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Fair Value Measurements
 9 Months Ended
Sep. 30, 2025
Fair Value Measurements [Abstract]  
Fair Value Measurements
Note 9 – Fair Value Measurements

The Company has established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by this hierarchy are as follows:

Level I:
Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level II:
Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level III:
Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and/or quarterly valuation process.

Assets and Liabilities Required to be Measured at Fair Value on a Recurring Basis
 
The fair values of equity securities and securities available for sale are determined by quoted prices in active markets, when available, and classified as Level I. If quoted market prices are not available, the fair value is determined by a matrix pricing, which is a mathematical technique, widely used in the industry to value 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 and classified as Level II. The fair values consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.
 
The following tables present the assets and liabilities reported on the Consolidated Balance Sheet at their fair value on a recurring basis as of September 30, 2025 and December 31, 2024 by level within the fair value hierarchy (in thousands). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

September 30, 2025
  
Level I
    
Level II
    
Level III
    
Total
  
Fair value measurements on a recurring basis:
                        
Assets
                        
Equity securities
  
$
1,803
    
$
-
    
$
-
    
$
1,803
  
Available for sale securities:
                                
U.S. Agency securities
    
-
      
51,417
      
-
      
51,417
  
U.S. Treasury securities
    
93,927
      
-
      
-
      
93,927
  
Obligations of state and
political subdivisions
    
-
      
114,185
      
-
      
114,185
  
Corporate obligations
    
-
      
11,164
      
-
      
11,164
  
Mortgage-backed securities in
government sponsored entities
    
-
      
180,664
      
-
      
180,664
  
Loans held for sale
    
-
      
13,508
      
-
      
13,508
  
Derivative instruments – assets
    
-
      
7,062
      
425
      
7,487
  
Derivative instruments - liabilities
    
-
      
(4,332
)
    
-
      
(4,332
)
December 31, 2024
  
Level I
    
Level II
    
Level III
    
Total
  
Fair value measurements on a recurring basis:
                        
Assets
                        
Equity securities
  
$
1,747
    
$
-
    
$
-
    
$
1,747
  
Available for sale securities:
                                
U.S. Agency securities
    
-
      
53,487
      
-
      
53,487
  
U.S. Treasuries securities
    
120,502
      
-
      
-
      
120,502
  
Obligations of state and
political subdivisions
    
-
      
94,902
      
-
      
94,902
  
Corporate obligations
    
-
      
10,438
      
-
      
10,438
  
Mortgage-backed securities in
government sponsored entities
    
-
      
146,583
      
-
      
146,583
  
Loans held for sale
            
9,607
              
9,607
  
Derivative instruments – assets
    
-
      
10,053
      
317
      
10,370
  
Derivative instruments - liabilities
    
-
      
(5,817
)
    
-
      
(5,817
)

The following tables represent the change in the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2025 and 2024 for interest rate lock commitments (IRLC) (in thousands):


  
IRLC-
  
For the three months ended September 30, 2025
  
Asset
  
Balance: June 30, 2025
  
$
548
  
Total unrealized losses:
        
Included in other comprehensive loss
    
-
  
Total losses included in earnings and held at reporting date
    
(123
)
Purchases, sales and settlements
    
-
  
Transfers in and/or out of Level 3
    
-
  
Ending Balance: September 30, 2025
  
$
425
  
Change in unrealized (losses) for the period included in earnings for assets held as of September 30, 2025
    
(123
)
Change in unrealized loss for the period included other comprehensive loss for assets held as of December 31, 2024
    
-
  
         


 
IRLC-
  
For the nine months ended September 30, 2025
  
Asset
  
Balance: December 31, 2024
  
$
317
  
Total unrealized losses:
        
Included in other comprehensive loss
    
-
  
Total gains included in earnings and held at reporting date
    
108
  
Purchases, sales and settlements
    
-
  
Transfers in and/or out of Level 3
    
-
  
Ending Balance: September 30, 2025
  
$
425
  
Change in unrealized gains for the period included in earnings  for assets held as of September 30, 2025
    
108
  
Change in unrealized loss for the period included other comprehensive loss for assets held as of December 31, 2024
    
-
  

   
IRLC-
  
For the three months ended September 30, 2024
  
Asset
  
Balance: June 30, 2024
  
$
494
  
Total unrealized losses:
        
Included in other comprehensive loss
    
-
  
Total losses included in earnings and held at reporting date
    
(92
)
Purchases, sales and settlements
    
-
  
Transfers in and/or out of Level 3
    
-
  
Ending Balance: September 30, 2024
  
$
402
  
Change in unrealized (losses) for the period included in earnings for assets held as of September 30, 2024
    
(92
)
Change in unrealized loss for the period included other comprehensive loss for assets held as of December 31, 2023
    
-
  
For the nine months ended September 30, 2024
  
IRLC-
Asset
  
Balance: December 31, 2023
  
$
324
  
Total unrealized losses:
        
Included in other comprehensive loss
    
-
  
Total gains included in earnings and held at reporting date
    
78
  
Purchases, sales and settlements
    
-
  
Transfers in and/or out of Level 3
    
-
  
Ending Balance: September 30, 2024
  
$
402
  
Change in unrealized gains for the period included in earnings for assets held as of September 30, 2024
    
78
  
Change in unrealized loss for the period included other comprehensive loss for assets held as of December 31, 2023
    
-
  

At September 30, 2025 and December 31, 2024, the Company had classified as Level 3 $425,000 and $317,000, respectively, of net derivative assets and liabilities related to IRLC. The fair value of IRLCs is based on prices obtained for loans with similar characteristics from third parties, adjusted by the pull-through rate, which represents the Company’s best estimate of the probability that a committed loan will fund. The weighted average pull-through rates applied ranged from 76.76% to 97.57% at September 30, 2025.

