Fair Value Measurements

6 Months Ended

Jun. 30, 2025

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Investment securities available for sale and marketable equity securities: Fair values are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Servicing rights: MSR and CSR are measured at fair value on a recurring basis. These assets are classified as Level 3 as quoted prices are not available. In order to determine the fair value of MSR and CSR, the present value of net expected future cash flows is estimated. Assumptions used include market discount rates, anticipated prepayment speeds, escrow calculations, delinquency rates, and ancillary fee income net of servicing costs.

Derivative instruments: The fair value of the interest rate lock commitments are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. The pull-through rate assumptions are considered Level 3 valuation inputs and are significant to the interest rate lock commitment valuation; as such, the interest rate lock commitment derivatives are classified as Level 3. Interest rate contracts are valued in a model, which uses as its basis a discounted cash flow technique incorporating credit valuation adjustments to reflect nonperformance risk in the measurement of fair value. Although the Company has determined that the majority of inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation

adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2025, the Company has assessed the significance of the impact of these adjustments on the overall valuation of its interest rate positions and has determined that they are not significant to the overall valuation of its interest rate derivatives. As a result, the Company has classified its interest rate derivative valuations in Level 2 of the fair value hierarchy.

Commitments to extend credit and standby letters of credit: The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.  The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligation with the counterparties at the reporting date.

Assets Subject to Nonrecurring Adjustment to Fair Value

    The Company is also required to measure certain assets such as equity method investments, goodwill, intangible assets, impaired loans, and Other Real Estate Owned (“OREO”) at fair value on a nonrecurring basis in accordance with GAAP. Any nonrecurring adjustments to fair value usually result from the write-down of individual assets.

    The Company uses either in-house evaluations or external appraisals to estimate the fair value of OREO and impaired loans as of each reporting date. In-house appraisals are considered Level 3 inputs and external appraisals are considered Level 2 inputs. The Company’s determination of which method to use is based upon several factors. The Company takes into account compliance with legal and regulatory guidelines, the amount of the loan, the size of the assets, the location and type of property to be valued and how critical the timing of completion of the analysis is to the assessment of value. Those factors are balanced with the level of internal expertise, internal experience and market information available, versus external expertise available such as qualified appraisers, brokers, auctioneers and equipment specialists.

Limitations

    Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates 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 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.

    Estimated fair values as of the periods indicated are as follows:

	June 30, 2025		December 31, 2024
(In Thousands)	Carrying Amount	Fair Value	Carrying Amount	Fair  Value
Financial assets:
Level 1 inputs:
Cash, due from banks and deposits in other banks	$141,283	$141,283	$62,736	$62,736
Investment securities available for sale	213,657	213,657	268,781	268,781
Marketable equity securities	8,747	8,747	8,719	8,719
Level 2 inputs:
Investment securities available for sale	215,764	215,764	209,836	209,836
Loans held for sale	104,151	104,151	59,957	59,957
Interest rate swaps	11,738	11,738	14,788	14,788
Level 3 inputs:
Investment securities held to maturity	36,750	36,039	36,750	35,750
Loans	2,202,115	2,119,187	2,129,263	2,014,070
Purchased receivables, net	109,098	109,098	74,078	74,078
Interest rate lock commitments	1,296	1,296	465	465
Mortgage servicing rights	27,506	27,506	26,439	26,439
Commercial servicing rights	2,400	2,400	2,194	2,194
Financial liabilities:
Level 2 inputs:
Deposits	$2,809,170	$2,810,895	$2,680,189	$2,683,029
Borrowings	63,026	60,233	23,045	19,991
Interest rate swaps	8,771	8,771	13,011	13,011
Level 3 inputs:
Junior subordinated debentures	10,310	11,130	10,310	10,897

    The following table sets forth the balances as of the periods indicated of assets and liabilities measured at fair value on a recurring basis:

