appropriate default and loss assumptions, and market-based discount rates.
The estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize at a future date. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. In addition, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates that must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values. Transfers between levels of the fair value hierarchy are deemed to occur at the end of the reporting period. There were no transfers between fair value levels for the three and six months ended June 30, 2025 and 2024.
The following methods were used to estimate the fair value of each class of financial instruments on a recurring basis:
Investment securities available-for-sale: Investment securities available-for-sale consist of U.S. Treasury securities and are carried at fair value. The Company estimates the fair value of investment securities available-for-sale using current active market quotes, if available, which are considered Level 1 measurements. Level 1 measurements include securities issued by the U.S. Treasury.
Investment in BFG: The Company’s valuation technique utilized the average of the discounted cash flow method and the Guideline Public Company method. A 4.5% discount for non-voting shares was applied to the valuation to arrive at fair value as of June 30, 2025 and December 31, 2024. The calculation of fair value utilized significant unobservable inputs, including projected cash flows, growth rates, and discount rates.
Derivative instruments: The Company’s derivative instruments consist of interest rate swaps accounted for as cash flow hedges. The Company’s derivative instruments are carried at fair value and considered Level 2 measurements. The Company measures fair value of interest rate swaps utilizing market observable inputs, such as forecasted yield curves.
The table below presents the Company's financial instruments valued on a recurring basis at the periods indicated:
June 30, 2025December 31, 2024
($ in thousands)LevelEstimated
Fair Value		Estimated
Fair Value
Financial assets:
U.S. Treasury securities1$30,146 $29,930 
Investment in BFG3$8,400 $7,700 
Derivative asset2$— $509 
Financial liabilities:
Derivative liability2$4 $— 
The table below presents a reconciliation of the Company’s investment in BFG classified as a Level 3 financial instrument and measured at fair value on a recurring basis for the periods indicated:
Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands)2025202420252024
Beginning balance$8,100 $8,200 $7,700 $4,200 
Purchase of BFG ownership interest— — — 4,125 
Change in fair value of BFG300 (200)700 (325)
Ending balance$8,400 $8,000 $8,400 $8,000 
The table below presents the Company’s financial instruments valued on a nonrecurring basis at the periods indicated:
($ in thousands)Fair Value Measurements Using
Description of Financial InstrumentFair ValueLevel 1Level 2Level 3
June 30, 2025
Nonrecurring assets:
Individually evaluated loans$39,230 $— $— $39,230 
December 31, 2024
Nonrecurring assets:
Individually evaluated loans$35,723 $— $— $35,723 
Individually evaluated loans – The loan amount above represents loans individually evaluated that have been adjusted to the lower of cost or fair value. When collateral-dependent loans are individually evaluated, they are measured using the current fair value of the collateral securing these loans, less selling costs. The fair value of real estate collateral is determined using collateral valuations or a discounted cash flow analysis using inputs such as discount rates, sale prices of
similar assets, and term of expected disposition. Some appraised values are adjusted based on management’s review and analysis, which may include historical knowledge, changes in market conditions, estimated selling and other anticipated costs, and/or expertise and knowledge. The loss, if any, represents charge-offs on loans when the fair value of the collateral is less than the carrying amount of the loan.
Quantitative information for Level 3 fair value measurements – The following table presents information about quantitative inputs and assumptions used to fair value Level 3 nonrecurring assets as of June 30, 2025 and December 31, 2024:
($ in thousands)Fair ValueValuation
Technique		Unobservable
Input		Range
(Weighted Average)
June 30, 2025
Individually evaluated loans$39,230 Market
comparable		Discount to appraisal value for estimated selling costs11.40%
December 31, 2024
Individually evaluated loans$35,723 Market
comparable		Discount to appraisal value for estimated selling costs11.40%
The range and weighted average of the significant unobservable inputs used to fair value the investment in BFG as of June 30, 2025 and as of December 31, 2024 are shown in the following table:
($ in thousands)June 30, 2025
Range
(Weighted Average)		December 31, 2024
Range
(Weighted Average)
Discounted Cash Flows
Revenue growth rate
15.3%15.3%
Expense growth rate
14.9%14.9%
Discount rate
25.0%27.5%
Lack of marketability discount
20.0%20.0%
Guideline Public Company
Multiples of enterprise value
3.8x to 5.0x
3.5x to 5.8x
The tables below present the carrying amount and estimated fair value of the Company's financial instruments at the periods indicated:
June 30, 2025
 Fair Value Measurements Using
($ in thousands)Carrying AmountEstimated Fair ValueLevel 1Level 2Level 3
Financial assets:
Cash and cash equivalents$90,100 $90,100 $90,100 $— $— 
Investment securities available-for-sale
30,146 30,146 30,146 — — 
Investment securities held-to-maturity11,248 10,007 — 10,007 — 
Investment in FHLB stock440 440 — 440 — 
Loans held-for-investment, net506,503 536,818 — — 536,818 
Strategic Program loans held-for-sale
147,282 147,282 — 147,282 — 
Accrued interest receivable2,380 2,380 — 2,380 — 
SBA servicing asset, net3,227 3,227 — 3,227 — 
Investment in BFG8,400 8,400 — — 8,400 
Financial liabilities:
Total deposits$635,174 $612,622 $— $612,622 $— 
Accrued interest payable3,746 3,746 — 3,746 — 
Derivative liability4 4 — 4 — 
December 31, 2024
Fair Value Measurements Using
($ in thousands)Carrying AmountEstimated Fair ValueLevel 1Level 2Level 3
Financial assets:
Cash and cash equivalents$109,162 $109,162 $109,162 $— $— 
Investment securities available-for-sale29,930 29,930 29,930 — — 
Investment securities held-to-maturity12,565 11,057 — 11,057 — 
Investment in FHLB stock349 349 — 349 — 
Loans held-for-investment, net447,812 478,919 — — 478,919 
Strategic Program loans held-for-sale
91,588 91,588 — 91,588 — 
Accrued interest receivable3,566 3,566 — 3,566 — 
SBA servicing asset, net3,273 3,273 — 3,273 — 
Investment in BFG7,700 7,700 — — 7,700 
Derivative asset509 509 — 509 — 
Financial liabilities:
Total deposits$544,952 $528,253 $— $528,253 $— 
Accrued interest payable1,494 1,494 — 1,494 — 
PPPLF64 64 — 64 —