Fair Value Measurements

3 Months Ended

Mar. 31, 2026

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 March 31, 2026 and December 31, 2025 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.

March 31, 2026	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,834	$	-		$	-	$	1,834
Available for sale securities:
U.S. Agency securities		-		49,549			-		49,549
U.S. Treasury securities		-		75,636			-		75,636
Obligations of state and political subdivisions		-		124,284			-		124,284
Corporate obligations		-		9,040			-		9,040
Mortgage-backed securities in government sponsored entities		-		189,777			-		189,777
Loans held for sale		-		5,874			-		5,874
Derivative assets		-		6,582			522		7,104
Derivative liabilities		-		(4,186	)		-		(4,186	)

December 31, 2025	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,815	$	-		$	-	$	1,815
Available for sale securities:
U.S. Agency securities		-		49,755			-		49,755
U.S. Treasuries securities		-		82,654			-		82,654
Obligations of state and political subdivisions		-		115,886			-		115,886
Corporate obligations		-		11,297			-		11,297
Mortgage-backed securities in government sponsored entities		-		185,149			-		185,149
Derivative assets		-		6,587			340		6,927
Derivative liabilities		-		(4,100	)		-		(4,100	)

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 months ended March 31, 2026 and 2025 for interest rate lock commitments (IRLC) (in thousands):

	IRLC-
For the three months ended March 31, 2026	Asset
Balance: December 31, 2025	$	340
Total unrealized losses:
Included in other comprehensive loss		-
Total gains included in earnings and held at reporting date		182
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: March 31, 2026	$	522
Change in unrealized gains for the period included in earnings for assets held as of March 31, 2026		182
Change in unrealized loss for the period included other comprehensive loss for assets held as of December 31, 2025		-

	IRLC-
For the three months ended March 31, 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		155
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: March 31, 2025	$	472
Change in unrealized gains for the period included in earnings for assets held as of March 31, 2025		155
Change in unrealized loss for the period included other comprehensive loss for assets held as of December 31, 2024		-

At March 31, 2026 and December 31, 2025, the Company had classified as Level 3 $522,000 and $340,000, respectively, of net derivative assets and liabilities related to interest rate lock commitments. 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 74.76% to 100.00% at March 31, 2026.

Significant unobservable inputs for assets measured at fair value on a recurring basis at March 31, 2026 and December 31, 2025 (dollars in thousands):

	Quantitative Information about Level 3 Fair Value Measurements
March 31, 2026	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted  Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	522	Discounted cash flows	Pull-through rates		74.76%-100.00	%		90.89	%

	Quantitative Information about Level 3 Fair Value Measurements
December 31, 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	$	340	Discounted cash flows	Pull-through rates		75.39%-97.16	%		85.90	%

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 March 31, 2026 and December 31, 2025 are included in the table below (in thousands):

March 31, 2026	Level I		Level II		Level III		Total
Collateral-dependent loans	$	-	$	-	$	8,721	$	8,721
Other real estate owned		-		-		2,358		2,358
December 31, 2025	Level I		Level II		Level III		Total
Collateral-dependent loans	$	-	$	-	$	8,628	$	8,628
Other real estate owned		-		-		2,358		2,358

• 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 $906,000 and $259,000 at March 31, 2026 and December 31, 2025, 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
March 31, 2026	Fair Value	Valuation Technique(s)	Unobservable input	Range	Weighted average
Collateral-dependent loans	$ 8,721	Appraised Collateral Values	Discount for time since appraisal	0-100%	22.94%
			Selling costs	0%-10%	9.38%
			Holding period	0 - 12 months	11.50 months
Other real estate owned	2,358	Appraised Collateral Values	Discount for time since appraisal	7.50%	7.50%

December 31, 2025	Fair Value	Valuation Technique(s)	Unobservable input	Range	Weighted average
Collateral dependent loans	8,628	Appraised Collateral Values	Discount for time since appraisal	0-100%	32.18%
			Selling costs	8%-10%	9.43%
			Holding period	1 - 12 months	11.62 months
Other real estate owned	2,358	Appraised Collateral Values	Discount for time since appraisal	7.50%	7.50%

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
March 31, 2026	Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	3,820	$	3,802	$	-	$	-	$	3,802
Net loans		2,275,328		2,256,059		-		-		2,256,059
Financial liabilities:
Deposits		2,441,185		2,438,959		1,870,741		-		568,218
Borrowed funds		198,738		193,638		-		-		193,638

	Carrying
December 31, 2025	Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	3,820	$	3,802	$	-	$	-	$	3,802
Net loans		2,327,816		2,295,926		-		-		2,295,926
Financial liabilities:
Deposits		2,376,979		2,375,552		1,877,545		-		498,007
Borrowed funds		309,448		304,486		-		-		304,486

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.