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Disclosures about Fair Value Measurements and Financial Instruments

9 Months Ended

Sep. 30, 2025

Disclosures about Fair Value Measurements and Financial Instruments

Disclosures about Fair Value Measurements and Financial Instruments

16. Disclosures about Fair Value Measurements and Financial Instruments

The following disclosures establish a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The three broad levels defined within 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 the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes 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.

Equity Securities Without Readily Determinable Fair Values

The Company has entered into a Registration Rights Agreement with a borrower who, upon emergence from bankruptcy, issued ordinary shares in satisfaction of debt previously contracted. The shares are not listed on any stock exchange. Since the shares do not have a readily determinable fair value, they are carried at cost and evaluated for impairment by management. In addition, if management identifies an observable price change in an orderly transaction for an identical or similar investment of the same issuer, the fair value of the equity securities will be measured and adjusted.

At September 30, 2025 and December 31, 2024, the carrying value of these equity securities was $600,000 which is included in other assets on the Consolidated Balance Sheets. There were no adjustments to the carrying value of equity securities without readily determinable fair values during the three and nine months ended September 30, 2025 and 2024.

Assets and Liabilities Measured and Recorded on a Recurring Basis

Equity securities are reported at fair value utilizing Level 1 inputs. These securities are mutual funds held within a rabbi trust for the Company's executive deferred compensation plan. The mutual funds held are open-end funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value and to transact at that price.

Securities classified as available for sale and trading are reported at fair value based on measurements obtained from an independent pricing service. The fair value measurements consider observable data that may include dealer quoted 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. It should be noted that available for sale securities are reported at fair value, net of any related allowance for credit losses.

The fair values of the simultaneous interest rate swaps, the interest rate hedges used for interest rate risk management, and the risk participation agreements associated with certain commercial real estate loans are based on an external derivative valuation model using data inputs from similar transactions as of the valuation date and classified Level 2.

The following tables present the assets and liabilities measured and reported on the Consolidated Balance Sheets on a recurring basis at their fair value as of September 30, 2025 and December 31, 2024, by level within the fair value hierarchy (in thousands).

Fair Value Measurements at September 30, 2025

Total

Level 1

Level 2

Level 3

Equity securities ⁽¹⁾

181

—

Available for sale securities:

U.S. Agency

4,791

—

4,791

—

U.S. Agency mortgage-backed securities

106,177

—

106,177

—

Municipal

10,938

—

10,938

—

Corporate bonds

47,655

—

47,655

—

Trading securities:

U.S. Treasury

1,995

—

1,995

—

Municipal

2,467

—

2,467

—

Interest rate swap asset ⁽¹⁾

2,605

—

2,605

—

Interest rate swap liability ⁽²⁾

(2,639)

—

(2,639)

—

Interest rate hedge ⁽²⁾

(160)

—

(160)

—

Risk participation agreement ⁽²⁾

(329)

—

(329)

—


	Fair Value Measurements at December 31, 2024
	Total		Level 1		Level 2		Level 3
Equity securities ⁽¹⁾	$	350	$	350	$	—	$	—
Available for sale securities:
U.S. Agency		4,666		—		4,666		—
U.S. Agency mortgage-backed securities		91,534		—		91,534		—
Municipal		8,363		—		8,363		—
Corporate bonds		51,057		363		50,021		673
Interest rate swap asset ⁽¹⁾		4,657		—		4,657		—
Interest rate swap liability ⁽²⁾		(4,691)		—		(4,691)		—
Interest rate hedge ⁽²⁾		(169)		—		(169)		—
Risk participation agreement ⁽²⁾		(207)		—		(207)		—

(1)	Included within other assets on the Consolidated Balance Sheets.

(2)	Included within other liabilities on the Consolidated Balance Sheets.

Assets Measured and Recorded on a Non-Recurring Basis

The Company evaluates individual loans for expected credit losses when those loans do not share similar risk characteristics with loans evaluated using a collective (pooled) basis. Individually evaluated loans are reported at the fair value of the underlying collateral if the repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on observable market data which at times are discounted using unobservable inputs. At September 30, 2025, an individually evaluated loan using the collateral method with a carrying value of $3.5 million was reduced by a specific valuation allowance totaling $185,000 resulting in a net fair value of $3.3 million. At December 31, 2024, the Company had no individually evaluated loans using the collateral method which were carried at fair value.

