v3.25.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The Corporation uses fair value measurements to record fair value adjustments on certain assets and liabilities and to determine fair value disclosures.  Items recorded at fair value on a recurring basis include securities available for sale, mortgage loans that are originated and intended for sale to the secondary market, and derivatives.  Additionally, from time to time, we may be required to record other assets at fair value on a nonrecurring basis, such as collateral dependent individually analyzed loans, loan servicing rights, property acquired through foreclosure or repossession, and mortgage loans reclassified to held for sale from portfolio.

Fair value is a market-based measurement, not an entity-specific measurement.  Fair value measurements are determined based on the assumptions the market participants would use in pricing the asset or liability.  In addition, GAAP specifies a hierarchy of valuation techniques based on whether the types of valuation information, or “inputs”, are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Corporation’s market assumptions. These two types of inputs have created the following fair value hierarchy:

•Level 1 – Quoted prices for identical assets or liabilities in active markets.
•Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
•Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in the markets and which reflect the Corporation’s market assumptions.

Fair Value Option Election
GAAP allows for the irrevocable option to elect fair value accounting for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. The Corporation has elected the fair value option for mortgage loans that are originated and intended for sale to the secondary market to better match changes in fair value of the loans with changes in the fair value of the forward sale commitment contracts used to economically hedge them.

The following table presents a summary of mortgage loans held for sale accounted for under the fair value option:
(Dollars in thousands)June 30,
2025		December 31,
2024
Aggregate fair value$35,681 $21,708 
Aggregate principal balance
34,877 21,420 
Difference between fair value and principal balance$804 $288 

Changes in fair value of mortgage loans held for sale accounted for under the fair value option election are included in mortgage banking revenues in the Unaudited Consolidated Statements of Income. Changes in fair value amounted to increases in mortgage banking revenues of $292 thousand and $517 thousand, respectively, for the three and six months ended June 30, 2025. This compared to decreases in mortgage banking revenues of $22 thousand and $91 thousand, respectively, for the three and six months ended June 30, 2024.
There were no mortgage loans held for sale 90 days or more past due as of June 30, 2025 and December 31, 2024.

Valuation Techniques for Items Recorded at Fair Value on a Recurring Basis
Available for Sale Debt Securities
Available for sale debt securities are recorded at fair value on a recurring basis. When available, the Corporation uses quoted market prices to determine the fair value of debt securities; such items are classified as Level 1. There were no Level 1 debt securities held at June 30, 2025 and December 31, 2024.

Level 2 debt securities are traded less frequently than exchange-traded instruments. The fair value of these securities is determined using matrix pricing with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.  This category includes obligations of U.S. government-sponsored enterprises, including mortgage-backed securities, individual name issuer trust preferred debt securities, and corporate bonds.
Debt securities not actively traded whose fair value is determined through the use of cash flows utilizing inputs that are unobservable are classified as Level 3. There were no Level 3 debt securities held at June 30, 2025 and December 31, 2024.

Mortgage Loans Held for Sale, at Fair Value
The Corporation has elected the fair value option for mortgage loans that are originated and intended for sale to the secondary market. The fair value is estimated based on current market prices for similar loans in the secondary market and therefore are classified as Level 2 assets.

Derivatives
Interest rate derivative contracts are traded in over-the-counter markets where quoted market prices are not readily available.  Fair value measurements are determined using independent valuation software, which utilizes the present value of future cash flows discounted using market observable inputs such as forward rate assumptions. The Corporation evaluates the credit risk of its counterparties, as well as that of the Corporation.  Accordingly, factors such as the likelihood of default by the Corporation and its counterparties, its net exposures, and remaining contractual life are considered in determining if any fair value adjustments related to credit risk are required.  Counterparty exposure is evaluated by netting positions that are subject to master netting agreements, as well as considering the amount of collateral securing the position, if any. The Corporation has determined that the majority of the inputs used to value its derivative positions fall within Level 2 of the fair value hierarchy. However, the credit valuation adjustments utilize Level 3 inputs. As of June 30, 2025 and December 31, 2024, the Corporation has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation. As a result, the Corporation has classified its derivative valuations in their entirety as Level 2.

Fair value measurements of forward loan commitments (interest rate lock commitments and forward sale commitments) are primarily based on current market prices for similar assets in the secondary market and therefore are classified as Level 2 assets. The fair value of interest rate lock commitments is also dependent on the ultimate closing of the loans. Pull-through rates are based on the Corporation’s historical data and reflect the Corporation’s best estimate of the likelihood that a commitment will result in a closed loan. Although the pull-through rates are Level 3 inputs, the Corporation has assessed the significance of the impact of pull-through rates on the overall valuation of its interest rate lock commitments and has determined that they are not significant to the overall valuation. As a result, the Corporation has classified its interest rate lock commitments as Level 2.

