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FAIR VALUE OF FINANCIAL INSTRUMENTS | 3 Months Ended
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Mar. 31, 2025
Fair Value Disclosures [Abstract] |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values: Level 1 - Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date. Level 2 - Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 - Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing as asset or liability. The Company uses fair value to measure certain assets and liabilities on a recurring basis, such as investment securities, mortgage servicing rights, and derivatives. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period, and such measurements are therefore considered "nonrecurring" for purposes of disclosing the Company's fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for loans held for sale, collateral-dependent loans, bank premises held for sale, and foreclosed assets. Recurring Basis The following is a description of the methods and significant assumptions used to measure the fair value of assets and liabilities on a recurring basis. Investment Securities When available, the Company uses quoted market prices to determine the fair value of securities; such items are classified in Level 1 of the fair value hierarchy. For the Company’s securities where 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. 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, cannot be obtained or cannot be corroborated, a security is generally classified as Level 3. The change in fair value of debt securities available-for-sale is recorded through an adjustment to the consolidated statement of comprehensive income. The change in fair value of equity securities with readily determinable fair values is recorded through an adjustment to the consolidated statement of income. Mortgage Servicing Rights The Company has elected to record its mortgage servicing rights at fair value. Mortgage servicing rights do not trade in an active market with readily observable prices. Accordingly, the Company determines the fair value of mortgage servicing rights by estimating the fair value of the future cash flows associated with the mortgage loans being serviced as calculated by an independent third party. Key economic assumptions used in measuring the fair value of mortgage servicing rights include, but are not limited to, prepayment speeds and discount rates. Due to the nature of the valuation inputs, mortgage servicing rights are classified as Level 3. The change in fair value is recorded through an adjustment to the consolidated statement of income. Derivative Financial Instruments Derivative financial instruments are carried at fair value as determined by dealer valuation models. Based on the inputs used, the derivative financial instruments subjected to recurring fair value adjustments are classified as Level 2. For derivative financial instruments designated as hedging instruments, the change in fair value is recorded through an adjustment to the consolidated statement of comprehensive income. For derivative financial instruments not designated as hedging instruments, the change in fair value is recorded through an adjustment to the consolidated statement of income. The following tables summarize assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 by level within the fair value hierarchy:
|  | March 31, 2025
(dollars in thousands) |  | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs |  | Total Fair Value
Debt securities available-for-sale: |  |  |  |  |  |  |  |
U.S. Treasury |  | $ | — |  |  | $ | 102,863 |  |  | $ | — |  |  | $ | 102,863 |
U.S. government agency |  | — |  |  | 51,780 |  |  | — |  |  | 51,780 |
Municipal |  | — |  |  | 132,338 |  |  | — |  |  | 132,338 |
Mortgage-backed: |  |  |  |  |  |  |  |
Agency residential |  | — |  |  | 236,216 |  |  | — |  |  | 236,216 |
Agency commercial |  | — |  |  | 116,403 |  |  | — |  |  | 116,403 |
Corporate |  | — |  |  | 66,535 |  |  | — |  |  | 66,535 |
Equity securities with readily determinable fair values |  | 3,323 |  |  | — |  |  | — |  |  | 3,323 |
Mortgage servicing rights |  | — |  |  | — |  |  | 18,519 |  |  | 18,519 |
Derivative financial assets |  | — |  |  | 4,291 |  |  | — |  |  | 4,291 |
Derivative financial liabilities |  | — |  |  | 4,298 |  |  | — |  |  | 4,298 |
|  | December 31, 2024
(dollars in thousands) |  | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs |  | Total Fair Value
Debt securities available-for-sale: |  |  |  |  |  |  |  |
U.S. Treasury |  | $ | — |  |  | $ | 111,145 |  |  | $ | — |  |  | $ | 111,145 |
U.S. government agency |  | — |  |  | 53,198 |  |  | — |  |  | 53,198 |
Municipal |  | — |  |  | 130,679 |  |  | — |  |  | 130,679 |
Mortgage-backed: |  |  |  |  |  |  |  |
Agency residential |  | — |  |  | 227,368 |  |  | — |  |  | 227,368 |