Other real estate owned is measured at fair value based on appraisals or Company prepared property evaluations, less estimated costs to sell at the date of foreclosure. The Bank’s internal Collections and Assigned Risk Department estimates the fair value of repossessed assets, such as vehicles and equipment, using a formula driven analysis based on automobile or other industry data, less estimated costs to sell at the time of repossession. Valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less costs to sell. Income and expenses from operations and changes in valuation allowance are included in the net expenses from OREO and repossessed assets.

Assets measured and recorded at fair value on a non-recurring basis are summarized below (in thousands, except range data):

Fair Value Measurements

September 30, 2025

Total

Level 1

Level 2

Level 3

Individually evaluated loans

3,278

—

3,278

Other real estate owned and repossessed assets

240

—

240


	Fair Value Measurements
December 31, 2024	Total		Level 1		Level 2		Level 3
Other real estate owned and repossessed assets	$	1,724	$	—	$	—	$	1,724


	Quantitative Information About Level 3 Fair Value Measurements
			Valuation	Unobservable
September 30, 2025	Fair Value		Techniques	Input	Range (Wgtd Avg)
Individually evaluated loans	$	3,278	Appraisal of collateral ⁽¹⁾	Appraisal adjustments ⁽²⁾	13% (13%)
Other real estate owned and repossessed assets	$	240	Appraisal of collateral ⁽¹⁾	Appraisal adjustments ⁽²⁾	15% to 59% (43%)
				Liquidation expenses	0% to 30% (11%)


	Quantitative Information About Level 3 Fair Value Measurements
			Valuation	Unobservable
December 31, 2024	Fair Value		Techniques	Input	Range (Wgtd Avg)
Other real estate owned and repossessed assets	$	1,724	Appraisal of collateral ⁽¹⁾	Appraisal adjustments ⁽²⁾	18% to 63% (24%)
				Liquidation expenses	0% to 33% (4%)

(1)	Fair Value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable. Also includes qualitative adjustments by management and estimated liquidation expenses.

(2)	Appraisals may be adjusted by management for qualitative factors such as economic conditions.

Fair Value of Financial Instruments

For the Company, as for most financial institutions, the majority of its assets and liabilities are considered financial instruments. Many of the Company’s financial instruments, however, lack an available trading market characterized by a willing buyer and willing seller engaging in an exchange transaction. Therefore, significant estimates and present value calculations were used by the Company for the purpose of this disclosure.

Fair values have been determined by the Company using independent third-party valuations that use the best available data (Level 2) and an estimation methodology (Level 3) the Company believes is suitable for each category of financial instruments. Management believes that cash and cash equivalents, bank owned life insurance, regulatory stock, accrued interest receivable and payable, deposits with no stated maturities, and short-term borrowings have fair values which approximate the recorded carrying values. The fair value measurements for all of these financial instruments are Level 1 measurements.

The estimated fair values based on US GAAP measurements and recorded carrying values at September 30, 2025 and December 31, 2024 for the remaining financial instruments not required to be reported at fair value were as follows:

September 30, 2025

Carrying

Value

Fair Value

Level 1

Level 2

Level 3

(In Thousands)

FINANCIAL ASSETS:

Investment securities – HTM

67,179

63,492

—

62,522

970

Loans, net of allowance for credit losses and unearned income

1,041,275

1,031,384

—

1,031,384

FINANCIAL LIABILITIES:

Deposits with stated maturities

381,639

381,508

—

381,508

All other borrowings ⁽¹⁾

74,780

74,894

—

74,894


	December 31, 2024
	Carrying
	Value			Fair Value		Level 1		Level 2		Level 3

		(In Thousands)
FINANCIAL ASSETS:
Investment securities – HTM	$	63,837	$	58,471	$	—	$	57,535	$	936
Loans held for sale		460		470		470		—		—
Loans, net of allowance for credit losses and unearned income		1,054,037		990,745		—		—		990,745
FINANCIAL LIABILITIES:
Deposits with stated maturities		336,312		336,167		—		—		336,167
All other borrowings ⁽¹⁾		82,784		81,476		—		—		81,476

(1)	All other borrowings include advances from Federal Home Loan Bank and subordinated debt.

Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values. The Company’s remaining assets and liabilities which are not considered financial instruments have not been valued differently than has been customary under historical cost accounting.