Fair Value

9 Months Ended

Sep. 30, 2025

Fair Value

Fair Value

6.    Fair Value

FASB ASC No. 820-10 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 prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level I 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.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair value of most securities available for sale is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or 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 (Level 2 inputs).

For those securities that cannot be priced using quoted market prices or observable inputs a Level 3 valuation is determined. These securities are primarily trust preferred securities and investments in state and municipal securities. The fair value of state and municipal obligations are derived by comparing the securities to current market rates plus an appropriate credit spread to determine an estimated value. Illiquidity spreads are then considered. Credit reviews are performed on each of the issuers. The significant unobservable inputs used in the fair value measurement of the Corporation’s state and municipal obligations are credit spreads related to specific issuers. Significantly higher credit spread assumptions would result in significantly lower fair value measurement. Conversely, significantly lower credit spreads would result in a significantly higher fair value measurements.

The fair value of derivatives is based on valuation models using observable market data as of the measurement date (Level 2 inputs).

	September 30, 2025
	Fair Value Measurements Using
	Significant Unobservable Inputs (Level 3)
(Dollar amounts in thousands)	Level 1		Level 2		Level 3		Total
U.S. Government agencies	$	—	$	79,182	$	—	$	79,182
Mortgage Backed Securities-residential		—		535,502		—		535,502
Mortgage Backed Securities-commercial		—		12,510		—		12,510
Collateralized mortgage obligations		—		153,861		—		153,861
State and municipal		—		365,636		—		365,636
Municipal taxable		—		36,573		—		36,573
Collateralized debt obligations		—		—		2,843		2,843
TOTAL	$	—	$	1,183,264	$	2,843	$	1,186,107
Derivative Assets				2,866
Derivative Liabilities				(2,866)

	December 31, 2024
	Fair Value Measurements Using
	Significant Unobservable Inputs (Level 3)
(Dollar amounts in thousands)	Level 1		Level 2		Level 3		Total
U.S. Government agencies	$	—	$	78,982	$	—	$	78,982
Mortgage Backed Securities-residential		—		541,320		—		541,320
Mortgage Backed Securities-commercial		—		13,661		—		13,661
Collateralized mortgage obligations		—		163,026		—		163,026
State and municipal		—		359,523		805		360,328
Municipal taxable		—		35,777		—		35,777
Collateralized debt obligations		—		—		2,896		2,896
TOTAL	$	—	$	1,192,289	$	3,701	$	1,195,990
Derivative Assets				3,060
Derivative Liabilities				(3,060)

There were no transfers between Level 1 and Level 2 during 2025 and 2024.

The tables below presents a reconciliation and income statement classification of gains and losses for all assets 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 the year ended December 31, 2024.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended
	September 30, 2025
	State and
	municipal		Collateralized
(Dollar amounts in thousands)	obligations		debt obligations		Total
Beginning balance, July 1	$	—	$	2,909	$	2,909
Total realized/unrealized gains or losses
Included in earnings		—		—		—
Included in other comprehensive income		—		(66)		(66)
Transfers		—		—		—
Settlements		—		—		—
Ending balance, September 30	$	—	$	2,843	$	2,843

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended
	September 30, 2025
	State and
	municipal		Collateralized
(Dollar amounts in thousands)	obligations		debt obligations		Total
Beginning balance, January 1	$	805	$	2,896	$	3,701
Total realized/unrealized gains or losses
Included in earnings		—		—		—
Included in other comprehensive income		—		(53)		(53)
Transfers		—		—		—
Settlements		(805)		—		(805)
Ending balance, September 30	$	—	$	2,843	$	2,843

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended
	December 31, 2024
	State and
	municipal		Collateralized
(Dollar amounts in thousands)	obligations		debt obligations		Total
Beginning balance, January 1	$	1,180	$	3,002	$	4,182
Total realized/unrealized gains or losses
Included in earnings		—		—		—
Included in other comprehensive income		—		(106)		(106)
Purchases		—		—		—
Settlements		(375)		—		(375)
Ending balance, December 31	$	805	$	2,896	$	3,701

Other real estate owned is valued at Level 3. Other real estate owned at September 30, 2025 with a value of $138 thousand was reduced by $20 thousand for fair value adjustment. At September 30, 2025 other real estate owned was comprised of $138 thousand from residential loans. Other real estate owned at December 31, 2024 with a value of $523 thousand was reduced by zero for fair value adjustment. At December 31, 2024 other real estate owned was comprised of $433 thousand from commercial loans and $90 thousand from residential loans.