Agency commercial |  | — |  |  | 116,681 |  |  | — |  |  | 116,681 |
Corporate |  | — |  |  | 58,978 |  |  | — |  |  | 58,978 |
Equity securities with readily determinable fair values |  | 3,315 |  |  | — |  |  | — |  |  | 3,315 |
Mortgage servicing rights |  | — |  |  | — |  |  | 18,827 |  |  | 18,827 |
Derivative financial assets |  | — |  |  | 5,553 |  |  | — |  |  | 5,553 |
Derivative financial liabilities |  | — |  |  | 5,525 |  |  | — |  |  | 5,525 |
The following tables present additional information about the unobservable inputs used in the fair value measurement of the mortgage servicing rights (dollars in thousands):
March 31, 2025 |  | Fair Value |  | Valuation Technique |  | Unobservable Inputs |  | Range (Weighted Average)
Mortgage servicing rights |  | $ | 18,519 |  |  | Discounted cash flows |  | Constant pre-payment rates (CPR) |  | 0.6% to 94.3% (7.9%)
|  |  |  |  |  | Discount rate |  | 9.0% to 11.0% (9.6%)
December 31, 2024 |  | Fair Value |  | Valuation Technique |  | Unobservable Inputs |  | Range (Weighted Average)
Mortgage servicing rights |  | $ | 18,827 |  |  | Discounted cash flows |  | Constant pre-payment rates (CPR) |  | 0.8% to 94.3% (7.6%)
|  |  |  |  |  | Discount rate |  | 9.0% to 96.4% (10.4%)
Nonrecurring Basis The following is a description of the methods and significant assumptions used to measure the fair value of assets and liabilities on a nonrecurring basis. Loans Held for Sale Mortgage loans originated and held for sale are carried at the lower of cost or estimated fair value. The Company obtains quotes or bids on these loans directly from purchasing financial institutions. Typically, these quotes include a premium on the sale and thus these quotes generally indicate fair value of the held for sale loans is greater than cost. Loans held for sale have been classified as Level 2. Collateral-Dependent Loans Periodically, a collateral-dependent loan is evaluated individually and is reported at the fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. If the collateral value is not sufficient, a specific reserve is recorded. Collateral values are estimated using recent appraisals and customized discounting criteria. Due to the significance of unobservable inputs, fair values of collateral-dependent loans have been classified as Level 3. Bank Premises Held for Sale Bank premises held for sale are recorded at the lower of cost or fair value, less estimated selling costs, at the date classified as held for sale. Values are estimated using recent appraisals and customized discounting criteria. Due to the significance of unobservable inputs, fair values of collateral-dependent loans have been classified as Level 3. Foreclosed Assets Foreclosed assets are recorded at fair value based on property appraisals, less estimated selling costs, at the date of the transfer. Subsequent to the transfer, foreclosed assets are carried at the lower of cost or fair value, less estimated selling costs. Values are estimated using recent appraisals and customized discounting criteria. Due to the significance of unobservable inputs, fair values of collateral-dependent loans have been classified as Level 3. The following tables summarize assets measured at fair value on a nonrecurring basis as of March 31, 2025 and December 31, 2024 by level within the fair value hierarchy:
|  | March 31, 2025
(dollars in thousands) |  | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs |  | Total Fair Value
Loans held for sale |  | $ | — |  |  | $ | 2,721 |  |  | $ | — |  |  | $ | 2,721 |
Collateral-dependent loans |  | — |  |  | — |  |  | 29,253 |  |  | 29,253 |
Bank premises held for sale |  | — |  |  | — |  |  | 190 |  |  | 190 |
Foreclosed assets |  | — |  |  | — |  |  | 460 |  |  | 460 |
|  | December 31, 2024
(dollars in thousands) |  | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs |  | Total Fair Value
Loans held for sale |  | $ | — |  |  | $ | 1,586 |  |  | $ | — |  |  | $ | 1,586 |
Collateral-dependent loans |  | — |  |  | — |  |  | 27,717 |  |  | 27,717 |
Bank premises held for sale |  | — |  |  | — |  |  | 317 |  |  | 317 |
Foreclosed assets |  | — |  |  | — |  |  | 367 |  |  | 367 |
The following tables present quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements (dollars in thousands):
March 31, 2025 |  | Fair Value |  | Valuation Technique |  | Unobservable Inputs |  | Range (Weighted Average)
Collateral-dependent loans |  | $ | 29,253 |  |  | Appraisal of collateral |  | Appraisal adjustments |  | Not meaningful
Bank premises held for sale |  | 190 |  |  | Appraisal |  | Appraisal adjustments |  | 7% (7%)
Foreclosed assets |  | 460 |  |  | Appraisal |  | Appraisal adjustments |  | 7% (7%)
December 31, 2024 |  | Fair Value |  | Valuation Technique |  | Unobservable Inputs |  | Range (Weighted Average)