(In Thousands)	Total	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
June 30, 2025
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$384,040	$213,657	$170,383	$—
U.S. Agency mortgage-backed securities	4,976	—	4,976	—
Corporate bonds	4,874	—	4,874	—
Collateralized loan obligations	35,531	—	35,531	—
Total available for sale securities	$429,421	$213,657	$215,764	$—
Marketable equity securities	$8,747	$8,747	$—	$—
Total marketable equity securities	$8,747	$8,747	$—	$—
Interest rate swaps	$10,205	$—	$10,205	$—
Interest rate lock commitments	1,296	—	—	1,296
Mortgage servicing rights	27,506	—	—	27,506
Commercial servicing rights	2,400	—	—	2,400
Total other assets	$41,407	$—	$10,205	$31,202
Liabilities:
Interest rate swaps	$8,771	$—	$8,771	$—
Retail interest rate contracts	189	—	189	—
Total other liabilities	$8,960	$—	$8,960	$—
December 31, 2024
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$432,931	$259,986	$172,945	$—
Municipal securities	—	—	—	—
Corporate bonds	8,795	8,795	—	—
Collateralized loan obligations	36,891	—	36,891	—
Total available for sale securities	$478,617	$268,781	$209,836	$—
Marketable equity securities	$8,719	$8,719	$—	$—
Total marketable securities	$8,719	$8,719	$—	$—
Interest rate swaps	$14,788	$—	$14,788	$—
Interest rate lock commitments	465	—	—	465
Mortgage servicing rights	26,439	—	—	26,439
Commercial servicing rights	2,194	—	—	2,194
Retail interest rate contracts	49	—	49	—
Total other assets	$43,935	$—	$14,837	$29,098
Liabilities:
Interest rate swaps	$13,011	$—	$13,011	$—
Total other liabilities	$13,011	$—	$13,011	$—

The following tables provide a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and six-month periods ended June 30, 2025 and 2024:

(In Thousands)	Beginning balance	Change included in earnings	Purchases and issuances	Sales and settlements	Ending balance	Net change in unrealized gains (losses) relating to items held at end of period
Three Months Ended June 30, 2025
Interest rate lock commitments	$1,389	($553)	$4,700	($4,240)	$1,296	$1,296
Mortgage servicing rights	26,814	(818)	1,510	—	27,506	—
Commercial servicing rights	2,317	(120)	203	—	2,400	—
Total	$30,520	($1,491)	$6,413	($4,240)	$31,202	$1,296
Three Months Ended June 30, 2024
Interest rate lock commitments	$765	($453)	$3,416	($2,669)	$1,059	$1,059
Mortgage servicing rights	20,055	(81)	1,103	—	21,077	—
Commercial servicing rights	2,100	(16)	32	—	2,116	—
Total	$22,920	($550)	$4,551	($2,669)	$24,252	$1,059

(In Thousands)	Beginning balance	Change included in earnings	Purchases and issuances	Sales and settlements	Ending balance	Net change in unrealized gains (losses) relating to items held at end of period
Six Months Ended June 30, 2025
Interest rate lock commitments	$465	($779)	$6,696	($5,086)	$1,296	$1,296
Mortgage servicing rights	26,439	(1,673)	2,740	—	27,506	—
Commercial servicing rights	2,194	(193)	399	—	2,400	—
Total	$29,098	($2,645)	$9,835	($5,086)	$31,202	$1,296
Six Months Ended June 30, 2024
Interest rate lock commitments	$342	($728)	$5,929	($4,484)	$1,059	$1,059
Mortgage servicing rights	19,564	(106)	1,619	—	21,077	—
Commercial servicing rights	2,200	(145)	61	—	2,116	—
Total	$22,106	($979)	$7,609	($4,484)	$24,252	$1,059

    There were no changes in unrealized gains and losses for the three and six-month periods ending June 30, 2025 and 2024 included in other comprehensive income for recurring Level 3 fair value measurements.

    As of and for the periods ending June 30, 2025 and December 31, 2024, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis.  For loans individually measured for credit losses, the Company classifies fair value measurements using observable inputs, such as external appraisals, as Level 2 valuations in the fair value hierarchy, and unobservable inputs, such as in-house evaluations, as Level 3 valuations in the fair value hierarchy.               

(In Thousands)	Total	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
June 30, 2025
Loans individually measured for credit losses	$—	$—	$—	$—
Total	$—	$—	$—	$—
December 31, 2024
Loans individually measured for credit losses	$—	$—	$—	$—
Total	$—	$—	$—	$—

    The following table presents the (gains) losses resulting from nonrecurring fair value adjustments for the three and six-month periods ended June 30, 2025 and 2024:

	Three Months Ended June 30,		Six Months Ended June 30,
(In Thousands)	2025	2024	2025	2024
Loans individually measured for credit losses	$—	($182)	$—	$2
Other real estate owned	—	—	—	—
Total loss from nonrecurring measurements	$—	($182)	$—	$2

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

    The following tables provide a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and nonrecurring basis at June 30, 2025 and December 31, 2024:

Financial Instrument	Valuation Technique - Recurring Basis	Unobservable Input	Weighted Average Rate Range
June 30, 2025
Interest rate lock commitment	External pricing model	Pull through rate	92.63	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	6.35% - 20.58%
		Discount rate	9.50% - 11.00%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	3.13% - 18.23%
		Discount rate	12.00	%
December 31, 2024
Interest rate lock commitment	External pricing model	Pull through rate	93.35	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	2.01% - 14.91%
		Discount rate	9.50% - 11.00%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	3.13% - 18.23%
		Discount rate	12.00	%