v3.26.1
Disclosures of Fair Values of Financial Instruments
6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Disclosures of Fair Values of Financial Instruments

Note 7 -- Disclosures of Fair Values of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1 Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-Sale Securities. The fair value of available-for-sale securities is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sources market parameters, including but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Equity Securities. The fair value of current equity securities is determined by obtaining quoted market prices in an active market and are classified within Level 1. In cases where quoted market prices are not available, fair values are estimated by using quoted prices of securities with similar characteristics and are classified in Level 2 of the valuation hierarchy.

Derivatives. The fair value of derivatives is based on models using observable market data as of the measurement date and are therefore classified in Level 2 of the valuation hierarchy.

 

Loans Held for Sale. The fair values are estimated by using quoted prices of loans with similar characteristics and are therefore classified in Level 2 of the valuation hierarchy.

The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of June 30, 2026 and December 31, 2025 (in thousands):

 

 

Fair Value Measurements Using:

 

 

 

Fair Value

 

 

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

 

 

Significant
Other
Observable
Inputs (Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

June 30, 2026

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. government corporations and agencies

 

$

142,367

 

 

$

—

 

 

$

142,367

 

 

$

—

 

Obligations of states and political subdivisions

 

 

287,012

 

 

 

—

 

 

 

287,012

 

 

 

—

 

Mortgage-backed securities

 

 

822,821

 

 

 

—

 

 

 

812,843

 

 

 

9,978

 

Corporate bonded debt

 

 

27,908

 

 

 

—

 

 

 

25,149

 

 

 

2,759

 

Total available-for-sale securities

 

 

1,280,108

 

 

 

—

 

 

 

1,267,371

 

 

 

12,737

 

Equity securities

 

 

3,620

 

 

 

3,620

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

6,724

 

 

 

—

 

 

 

6,724

 

 

 

—

 

Derivative assets: interest rate swaps

 

 

1,806

 

 

 

—

 

 

 

1,806

 

 

 

—

 

Total assets

 

$

1,292,258

 

 

$

3,620

 

 

$

1,275,901

 

 

$

12,737

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities: interest rate swaps

 

$

1,480

 

 

$

—

 

 

$

1,480

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2025

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. government corporations and agencies

 

$

144,080

 

 

$

—

 

 

$

144,080

 

 

$

—

 

Obligations of states and political subdivisions

 

 

280,633

 

 

 

—

 

 

 

280,633

 

 

 

—

 

Mortgage-backed securities

 

 

624,666

 

 

 

—

 

 

 

624,666

 

 

 

—

 

Corporate bonded debt

 

 

27,504

 

 

 

—

 

 

 

24,745

 

 

 

2,759

 

Total available-for-sale securities

 

 

1,076,883

 

 

 

—

 

 

 

1,074,124

 

 

 

2,759

 

Equity securities

 

 

4,588

 

 

 

4,588

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

5,203

 

 

 

—

 

 

 

5,203

 

 

 

—

 

Derivative assets: interest rate swaps

 

 

1,728

 

 

 

—

 

 

 

1,728

 

 

 

—

 

Total assets

 

$

1,088,402

 

 

$

4,588

 

 

$

1,081,055

 

 

$

2,759

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities: interest rate swaps

 

$

1,247

 

 

$

—

 

 

$

1,247

 

 

$

—

 

The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the years ended three and six months ended June 30, 2026 and 2025 is summarized as follows (in thousands):

 

 

Three months ended

 

 

Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Beginning balance

 

$

10,234

 

 

$

5,759

 

 

$

2,759

 

 

$

5,759

 

Transfers out of Level 3

 

 

(7,475

)

 

 

—

 

 

 

(7,475

)

 

 

—

 

Purchases, issuances, sales and settlements:

 

 

 

 

 

 

 

 

 

 

 

 

Purchases

 

 

9,978

 

 

 

7,029

 

 

 

17,453

 

 

 

7,029

 

Maturities

 

 

—

 

 

 

(3,000

)

 

 

—

 

 

 

(3,000

)

Ending balance

 

$

12,737

 

 

$

9,788

 

 

$

12,737

 

 

$

9,788

 

Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Collateral Dependent Loans.

