v3.26.1
Fair Value Measurements
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The fair value of a financial instrument is the current amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Valuation techniques use certain inputs to arrive at fair value. Inputs to valuation techniques are the assumptions that market participants would use in pricing the asset or liability. They may be observable or unobservable. First Guaranty uses a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs – Unadjusted quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds or credit risks) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value follows, as well as the classification of such instruments within the valuation hierarchy.

Securities available for sale. Securities are classified within Level 1 where quoted market prices are available in an active market. Inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are unavailable, fair value is estimated using quoted prices of securities with similar characteristics, at which point the securities would be classified within Level 2 of the hierarchy. Securities classified Level 3 as of December 31, 2025 includes corporate debt and municipal securities.

Loans evaluated individually. Fair value is measured by either the fair value of the collateral if the loan is collateral dependent (Level 2 or Level 3), or the present value of expected future cash flows, discounted at the loan's effective interest rate (Level 3). Fair value of the collateral is determined by appraisals or by independent valuation.

Other real estate owned. Properties are recorded at the balance of the loan or at estimated fair value less estimated selling costs, whichever is less, at the date acquired. Fair values of other real estate owned ("OREO") at December 31, 2025 and 2024 are determined by sales agreement or appraisal, and costs to sell are based on estimation per the terms and conditions of the sales agreement or amounts commonly used in real estate transactions. Inputs include appraisal values or recent sales activity for similar assets in the property's market; thus OREO measured at fair value would be classified within either Level 2 or Level 3 of the hierarchy. During 2025, First Guaranty transferred $4.4 million of existing bank owned properties previously used as either operating branches or future branch development to other real estate owned. Those properties were available for sales as of December 31, 2025. The properties are included in Level 3 as of December 31, 2025.

Certain non-financial assets and non-financial liabilities are measured at fair value on a non-recurring basis including assets and liabilities related to reporting units measured at fair value in the testing of goodwill impairment, as well as intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment.

The following table summarizes financial assets measured at fair value on a recurring basis as of December 31, 2025 and 2024, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

(in thousands)December 31, 2025December 31, 2024
Available for Sale Securities Fair Value Measurements Using:  
Level 1: Quoted Prices in Active Markets For Identical Assets$98,149 $147,780 
Level 2: Significant Other Observable Inputs555,565 127,222 
Level 3: Significant Unobservable Inputs22,878 6,095 
Securities available for sale measured at fair value$676,592 $281,097 

First Guaranty'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 methodologies used 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.

The change in Level 1 securities available for sale from December 31, 2024 to December 31, 2025 was due to a net decrease in Treasury bills of $49.6 million. There were no transfers between Level 1 and 2 securities available for sale from December 31, 2024 to December 31, 2025. There were $17.1 million in municipal bonds transferred from level Level 2 to Level 3 from December 31, 2024 to December 31, 2025.
The following table reconciles assets measured at fair value on a recurring basis using unobservable inputs (Level 3):

Level 3 Changes
(in thousands)December 31, 2025December 31, 2024
Balance, beginning of year$6,095 $10,483 
Total gains or losses (realized/unrealized):
Included in earnings— — 
Included in other comprehensive income121 230 
Purchases, sales, issuances and settlements, net(473)(4,618)
Transfers in and/or out of Level 317,135 — 
Balance as of end of year$22,878 $6,095 

There were no gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held as of December 31, 2025.

The following table measures financial assets and financial liabilities measured at fair value on a non-recurring basis as of December 31, 2025 and December 31, 2024, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value:

(in thousands)At December 31, 2025At December 31, 2024
Fair Value Measurements Using: Loan Individually Evaluated for Impairment  
Level 1: Quoted Prices in Active Markets For Identical Assets$— $— 
Level 2: Significant Other Observable Inputs— — 
Level 3: Significant Unobservable Inputs43,809 50,449 
Individually evaluated loans measured at fair value$43,809 $50,449 
Fair Value Measurements Using: Other Real Estate Owned  
Level 1: Quoted Prices in Active Markets For Identical Assets$— $— 
Level 2: Significant Other Observable Inputs— 319 
Level 3: Significant Unobservable Inputs35,084 — 
Other real estate owned measured at fair value$35,084 $319 

ASC 825-10 provides First Guaranty with an option to report selected financial assets and liabilities at fair value. The fair value option established by this statement permits First Guaranty to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each reporting date subsequent to implementation.

First Guaranty has chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with accounting principles generally accepted in the United States.