Collateral-dependent loans |  | $ | 27,717 |  |  | Appraisal of collateral |  | Appraisal adjustments |  | Not meaningful
Bank premises held for sale |  | 317 |  |  | Appraisal |  | Appraisal adjustments |  | 7% (7%)
Foreclosed assets |  | 367 |  |  | Appraisal |  | Appraisal adjustments |  | 7% (7%)
Other Fair Value Methods The following methods and assumptions were used by the Company in estimating fair value disclosures of its other financial instruments. Cash and Cash Equivalents The carrying amounts of these financial instruments approximate their fair values. Restricted Stock The carrying amount of FHLB stock approximates fair value based on the redemption provisions of the FHLB. Loans The fair value estimation process for the loan portfolio uses an exit price concept and reflects discounts the Company believes are consistent with discounts in the marketplace. Fair values are estimated for portfolios of loans with similar characteristics. Loans are segregated by type such as commercial and industrial, agricultural and farmland, commercial real estate – owner occupied, commercial real estate – non-owner occupied, multi-family, construction and land development, one-to-four family residential, and municipal, consumer, and other. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities. The fair value analysis also includes other assumptions to estimate fair value, intended to approximate those a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate. Investments in Unconsolidated Subsidiaries The fair values of the Company’s investments in unconsolidated subsidiaries are presumed to approximate carrying amounts. Time and Brokered Time Deposits Fair values of certificates of deposit with stated maturities have been estimated using the present value of estimated future cash flows discounted at rates currently offered for similar instruments. Time deposits also include public funds time deposits. Securities Sold Under Agreements to Repurchase The fair values of repurchase agreements with variable interest rates are presumed to approximate their recorded carrying amounts. FHLB Advances The fair values of FHLB advances are estimated using discounted cash flow analyses based on current rates offered for borrowings with similar remaining maturities and characteristics. Subordinated Notes The fair values of subordinated notes are estimated using discounted cash flow analyses based on rates observed on recent debt issuances by other financial institutions. Junior Subordinated Debentures The fair values of subordinated debentures are estimated using discounted cash flow analyses based on rates observed on recent debt issuances by other financial institutions. Accrued Interest The carrying amounts of accrued interest approximate fair value. The following table provides summary information on the carrying amounts and estimated fair values of the Company’s other financial instruments:
(dollars in thousands) |  | Fair Value Hierarchy Level |  | March 31, 2025 |  | December 31, 2024
|  | Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | Level 1 |  | $ | 211,591 |  |  | $ | 211,591 |  |  | $ | 137,692 |  |  | $ | 137,692 |
Debt securities held-to-maturity |  | Level 2 |  | 490,398 |  |  | 445,762 |  |  | 499,858 |  |  | 445,186 |
Restricted stock |  | Level 3 |  | 5,086 |  |  | 5,086 |  |  | 5,086 |  |  | 5,086 |
Loans, net |  | Level 3 |  | 3,419,667 |  |  | 3,358,974 |  |  | 3,424,102 |  |  | 3,418,318 |
Investments in unconsolidated subsidiaries |  | Level 3 |  | 1,614 |  |  | 1,614 |  |  | 1,614 |  |  | 1,614 |
Accrued interest receivable |  | Level 2 |  | 22,735 |  |  | 22,735 |  |  | 24,770 |  |  | 24,770 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Time deposits |  | Level 3 |  | 787,335 |  |  | 781,985 |  |  | 785,430 |  |  | 779,997 |
Securities sold under agreements to repurchase |  | Level 2 |  | 2,698 |  |  | 2,698 |  |  | 28,969 |  |  | 28,969 |
FHLB advances |  | Level 3 |  | 7,209 |  |  | 6,303 |  |  | 13,231 |  |  | 13,159 |
Subordinated notes |  | Level 3 |  | 39,573 |  |  | 39,095 |  |  | 39,553 |  |  | 38,316 |
Junior subordinated debentures |  | Level 3 |  | 52,864 |  |  | 47,966 |  |  | 52,849 |  |  | 47,942 |
Accrued interest payable |  | Level 2 |  | 4,487 |  |  | 4,487 |  |  | 5,096 |  |  | 5,096 |
The Company estimated the fair value of lending related commitments as described in Note 14 to be immaterial based on limited interest rate exposure due to their variable nature, short-term commitment periods, and termination clauses provided in the agreements. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair values have been estimated using data which management considered the best available and estimation methodologies deemed suitable for the pertinent category of financial instrument.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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