Significant unobservable inputs for assets measured at fair value on a recurring basis at September 30, 2025 and December 31, 2024 (dollars in thousands):

   
Quantitative Information about Level 3 Fair Value Measurements
        
September 30, 2025
  
Fair
Value
  
Valuation Technique
Significant
Unobservable
Input
  
Range
    
Weighted
Average
  
Measured at Fair Value on a Recurring Basis:
                      
Net derivative asset and liability:
                      
IRLC
  
$
425
  
 Discounted cash flows
 Pull-through rates
    
76.76%-
97.57
%
    
89.36
%
                             
December 31, 2024
                            
Measured at Fair Value on a Recurring Basis:
                            
Net derivative asset and liability:
                            
IRLC
  
$
317
  
 Discounted cash flows
 Pull-through rates
    
76.35%-100.00%

   
89.65
%

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis as of September 30, 2025 and December 31, 2024 are included in the table below (in thousands):

September 30, 2025
  
Level I
    
Level II
    
Level III
    
Total
  
Collateral-dependent loans
  
$
-
    
$
-
    
$
1,649
    
$
1,649
  
Other real estate owned
    
-
      
-
      
2,434
      
2,434
  

December 31, 2024
  
Level I
    
Level II
    
Level III
    
Total
  
Collateral-dependent loans
  
$
-
    
$
-
    
$
3,579
    
$
3,579
  
Other real estate owned
    
-
      
-
      
2,486
      
2,486
  


•
Collateral-Dependent Loans - The Company records nonrecurring adjustments of collateral-dependent loans held for investment. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained to support the fair value of the collateral and incorporate measures that include recent sales prices for comparable properties and cost of construction. Periodically, in cases where the carrying value exceeds the fair value of the collateral less estimated cost to sell, an impairment charge is recognized in the form of a charge-off. The fair values above excluded estimated selling costs of $88,000 and $253,000 at September 30, 2025 and December 31, 2024, respectively.

•
Other Real Estate Owned (OREO) – OREO is carried at the lower of cost or fair value, less estimated costs to sell, which is measured at the date of foreclosure.  If the fair value of the collateral exceeds the carrying amount of the loan, no charge-off or adjustment is necessary, the loan is not considered to be carried at fair value, and is therefore not included in the table above. If the fair value of the collateral is less than the carrying amount of the loan, management will charge the loan down to its estimated realizable value. The fair value of OREO is based on the appraised value of the property, which is generally unadjusted by management and is based on comparable sales for similar properties in the same geographic region as the subject property, and is included in the above table as a Level II measurement.  In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed.  In these cases, the loans are categorized in the above table as a Level III measurement since these adjustments are considered to be unobservable inputs. Income and expenses from operations and further declines in the fair value of the collateral subsequent to foreclosure are included in net expenses from OREO.
 
The following table provides a listing of the significant unobservable inputs used in the fair value measurement process for items valued utilizing Level III techniques (dollars in thousands).

Quantitative Information about Level III Fair Value Measurements
  
September 30, 2025
  
Fair
Value
  
Valuation Technique(s)
Unobservable input
  
Range
    
Weighted
average
  
Collateral-dependent loans
  
$
1,649
  
Appraised Collateral Values
Discount for time since appraisal
    
0-100
%
    
30.43
%

          
Selling costs
    
0%-10
%
    
9.93
%
             
Holding period
  
0 - 12 months
    
10.08 months
  
                             
Other real estate owned
    
2,434
  
Appraised Collateral Values
Discount for time since appraisal
    
7.0-20.0
%
    
7.96
%
                             
December 31, 2024
  
Fair
Value
  
Valuation Technique(s)
Unobservable input
  
Range
    
Weighted average
  
Collateral dependent loans
   $
3,579
  
Appraised Collateral Values
Discount for time since appraisal
    
0-100
%
    
36.67
%
             
Selling costs
    
4%-12
%
    
7.05
%
             
Holding period
  
1 - 12 months
    
11.04 months
  
                             
Other real estate owned
    
2,486
  
Appraised Collateral Values
Discount for time since appraisal
    
20-32
%
    
31.32
%

Financial Instruments Not Required to be Measured or Reported at Fair Value

The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis are as follows (in thousands):

   
Carrying
                          
September 30, 2025
  
Amount
    
Fair Value
    
Level I
    
Level II
    
Level III
  
Financial assets:
                              
Interest bearing time deposits with other banks
  
$
3,820
    
$
3,800
    
$
-
    
$
-
    
$
3,800
  
Net loans
    
2,312,934
      
2,267,591
      
-
      
-
      
2,267,591
  
                                         
Financial liabilities:
                                        
Deposits
    
2,411,203
      
2,409,324
      
1,941,622
      
-
      
467,702
  
Borrowed funds
    
279,589
      
277,636
      
-
      
-
      
277,636
  


 
Carrying
                                  
December 31, 2024
  
Amount
    
Fair Value
    
Level I
    
Level II
    
Level III
  
Financial assets:
                                        
Interest bearing time deposits with other banks
  
$
3,820
    
$
3,820
    
$
-
    
$
-
    
$
3,820
  
Net loans
    
2,291,543
      
2,209,083
      
-
      
-
      
2,209,083
  

                                       
Financial liabilities:
                                        
Deposits
    
2,382,028
      
2,377,438
      
1,860,227
      
-
      
517,211
  
Borrowed funds
    
297,721
      
284,952
      
-
      
-
      
284,952
  
The carrying amounts for cash and due from banks, bank owned life insurance, regulatory stock, accrued interest receivable and payable approximate fair value and are considered Level I measurements.