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Fair Value Disclosures
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Disclosures Fair Value Disclosures
Certain assets and liabilities are recorded at fair value to provide additional insight into the Company's quality of earnings. Some of these assets and liabilities are measured on a recurring basis while others are measured on a nonrecurring basis, with the determination based upon applicable existing accounting pronouncements. For example, securities AFS are recorded at fair value on a recurring basis. Other assets, such as other real estate owned and IAL, are recorded at fair value on a nonrecurring basis using the lower of cost or market methodology to determine impairment of individual assets. The Company groups assets and liabilities, which are recorded at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. A financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement (with level 1 considered highest and level 3 considered lowest). A brief description of each level follows:
Level 1 - Valuation is based upon quoted prices for identical instruments in active markets.
Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates that market participants would use in pricing the asset or liability. Valuation includes use of discounted cash flow models and similar techniques.

The fair value methods and assumptions for the Company's financial instruments and other assets measured at fair value are set forth below.

Investment Securities
The fair values of investment securities are estimated by independent providers using a market approach with observable inputs, including matrix pricing and recent transactions. In obtaining such valuation information from third parties, the Company has evaluated their valuation methodologies used to develop the fair values in order to determine whether the valuations are representative of an exit price in the Company's principal markets. The Company's principal markets for its securities portfolios are the secondary institutional markets, with an exit price that is predominantly reflective of bid level pricing in those markets. Fair values are calculated based on the value of one unit without regard to any premium or discount that may result from concentrations of ownership of a financial instrument, possible tax ramifications, or estimated transaction costs. If these considerations had been incorporated into the fair value estimates, the aggregate fair value could have been changed. The carrying values of restricted equity securities approximate fair values. As such, the Company classifies investment securities as Level 2.
Loans
Fair values are estimated for portfolios of loans are based on an exit pricing notion. The fair values of performing loans are
calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest risk inherent in the loan. The estimates of maturity are based on the Company's historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions, and the effects of estimated prepayments. Assumptions regarding credit risk, cash flows, and discount rates are judgmentally determined using available market information and specific borrower information. Management has made estimates of fair value using discount rates that it believes to be reasonable. However, because there is no market for many of these financial instruments, Management has no basis to determine whether the fair value presented above would be indicative of the value negotiated in an actual sale. As such, the Company classifies loans as Level 3, except for certain IAL. Fair values of IAL are based on estimated cash flows and are discounted using a rate commensurate with the risk associated with the estimated cash flows, or if collateral dependent, discounted to the appraised value of the collateral as determined by reference to sale prices of similar properties, less costs to sell. As such, the Company classifies IAL for which a specific reserve results in a fair value measure as Level 2. All other IAL are classified as Level 3.

Other Real Estate Owned
Real estate acquired through foreclosure is initially recorded at fair value. The fair value of OREO is based on property appraisals and an analysis of sales prices of similar properties currently available. As such, the Company records OREO as nonrecurring Level 2.

Mortgage Servicing Rights
Mortgage servicing rights represent the value associated with servicing residential mortgage loans. Servicing assets and servicing liabilities are reported using the amortization method and compared to fair value for impairment. In evaluating the fair values of mortgage servicing rights, the Company obtains third party valuations based on loan level data including note rate, type and term of the underlying loans. As such, the Company classifies mortgage servicing rights as Level 2.

Time Deposits
The fair value of maturity deposits is based on the discounted value of contractual cash flows using a replacement cost of funds approach. The discount rate is estimated using the cost of funds borrowing rate in the market. As such, the Company classifies deposits as Level 2.

Borrowed Funds
The fair value of borrowed funds is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently available for borrowings of similar remaining maturities. As such, the Company classifies borrowed funds as Level 2.

Derivatives
The fair value of interest rate swaps is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes and, accordingly, are classified as Level 2 inputs. The credit value adjustments associated with derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of December 31, 2024 and 2023, the Company has assessed the
significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives due to collateral postings.

Customer Loan Derivatives
The valuation of the Company’s customer loan derivatives is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of master netting arrangements and any applicable credit enhancements, such as collateral postings.

Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These values do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on Management's 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 value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial instruments include the deferred tax asset, premises and equipment, and other real estate owned. In addition, tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables present the balances of assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2024 and 2023.
At December 31, 2024
Level 1Level 2Level 3Total
Securities available for sale
U.S. Government-sponsored agencies$— $19,796,000 $— $19,796,000 
Mortgage-backed securities— 219,382,000 — 219,382,000 
State and political subdivisions— 33,252,000 — 33,252,000 
Asset-backed securities— 2,250,000 — 2,250,000 
Total securities available for sale— 274,680,000 — 274,680,000 
  Interest rate swap agreements— 198,000 — 198,000 
  Customer loan interest swap agreements— 4,859,000 — 4,859,000 
Total interest rate swap agreements— 5,057,000 — 5,057,000 
Total assets$— $279,737,000 $— $279,737,000 

At December 31, 2024
Level 1Level 2Level 3Total
Interest rate swap agreements$— $758,000 $— $758,000 
Customer loan interest swap agreements— 4,859,000 — 4,859,000 
Total liabilities$— $5,617,000 $— $5,617,000 
At December 31, 2023
Level 1Level 2Level 3Total
Securities available for sale
U.S. Government-sponsored agencies$— $19,830,000 $— $19,830,000 
Mortgage-backed securities— 224,597,000 — 224,597,000 
State and political subdivisions— 34,645,000 — 34,645,000 
Asset-backed securities— 2,981,000 — 2,981,000 
Total securities available for sale— 282,053,000 — 282,053,000 
  Interest rate swap agreements— 380,000 — 380,000 
  Customer loan interest swap agreements— 4,348,000 — 4,348,000 
Total interest rate swap agreements— 4,728,000 — 4,728,000 
Total assets$— $286,781,000 $— $286,781,000 

