Fair Value Measurements

9 Months Ended

Sep. 30, 2025

Note 13. Fair Value Measurements

Fair Value Hierarchy

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 market prices (unadjusted) for identical instruments traded in active markets that the entity has the ability to access as of the measurement date.

Level 2 —Significant other 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 an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The estimated carrying and fair values of the Company’s financial instruments not carried at fair value are as follows (in thousands):


	September 30, 2025
	Carrying Amount		Fair Value
			Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	39,823	$	39,823	$	—	$	—	$	39,823
Interest-earning deposits in other banks	81,735		81,735		—		—		81,735

Held-to-maturity investment securities	287,082		—		266,706		—		266,706
Loans, net	2,421,552		—		—		2,399,601		2,399,601

Financial liabilities:
Time deposits	489,487		—		487,913		—		487,913
Borrowings	20,000		—		20,000		—		20,000
Senior debt and subordinated debentures	69,998		—		—		70,312		70,312


	December 31, 2024
	Carrying Amount		Fair Value
			Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	28,029	$	28,029	$	—	$	—	$	28,029
Interest-earning deposits in other banks	92,369		92,369		—		—		92,369

Held-to-maturity investment securities	301,359		—		274,568		—		274,568

Loans, net	2,308,418		—		—		2,252,462		2,252,462

Financial liabilities:
Time deposits	443,284		—		440,046		—		440,046
Borrowings	133,442		—		133,743		—		133,743
Senior debt and subordinated debentures	69,889		—		—		62,535		62,535

The methods and assumptions used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents — The carrying amounts of cash and due from banks, interest-earning deposits in other banks, and Federal funds sold approximate fair values and are classified as Level 1.

(b) Investment securities — The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

(c) Loans — Fair values of loans are estimated as follows: fixed and variable loans are estimated using discounted cash flow analyses, taking into consideration various factors including loan type, credit loss and prepayment expectations. The loan cash flows are discounted to present value using a combination of existing market rates and liquidity spreads as well as underlying index rates and margins on variable rate loans resulting in a Level 3 classification.

(d) Individually evaluated loans — Loans are not recorded at fair value on a recurring basis. However, from time to time, certain loans have individual risk characteristics not consistent with a pool of loans and are individually evaluated for credit reserves. Loans for which it is probable that payment of interest and principal will not be made in accordance with the original contractual terms of the loan agreement are typically individually evaluated. The fair value of these loans is estimated using one of several methods, including collateral value, fair value of similar debt, enterprise value, liquidation value and discounted cash flows. Those loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the Company records the loan as nonrecurring Level 3.

(e) Time Deposits — Fair value for fixed and variable rate certificates of deposit are estimated using discounted cash flow analyses using interest rates offered at each reporting date by the Company for certificates with similar remaining maturities resulting in a Level 2 classification.

(f) Short-Term Borrowings — The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

(g) Subordinated Debentures and Senior Debt — The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

Assets Recorded at Fair Value

The Company is required or permitted to record the following assets at fair value on a recurring basis. The following tables present information about the Company’s assets measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024 (in thousands):


	Fair Value Measurements Using
September 30, 2025	Fair Value		Level 1		Level 2		Level 3
Available-for-sale debt securities:
U.S. Treasury securities	$	9,439	$	9,439	$	—	$	—
U.S. Government agencies	65		—		65		—
Obligations of states and political subdivisions	164,403		—		164,403		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	66,662		—		66,662		—
Private label mortgage and asset backed securities	232,012		—		232,012		—
Corporate debt securities	494		—		494		—
Equity securities	6,769		6,769		—		—
Total assets measured at fair value on a recurring basis	$	479,844	$	16,208	$	463,636	$	—


	Fair Value Measurements Using
December 31, 2024	Fair Value		Level 1		Level 2		Level 3
Available-for-sale debt securities:
U.S. Treasury securities	$	9,058	$	9,058	$	—	$	—
U.S. Government agencies	65		—		65		—
Obligations of states and political subdivisions	164,640		—		164,640		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	72,302		—		72,302		—
Private label mortgage and asset backed securities	230,555		—		230,555		—
Equity securities	6,586		6,586		—		—
Total assets measured at fair value on a recurring basis	$	483,206	$	15,644	$	467,562	$	—

The table below presents the recorded investment in assets and liabilities measured at fair value on a nonrecurring basis, as of the date indicated (in thousands):


	Fair Value Measurements Using
September 30, 2025	Fair Value		Level 1	Level 2	Level 3
Collateral dependent loans
Commercial and industrial	$	1,000	—	—	$	1,000
Total collateral dependent loans	$	1,000	—	—	$	1,000

There were no assets or liabilities measured on a non-recurring basis at December 31, 2024.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2025 (in thousands):

Fair Value Measurements Using

September 30, 2025

Fair Value

Valuation Technique

Unobservable Inputs

Range, Weighted Average

Collateral dependent loans

$1,000

Fair value of property

Cost to sell

Not meaningful N/A

The individually evaluated loan amounts above represent collateral dependent loans that have been adjusted to fair value. When the Company identifies a collateral dependent loan with unique risk characteristics, the Company evaluates the need for an allowance using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan, the fair value of collateral is generally estimated by obtaining external appraisals. If the Company determines that the value of the loan is less than the recorded investment in the loan, the Company recognizes this impairment and adjusts the carrying value of the loan to fair value through the allowance for credit losses. The loss represents charge-offs or impairments on collateral dependent loans for fair value adjustments based on the fair value of collateral. The carrying value of loans fully charged-off is zero.

There were no liabilities measured at fair value on a recurring basis at September 30, 2025 and December 31, 2024.

There were no changes in valuation techniques used during the periods ended September 30, 2025 or December 31, 2024.