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for expected credit losses. Allowable methods for determining the amount of impairment and estimating fair value include using the fair value of the collateral for collateral dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

Management establishes a specific allowance for loans that have an estimated fair value that is below the carrying value. The total carrying amount of loans for which a change in specific allowance has occurred as of June 30, 2026 was $24.6 million and a fair value of $23.4 million resulting in specific loss exposures of $1.2 million. As of December 31, 2025, the total carrying amount of loans for which a change in specific allowance occurred was $11.0 million. These loans had a fair value of $10.4 million which resulted in specific loss exposures of $605,000.

When there is little prospect of collecting principal or interest, loans, or portions of loans, may be charged off to the allowance for credit losses. Losses are recognized in the period an obligation becomes uncollectible. The recognition of a loss does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan even though partial recovery may be affected in the future.

Foreclosed Assets Held for Sale.

Other real estate owned acquired through loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for credit losses. Due to the subjective nature of establishing fair value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, a valuation allowance is recorded through non-interest expense. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other non-interest expenses. The total carrying amount of other real estate owned as of June 30, 2026 was $5.8 million. Other real estate owned included in the total carrying amount and measured at fair value on a nonrecurring basis during the year amounted to $267,000. The total carrying amount of other real estate owned as of December 31, 2025 was $2.9 million. Other real estate owned included in the total carrying amount and measured at fair value on a nonrecurring basis during the year amounted to $605,000.

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2026 and December 31, 2025 (in thousands):

 

 

Fair Value Measurements Using:

 

 

 

 

 

 

Quoted Prices
in Active
Markets for
Identical Assets

 

 

Significant
Other
Observable
Inputs

 

 

Significant
Unobservable
Inputs

 

 

 

Fair Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

June 30, 2026

 

 

 

 

 

 

 

 

 

 

 

 

Collateral dependent loans

 

$

23,404

 

 

$

—

 

 

$

—

 

 

$

23,404

 

Foreclosed assets held for sale

 

 

267

 

 

 

—

 

 

 

—

 

 

 

267

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2025

 

 

 

 

 

 

 

 

 

 

 

 

Collateral dependent loans

 

$

10,389

 

 

$

—

 

 

$

—

 

 

$

10,389

 

Foreclosed assets held for sale

 

 

605

 

 

 

—

 

 

 

—

 

 

 

605

 

 

Sensitivity of Significant Unobservable Inputs

The following table presents quantitative information about unobservable inputs used in Level 3 fair value measurements other than goodwill at June 30, 2026 and December 31, 2025.

 

 

 

Fair Value

 

Valuation

 

 

 

Range

 

 

(in thousands)

 

Technique

 

Unobservable Inputs

 

(Weighted Average)

June 30, 2026

 

 

 

 

 

 

 

 

 

 

Collateral dependent loans

 

$23,404

 

Third party
valuations

 

Discount to reflect realizable value

 

0%-40%

 

(20%)

Foreclosed assets held for sale

 

267

 

Third party
valuations

 

Discount to reflect realizable value less estimated selling costs

 

0%-40%

 

(35%)

 

 

 

 

 

 

 

 

 

 

 

December 31, 2025

 

 

 

 

 

 

 

 

 

 

Collateral dependent loans

 

$10,389

 

Third party valuations

 

Discount to reflect realizable value

 

0% - 40%

 

(20%)

Foreclosed assets held for sale

 

605

 

Third party valuations

 

Discount to reflect realizable value less estimated selling costs

 

0% - 40%

 

(35%)

 

The following tables present estimated fair values of the Company’s financial instruments at June 30, 2026 and December 31, 2025 (in thousands):

 

 

 

Carrying
Amount

 

 

Fair
Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

June 30, 2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

303,777

 

 

$

303,777

 

 

$

303,777

 

 

$

—

 

 

$

—

 

Federal funds sold

 

 

76

 

 

 

76

 

 

 

76

 

 

 

—

 

 

 

—

 

Certificates of deposit

 

 