Items Recorded at Fair Value on a Recurring Basis
The following tables present the balances of assets and liabilities reported at fair value on a recurring basis:
(Dollars in thousands)TotalQuoted 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 debt securities:
Obligations of U.S. government agencies and U.S government sponsored enterprises$39,581 $— $39,581 $— 
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises
912,510 — 912,510 — 
Obligations of states and political subdivisions
635 — 635 — 
Individual name issuer trust preferred debt securities
6,049 — 6,049 — 
Corporate bonds
12,566 — 12,566 — 
Mortgage loans held for sale35,681 — 35,681 — 
Derivative assets33,628 — 33,628 — 
Total assets at fair value on a recurring basis$1,040,650 $— $1,040,650 $— 
Liabilities:
Derivative liabilities$34,664 $— $34,664 $— 
Total liabilities at fair value on a recurring basis$34,664 $— $34,664 $— 
(Dollars in thousands)TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
December 31, 2024
Assets:
Available for sale debt securities:
Obligations of U.S. government agencies and U.S government sponsored enterprises$38,612 $— $38,612 $— 
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises
855,147 — 855,147 — 
Obligations of states and political subdivisions
655 — 655 — 
Individual name issuer trust preferred debt securities
9,221 — 9,221 — 
Corporate bonds
12,670 — 12,670 — 
Mortgage loans held for sale21,708 — 21,708 — 
Derivative assets54,302 — 54,302 — 
Total assets at fair value on a recurring basis$992,315 $— $992,315 $— 
Liabilities:
Derivative liabilities$51,663 $— $51,663 $— 
Total liabilities at fair value on a recurring basis$51,663 $— $51,663 $— 

Valuation Techniques for Items Recorded at Fair Value on a Nonrecurring Basis
Collateral Dependent Individually Analyzed Loans
Collateral dependent individually analyzed loans are valued based upon the lower of amortized cost or fair value. Fair value is determined based on the appraised value of the underlying collateral. Such collateral primarily consists of real estate and, to a lesser extent, other business assets. For collateral dependent loans that are expected to be repaid substantially through the sale of the collateral, management adjusts the fair value for estimated costs to sell. Management may also adjust appraised values to reflect estimated market value declines or apply other discounts to appraised values resulting from its knowledge of the collateral. Internal valuations may be utilized to determine the fair value of other business assets. Collateral dependent individually analyzed loans are categorized as Level 3.

Mortgage Loans Held for Sale, at Lower of Cost or Market
Pursuant to the terms of a sales agreement effective December 30, 2024, the Bank had committed to sell residential mortgage loans with an amortized cost balance of $344.6 million that were held in portfolio. These loans were reclassified to held for sale and written down to a fair value of $281.7 million in December 2024. The fair value of these loans was based on the terms of the sales agreement with an unrelated third party and therefore are categorized as Level 2. The sale of these loans was completed on January 24, 2025.

Items Recorded at Fair Value on a Nonrecurring Basis
The following table presents the carrying value of assets held at June 30, 2025, which were written down to fair value during the six months ended June 30, 2025:
(Dollars in thousands)TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Assets:
Collateral dependent individually analyzed loans$11,295 $— $— $11,295 
Total assets at fair value on a nonrecurring basis$11,295 $— $— $11,295 
The following table presents the carrying value of assets held at December 31, 2024, which were written down to fair value during the year ended December 31, 2024.
(Dollars in thousands)TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Assets:
Collateral dependent individually analyzed loans$9,057 $— $— $9,057 
Mortgage loans held for sale, at lower of cost or market281,706 — 281,706 — 
Total assets at fair value on a nonrecurring basis$290,763 $— $281,706 $9,057 

The following tables present valuation techniques and unobservable inputs for assets measured at fair value on a nonrecurring
basis for which the Corporation has utilized Level 3 inputs to determine fair value:
(Dollars in thousands)Fair ValueValuation TechniqueUnobservable InputRange of Inputs Utilized
(Weighted Average)
June 30, 2025
Collateral dependent individually analyzed loans$11,295 Appraisals of collateralDiscount for costs to sell
0% - 15% (5%)
Appraisal adjustments
0% - 30% (20%)
(Dollars in thousands)Fair ValueValuation TechniqueUnobservable InputInputs Utilized
(Weighted Average)
December 31, 2024
Collateral dependent individually analyzed loans$9,057 Appraisals of collateralDiscount for costs to sell
14% - 49% (16%)
Appraisal adjustments
0% - 10% (7%)

Items for which Fair Value is Only Disclosed
The estimated fair values and related carrying amounts for financial instruments for which fair value is only disclosed are presented in the tables below:
(Dollars in thousands)
June 30, 2025Carrying AmountTotal
Fair Value		Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Financial Assets:
Cash and cash equivalents$167,724 $167,724 $167,724 $— $— 
Loans, net of allowance for credit losses on loans (1)
5,099,201 4,956,288 — — 4,956,288 
FHLB stock
45,273 45,273 — 45,273 — 
Investment in BOLI
113,372 113,372 — 113,372 — 
Financial Liabilities:
Non-maturity deposits$3,836,160 $3,836,160 $— $3,836,160 $— 
Time deposits1,209,088 1,204,994 — 1,204,994 — 
FHLB advances
1,001,000 1,004,500 — 1,004,500 — 
Junior subordinated debentures22,681 19,618 — 19,618 — 
(1)The estimated fair value excludes a $179 thousand negative basis adjustment associated with fair value hedges. See Note 7 for additional disclosure.
(Dollars in thousands)
December 31, 2024Carrying AmountTotal
Fair Value		Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Financial Assets:
Cash and cash equivalents$113,889 $113,889 $113,889 $— $— 
Loans, net of allowance for credit losses on loans (1)
5,095,878 4,952,110 — — 4,952,110 
FHLB stock
49,817 49,817 — 49,817 — 
Investment in BOLI
106,777 106,777 — 106,777 — 
Financial Liabilities:
Non-maturity deposits$3,626,152 $3,626,152 $— $3,626,152 $— 
Time deposits1,489,648 1,479,267 — 1,479,267 — 
FHLB advances
1,125,000 1,125,819 — 1,125,819 — 
Junior subordinated debentures22,681 19,602 — 19,602 — 
(1)The estimated fair value excludes a $1.5 million negative basis adjustment associated with fair value hedges. See Note 7 for additional disclosure.