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Fair Value Accounting
 9 Months Ended
Sep. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Accounting

NOTE 6 – Fair Value Accounting

 

FASB ASC 820, “Fair Value Measurement and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an 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. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

  Level 1 – Quoted market price in active markets
 

Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include certain debt and equity securities that are traded in an active exchange market.

 

  Level 2 – Significant other observable inputs
 

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 for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include fixed income securities and mortgage-backed securities that are held in the Company’s available-for-sale portfolio and valued by a third-party pricing service, as well as certain individually evaluated loans.

 

  Level 3 – Significant unobservable inputs
  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include 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.  These methodologies may result in a significant portion of the fair value being derived from unobservable data.  

 

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 12 of the Company’s 2024 Annual Report on Form 10-K. See Note 5 for how the derivative asset fair value is determined. The Company’s loan portfolio is initially fair valued using a segmented approach, using the eight categories of loans as disclosed in Note 4 – Loans and Allowance for Credit Losses. Loans are considered a Level 3 classification.

 

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

 

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024.

 

                
             
           September 30, 2025 
(dollars in thousands)  Level 1   Level 2   Level 3   Total 
Assets                    
Securities available for sale                    
Corporate bonds  $-    1,959    -    1,959 
US treasuries   -    944    -    944 
US government agencies   -    15,165    -    15,165 
State and political subdivisions   -    19,901    -    19,901 
Asset-backed securities   -    33,774    -    33,774 
Mortgage-backed securities   -    59,297    -    59,297 
Mortgage loans held for sale   -    6,906    -    6,906 
Mortgage loan interest rate lock commitments   -    366    -    366 
Total assets measured at fair value on a recurring basis  $-    138,312    -    138,312 
Liabilities                    
MBS forward sales commitments  $-    8    -    8 
Derivative liability   -    1,664    -    1,664 
Total liabilities measured at fair value on a recurring basis  $-    1,672    -    1,672 

 

                
                 
   December 31, 2024 
(dollars in thousands)  Level 1   Level 2   Level 3   Total 
Assets                    
Securities available for sale:                    
Corporate bonds  $-    1,927    -    1,927 
US treasuries   -    908    -    908 
US government agencies   -    15,795    -    15,795 
State and political subdivisions   -    19,322    -    19,322 
Asset-backed securities   -    36,538    -    36,538 
Mortgage-backed securities   -    57,637    -    57,637 
Mortgage loans held for sale
   -    4,565    -    4,565 
Mortgage loan interest rate lock commitments   -    188    -    188 
Derivative asset   -    3,698    -    3,698 
MBS forward sales commitments   -    40    -    40 
Total assets measured at fair value on a recurring basis  $-    140,618    -    140,618 

 

The Company had no liabilities recorded at fair value on a recurring basis as of December 31, 2024.

 

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

 

The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis as of September 30, 2025 and December 31, 2024.

 

                    
                 
           As of September 30, 2025 
(dollars in thousands)  Level 1   Level 2   Level 3   Total 
Assets                    
Individually evaluated loans  $-    10,512    1,063    11,575 
Other real estate owned   -    275    -    275 
Total assets measured at fair value on a nonrecurring basis  $-    10,787    1,063    11,850 

 

           As of December 31, 2024 
(dollars in thousands)  Level 1   Level 2   Level 3   Total 
Assets                    
Individually evaluated loans  $-    9,139    1,127    10,266 
Total assets measured at fair value on a nonrecurring basis  $-    9,139    1,127    10,266 

 

The Company had no liabilities carried at fair value or measured at fair value on a nonrecurring basis as of September 30, 2025 and December 31, 2024.

 

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of September 30, 2025 and December 31, 2024, the significant unobservable inputs used in the fair value measurements were as follows:

 

     
  Valuation Technique Significant Unobservable Inputs Range of Inputs
Individually evaluated loans Appraised Value/ Discounted Cash Flows Discounts to appraisals or cash flows for estimated holding and/or selling costs or age of appraisal 0-25%

 

Fair Value of Financial Instruments

 

Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash. Certain items

 

are specifically excluded from the disclosure requirements, including the Company’s common stock, premises and equipment and other assets and liabilities.

 

The estimated fair values of the Company’s financial instruments at September 30, 2025 and December 31, 2024 are as follows:

 

                                       
             
       September 30, 2025 
(dollars in thousands)  Carrying
Amount		   Fair
Value		   Level 1   Level 2   Level 3 
Financial Assets:                         
Other investments, at cost  $20,066    20,066    -    -    20,066 
Loans1   3,734,452    3,517,817    -    -    3,517,817 
Financial Liabilities:                         
Deposits   3,676,417    3,444,304    -    3,444,304    - 
Subordinated debentures   24,903    27,030    -    27,030    - 

 

           December 31, 2024 
(dollars in thousands)  Carrying
Amount		   Fair
Value		   Level 1   Level 2   Level 3 
Financial Assets:                         
Other investments, at cost  $19,490    19,490    -    -    19,490 
Loans1   3,579,640    3,319,602    -    -    3,319,602 
Financial Liabilities:                         
Deposits   3,435,765    3,158,893    -    3,158,893    - 
Subordinated debentures   24,903    27,539    -    27,539    - 
1Carrying amount is net of the allowance for credit losses and individually evaluated loans.