4,570

 

 

 

4,570

 

 

 

—

 

 

 

4,570

 

 

 

—

 

Available-for-sale investment securities

 

 

1,280,108

 

 

 

1,280,108

 

 

 

—

 

 

 

1,267,371

 

 

 

12,737

 

Held-to-maturity investment securities

 

 

2,265

 

 

 

2,265

 

 

 

2,265

 

 

 

—

 

 

 

—

 

Equity investment securities

 

 

3,620

 

 

 

3,620

 

 

 

3,620

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

6,724

 

 

 

6,724

 

 

 

—

 

 

 

6,724

 

 

 

—

 

Loans net of allowance for credit losses

 

 

6,840,629

 

 

 

6,835,735

 

 

 

—

 

 

 

—

 

 

 

6,835,735

 

Interest receivable

 

 

43,276

 

 

 

43,276

 

 

 

—

 

 

 

43,276

 

 

 

—

 

Federal Reserve Bank stock

 

 

22,980

 

 

 

22,980

 

 

 

—

 

 

 

22,980

 

 

 

—

 

Federal Home Loan Bank stock

 

 

9,729

 

 

 

9,729

 

 

 

—

 

 

 

9,729

 

 

 

—

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

7,571,544

 

 

$

7,500,937

 

 

$

—

 

 

$

6,007,774

 

 

$

1,493,163

 

Repurchase agreements with customers

 

 

196,991

 

 

 

196,991

 

 

 

—

 

 

 

196,991

 

 

 

—

 

Other borrowings

 

 

209,567

 

 

 

207,997

 

 

 

—

 

 

 

207,997

 

 

 

—

 

Subordinated debt, net

 

 

32,705

 

 

 

33,458

 

 

 

—

 

 

 

33,458

 

 

 

—

 

Junior subordinated debt, net

 

 

34,077

 

 

 

32,480

 

 

 

—

 

 

 

32,480

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

254,844

 

 

$

254,844

 

 

$

254,844

 

 

$

—

 

 

$

—

 

Federal funds sold

 

 

76

 

 

 

76

 

 

 

76

 

 

 

—

 

 

 

—

 

Certificates of deposit

 

 

1,740

 

 

 

1,740

 

 

 

—

 

 

 

1,740

 

 

 

—

 

Available-for-sale investment securities

 

 

1,076,883

 

 

 

1,076,883

 

 

 

—

 

 

 

1,074,124

 

 

 

2,759

 

Held-to-maturity investment securities

 

 

2,288

 

 

 

2,288

 

 

 

2,288

 

 

 

—

 

 

 

—

 

Equity investment securities

 

 

4,588

 

 

 

4,588

 

 

 

4,588

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

5,203

 

 

 

5,203

 

 

 

—

 

 

 

5,203

 

 

 

—

 

Loans net of allowance for credit losses

 

 

5,931,296

 

 

 

5,761,258

 

 

 

—

 

 

 

—

 

 

 

5,761,258

 

Interest receivable

 

 

39,949

 

 

 

39,949

 

 

 

—

 

 

 

39,949

 

 

 

—

 

Federal Reserve Bank stock

 

 

19,855

 

 

 

19,855

 

 

 

—

 

 

 

19,855

 

 

 

—

 

Federal Home Loan Bank stock

 

 

11,351

 

 

 

11,351

 

 

 

—

 

 

 

11,351

 

 

 

—

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

6,395,273

 

 

$

6,322,439

 

 

$

—

 

 

$

5,265,780

 

 

$

1,056,659

 

Repurchase agreements with customers

 

 

196,716

 

 

 

196,716

 

 

 

—

 

 

 

196,716

 

 

 

—

 

Other borrowings

 

 

270,000

 

 

 

270,338

 

 

 

—

 

 

 

270,338

 

 

 

—

 

Subordinated debt, net

 

 

60,008

 

 

 

60,800

 

 

 

—

 

 

 

60,800

 

 

 

—

 

Junior subordinated debt, net

 

 

24,454

 

 

 

22,083

 

 

 

—

 

 

 

22,083

 

 

 

—