Fair value is measured based on the value of the collateral securing those loans, and is determined using several methods. Generally the fair value of real estate is determined based on appraisals by qualified licensed appraisers. Appraisals for real estate generally use three methods to derive value: cost, sales or market comparison and income approach. The cost method bases value on the cost to replace current property. The market comparison evaluates the sales price of similar properties in the same market area. The income approach considers net operating income generated by the property and the investor’s required return. The final fair value is based on a reconciliation of these three approaches. If an appraisal is not available, the fair value may be determined by using a cash flow analysis, a broker’s opinion of value, the net present value of future cash flows, or an observable market price from an active market. Fair value of other real estate is based upon the current appraised values of the properties as determined by qualified licensed appraisers and the Company’s judgment of other relevant market conditions. Appraisals are obtained annually and reductions in value are recorded as a valuation through a charge to expense. The primary unobservable input used by management in estimating fair value are additional discounts to the appraised value to consider market conditions and the age of the appraisal, which are based on management’s past experience in resolving these types of properties. These discounts range from 20% to 100% with an average discount of 62%. Values for non-real estate collateral, such as business equipment, are based on appraisals performed by qualified licensed appraisers or the customers financial statements. Values for non real estate collateral use much higher discounts than real estate collateral. Other real estate and individually evaluated loans carried at fair value are primarily comprised of smaller balance properties.

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at September 30, 2025.

(Dollar amounts in thousands)	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
Collateralized debt obligations	$	2,843	Discounted cash flow	Discount rate	6.26	%
Collateral dependent loans	$	12,092	Discounted cash flow	Discount rate for age of appraisal and market conditions	20.00%-100.00	%

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at December 31, 2024.

(Dollar amounts in thousands)	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
State and municipal obligations	$	805	Discounted cash flow	Discount rate	4.24%-4.44	%
Collateralized debt obligations	$	2,896	Discounted cash flow	Discount rate	6.62	%
Collateral dependent loans		3,099	Discounted cash flow	Discount rate for age of appraisal and market conditions	20.00%-100.00	%

The carrying amounts and estimated fair value of financial instruments at September 30, 2025 and December 31, 2024, are shown below. Carrying amount is the estimated fair value for cash and due from banks, federal funds sold, short-term borrowings, accrued interest receivable and payable, demand deposits, short-term debt and variable-rate loans or deposits that reprice frequently and fully. Security fair values were described previously. For fixed-rate, collectively evaluated loans or deposits, variable rate loans or deposits with infrequent repricing or repricing limits, and for longer-term borrowings, fair value is based on discounted cash flows using current market rates applied to the estimated life and considering credit risk. The valuation of individually evaluated loans was described previously. Loan fair value estimates represent an exit price. Fair values of loans held for sale are based on market bids on the loans or similar loans. It was not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability. Fair value of debt is based on current rates for similar financing. The fair value of off-balance sheet items is not considered material.

	September 30, 2025
	Carrying		Fair Value
(Dollar amounts in thousands)	Value		Level 1		Level 2		Level 3		Total
Cash and due from banks	$	87,438	$	36,798	$	50,640	$	—	$	87,438
Federal funds sold		157		—		157		—		157
Securities available-for-sale		1,186,107		—		1,183,264		2,843		1,186,107
Restricted stock		18,761		n/a		n/a		n/a		n/a
Loans, net		3,919,990		—		—		3,858,240		3,858,240
Accrued interest receivable		26,526		—		6,577		19,949		26,526
Deposits		(4,615,305)		—		(4,610,086)		—		(4,610,086)
Short-term borrowings		(182,522)		—		(182,522)		—		(182,522)
Other borrowings		(170,453)		—		(170,453)		—		(170,453)
Accrued interest payable		(2,965)		—		(2,965)		—		(2,965)

	December 31, 2024
	Carrying		Fair Value
(Dollar amounts in thousands)	Value		Level 1		Level 2		Level 3		Total
Cash and due from banks	$	93,526	$	35,889	$	57,637	$	—	$	93,526
Federal funds sold		820		—		820		—		820
Securities available-for-sale		1,195,990		—		1,192,289		3,701		1,195,990
Restricted stock		17,555		n/a		n/a		n/a		n/a
Loans, net		3,790,409		—		—		3,717,843		3,717,843
Accrued interest receivable		26,934		—		6,543		20,391		26,934
Deposits		(4,718,914)		—		(4,723,356)		—		(4,723,356)
Short-term borrowings		(187,057)		—		(187,057)		—		(187,057)
Other borrowings		(28,120)		—		(29,693)		—		(29,693)
Accrued interest payable		(3,799)		—		(3,799)		—		(3,799)