NOTE 8 - FAIR VALUE

3 Months Ended

Mar. 31, 2026

FAIR VALUE

FAIR VALUE

NOTE 8 – FAIR VALUE

Accounting guidance on fair value measurement uses a hierarchy intended to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy includes three levels and is based upon the valuation techniques used to measure assets and liabilities. The three levels are as follows:

● Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in markets;

● Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and

● Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Assets and liabilities measured at fair value on a recurring basis comprise the following at March 31, 2026 and December 31, 2025:

			Fair Value Measurements at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
	(dollars in thousands)
March 31, 2026:
Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	15,059	$	—	$	15,059	$	—
Residential mortgage-backed and related securities		86,222		—		86,222		—
Municipal securities		160,247		—		160,247		—
Asset-backed securities		4,076		—		4,076		—
Corporate securities		24,502		—		24,502		—
Securities trading		82,728		—		—		82,728
Derivatives		209,836		—		209,836		—
Total assets measured at fair value	$	582,670	$	—	$	499,942	$	82,728
Derivatives	$	149,836	$	—	$	149,836	$	—
Total liabilities measured at fair value	$	149,836	$	—	$	149,836	$	—
December 31, 2025:
Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	16,024	$	—	$	16,024	$	—
Residential mortgage-backed and related securities		68,855		—		68,855		—
Municipal securities		163,085		—		163,085		—
Asset-backed securities		4,439		—		4,439		—
Corporate securities		27,374		—		27,374		—
Securities trading		83,857		—		—		83,857
Derivatives		188,409		—		188,409		—
Total assets measured at fair value	$	552,043	$	—	$	468,186	$	83,857
Derivatives	$	137,051	$	—	$	137,051	$	—
Total liabilities measured at fair value	$	137,051	$	—	$	137,051	$	—

The securities AFS portfolio consists of securities whereby the Company obtains fair values from an independent pricing service. The fair values are determined by pricing models that consider observable market data, such as interest rate volatilities, SOFR yield curve, credit spreads and prices from market makers and live trading systems (Level 2 inputs).

Trading securities consist of retained beneficial interests from securitizations and are classified as a Level 3 in the fair value hierarchy.  Fair values are estimated using the discounted cash flow method, including discount rates which are deemed to be significant unobservable inputs. As of March 31, 2026, the discount rates ranged from 3.23% to 6.40%.

Changes in fair value of trading securities for the three months ended March 31, 2026 and 2025, respectively, are presented as follows:

	Three Months Ended
	March 31, 2026		March 31, 2025
Balance at the beginning of the period	$	83,857	$	83,529
Paydowns		(44)		(40)
Premium amortization		(233)		(235)
Fair value gain		(852)		(809)
Balance at the end of the period	$	82,728	$	82,445

Interest rate caps, swaps, collars and swaptions are used for the purpose of hedging interest rate risk on various financial assets and liabilities, further described in Note 5 to the Consolidated Financial Statements. The fair values are determined by pricing models that consider observable market data for derivative instruments with similar structures (Level 2 inputs).

Certain financial assets are measured at fair value on a non-recurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Assets measured at fair value on a non-recurring basis comprised the following at March 31, 2026 and December 31, 2025:

			Fair Value Measurements at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
March 31, 2026:
Loans/leases evaluated individually	$	44,105	$	—	$	—	$	44,105
OREO		583		—		—		583
	$	44,688	$	—	$	—	$	44,688
December 31, 2025:
Loans/leases evaluated individually	$	47,183	$	—	$	—	$	47,183
OREO		583		—		—		583
	$	47,766	$	—	$	—	$	47,766

Loans/leases evaluated individually are valued at the lower of cost or fair value and are classified as Level 3 in the fair value hierarchy. Fair value is measured based on the value of the collateral securing these loans/leases. Collateral may be comprised of real estate and/or business assets, including equipment, inventory and/or accounts receivable, and is determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values are discounted based on management's historical knowledge, changes in market conditions from the time of valuation, and/or management's expertise and knowledge of the client and client's business.

OREO in the table above consists of property acquired through foreclosures and settlement of loans.  Property acquired is carried at the estimated fair value of the property, less disposal costs, and is classified as a Level 3 in the fair value

hierarchy.  The estimated fair value of the property acquired is generally determined based on appraisals by qualified licensed appraisers hired by the Company.  Appraised and reported values are discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the property.

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

	Quantitative Information about Level Fair Value Measurements
	Fair Value		Fair Value
	March 31,		December 31,
	2026		2025		Valuation Technique	Unobservable Input	Range
	(dollars in thousands)
Loans/leases evaluated individually	$	44,105	$	47,183	Appraisal of collateral	Appraisal adjustments	-10.00	%	to	-30.00	%
OREO		583		583	Appraisal of collateral	Appraisal adjustments	0.00	%	to	-35.00	%

For the loans/leases evaluated individually and OREO, the Company records carrying value at fair value less disposal or selling costs. The amounts reported in the tables above are fair values before the adjustment for disposal or selling costs.

There have been no changes in valuation techniques used for any assets or liabilities measured at fair value during the three months ended March 31, 2026 and 2025.

The following table presents the carrying values and estimated fair values of financial assets and liabilities carried on the Company's consolidated balance sheets, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis:

	Fair Value	As of March 31, 2026				As of December 31, 2025
	Hierarchy	Carrying		Estimated		Carrying		Estimated
	Level	Value		Fair Value		Value		Fair Value
		(dollars in thousands)
Cash and due from banks	Level 1	$	80,038	$	80,038	$	76,494	$	76,494
Federal funds sold	Level 2		950		950		23,150		23,150
Interest-bearing deposits at financial institutions	Level 2		38,340		38,340		53,249		53,249
Investment securities:
HTM	Level 2		951,916		840,740		948,676		857,663
AFS	Level 2		290,106		290,106		279,777		279,777
Trading	Level 3		82,728		82,728		83,857		83,857
Loans/leases receivable, net	Level 3		40,838		44,105		43,688		47,183
Loans/leases receivable, net	Level 2		7,159,203		6,934,233		7,033,140		6,794,019
Derivatives	Level 2		209,836		209,836		192,426		192,426
Deposits:
Nonmaturity deposits	Level 2		6,628,462		6,628,462		6,145,194		6,145,194
Time deposits	Level 2		1,142,388		1,140,593		1,269,004		1,268,442
Short-term borrowings	Level 2		1,950		1,950		2,650		2,650
FHLB advances	Level 2		25,609		24,512		245,383		244,237
Other borrowings	Level 2		107,457		100,155		107,395		100,634
Subordinated notes	Level 2		234,217		237,610		234,122		237,648
Junior subordinated debentures	Level 2		49,024		43,443		48,991		42,997
Derivatives	Level 2		149,836		149,836		214,327		214,327