At December 31, 2023
Level 1Level 2Level 3Total
Interest rate swap agreements$— $2,149,000 $— $2,149,000 
Customer loan interest swap agreements— 4,348,000 — 4,348,000 
Total liabilities$— $6,497,000 $— $6,497,000 

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis

The following tables present assets measured at fair value on a nonrecurring basis that have had a fair value adjustment since their initial recognition. Mortgage servicing rights are presented at fair value with no impairment reserve at at December 31, 2024 and 2023. OREO is presented net of an allowance of $35,000 at December 31, 2024. There was no OREO or related allowance at December 31, 2023. Only collateral-dependent IAL with a related specific ACL or a partial charge off are included in IAL for purposes of fair value disclosures. IAL below are presented net of specific allowances of $821,000 and $19,000 at December 31, 2024 and 2023, respectively.
At December 31, 2024
Level 1Level 2Level 3Total
Mortgage servicing rights$— $3,054,000 $— $3,054,000 
Other real estate owned— 173,000 — 173,000 
Individually analyzed loans— 538,000 — 538,000 
Total assets$— $3,765,000 $— $3,765,000 
At December 31, 2023
Level 1Level 2Level 3Total
Mortgage servicing rights$— $3,583,000 $— $3,583,000 
Individually analyzed loans— 285,000 — 285,000 
Total assets$— $3,868,000 $— $3,868,000 

Fair Value of Financial Instruments

FASB ASC Topic 825, "Financial Instruments," requires disclosures of fair value information about financial instruments, whether or not recognized in the balance sheet, if the fair values can be reasonably determined. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques using observable inputs when available. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. FASB ASC Topic 825 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

This summary excludes financial assets and liabilities for which carrying value approximates fair values and financial instruments that are recorded at fair value on a recurring basis. Financial instruments for which carrying values approximate fair value include cash equivalents, interest-bearing deposits in other banks, demand, NOW, savings and money market deposits. The estimated fair value of demand, NOW, savings and money market deposits is the amount payable on demand at the reporting date. Carrying value is used because the accounts have no stated maturity and the customer has the ability to withdraw funds immediately.
The carrying amounts and estimated fair values for financial instruments as of December 31, 2024 were as follows:
 CarryingEstimated
As of December 31, 2024valuefair valueLevel 1Level 2Level 3
Financial assets
Securities to be held to maturity (net of allowance for credit losses)$369,704,000 $314,993,000 $— $314,993,000 $— 
Loans held for sale— — — — — 
Loans (net of allowance for credit losses)
Commercial
Real estate752,613,000 720,898,000 — — 720,898,000 
Construction98,773,000 94,611,000 — — 94,611,000 
Other519,560,000 513,417,000 — 538,000 512,879,000 
Municipal61,565,000 57,657,000 — — 57,657,000 
Residential
Term705,566,000 643,402,000 — — 643,402,000 
Construction35,007,000 34,631,000 — — 34,631,000 
Home equity line of credit122,377,000 119,930,000 — — 119,930,000 
Consumer20,608,000 18,274,000 — — 18,274,000 
Total loans2,316,069,000 2,202,820,000 — 538,000 2,202,282,000 
Mortgage servicing rights1,894,000 3,054,000 — 3,054,000 — 
Financial liabilities
Local certificates of deposit$385,897,000 $365,937,000 $— $365,937,000 $— 
National certificates of deposit728,914,000 747,681,000 — 747,681,000 — 
Total certificates of deposit 1,114,811,000 1,113,618,000 — 1,113,618,000 — 
Repurchase agreements51,278,000 51,181,000 — 51,181,000 — 
Other borrowed funds95,000,000 95,066,000 — 95,066,000 — 
Total borrowed funds146,278,000 146,247,000 — 146,247,000 — 
The carrying amounts and estimated fair values for financial instruments as of December 31, 2023 were as follows:
 CarryingEstimated
As of December 31, 2023valuefair valueLevel 1Level 2Level 3
Financial assets
Securities to be held to maturity (net of allowance for credit losses)$385,235,000 $338,570,000 $— $338,570,000 $— 
Loans (net of allowance for credit losses)
Commercial
Real estate699,537,000 658,732,000 — — 658,732,000 
Construction86,695,000 81,638,000 — — 81,638,000 
Other443,944,000 431,067,000 — — 431,067,000 
Municipal51,089,000 46,806,000 — — 46,806,000 
Residential
Term669,864,000 595,033,000 — 285,000 594,748,000 
Construction31,740,000 31,131,000 — — 31,131,000 
Home equity line of credit103,400,000 102,858,000 — — 102,858,000 
Consumer19,155,000 16,963,000 — — 16,963,000 
Total loans2,105,424,000 1,964,228,000 — 285,000 1,963,943,000 
Mortgage servicing rights2,177,000 3,583,000 — 3,583,000 — 
Financial liabilities
Local certificates of deposit$293,466,000 $362,555,000 $— $362,555,000 $— 
National certificates of deposit776,781,000 699,919,000 — 699,919,000 — 
Total certificates of deposit1,070,247,000 1,062,474,000 — 1,062,474,000 — 
Repurchase agreements49,576,000 49,462,000 — 49,462,000 — 
Other borrowed funds20,076,000 20,074,000 — 20,074,000 — 
Total borrowed funds69,652,000 69,536,000 — 69,536,000 —