2021 Annual Report

Recurring Basis The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The following table presents the balances of the assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020:

December 31, 2021

(dollars in thousands)

Level 1 Level 2 Level 3

Total

Fair Value of Financial Assets: Securities Available for Sale: U.S. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 754 $ Municipal Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SBA Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asset-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Rate Caps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Rate Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 158,369 — 124,537 — 84,480 — 30,370 — 40,852 — 7,356 — 2,358 — 2,358 Total Fair Value of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 754 $ 448,322 $ — $ 449,076 Fair Value of Financial Liabilities: Interest Rate Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 1,567 $ — $ 1,567 Total Fair Value of Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . $ — $ 1,567 $ — $ 1,567 Fair Value of Financial Assets: Securities Available for Sale: Municipal Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 115,012 $ — 115,012 Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 124,260 — 124,260 Corporate Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 72,155 — 72,155 SBA Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 40,107 — 40,107 Asset-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 39,095 — 39,095 Interest Rate Caps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,834 — 2,834 Interest Rate Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,757 — 2,757 Total Fair Value of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 396,220 $ — $ 396,220 Fair Value of Financial Liabilities: Interest Rate Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 6,167 $ — $ 6,167 Total Fair Value of Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . $ — $ 6,167 $ — $ 6,167 Investment Securities When available, the Company uses quoted market prices to determine the fair value of investment securities; such items are classified in Level 1 of the fair value hierarchy. For the Company’s investments, when quoted prices are not available for identical securities in an active market, the Company determines fair value utilizing vendors who apply matrix pricing for similar bonds where no price is observable or may compile prices from various sources. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, prepayment speeds, default rates, loss severity, current market, and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially, all of these assumptions are observable in the marketplace and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Fair values from these models are verified, where possible, against quoted market prices for recent trading activity of assets with similar characteristics to the security being valued. Such methods are generally classified as Level 2. However, when prices from independent sources vary, or cannot be obtained or corroborated, a security is generally classified as Level 3. — $ — $ 754 — 158,369 — 124,537 — 84,480 — 30,370 — 40,852 — 7,356 December 31, 2020 (dollars in thousands) Level 1 Level 2 Level 3 Total

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