v3.26.1
FAIR VALUE
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
FAIR VALUE FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date.
Level 2 – Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following is 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.
Investment Securities Available for Sale: The fair values of investment securities available for sale are determined by matrix pricing, which is a mathematical technique used to value debt securities without relying exclusively on quoted prices for the specific investment securities, but rather by relying on the investment securities’ relationship to other benchmark quoted investment securities (Level 2). Management obtains the fair values of investment securities available for sale on a monthly basis from a third party pricing service.
Government Guaranteed Loans HFI, at Fair Value: The Company has elected to account for certain government guaranteed loans HFI at fair value. Fair value is calculated based on the present value of estimated future payments (Level 3). The valuation model uses interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future payments. Whenever available, the present value is validated against available market data.
Individually Evaluated Loans: Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the ACL. Loans are considered collateral dependent when the Company has determined that foreclosure of the collateral is probable or when a borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of collateral. A collateral dependent loan’s ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. Fair value of the loan’s collateral is determined by appraisals, independent valuation, or management’s estimation of fair value which is then adjusted for the cost related to liquidation of the collateral. Collateral dependent loans are generally classified as Level 3 based on management’s judgment and estimation.
Other Real Estate Owned: Other real estate owned assets are recorded at fair value less estimated costs to sell upon the transfer of a loan to other real estate owned and, subsequently, continue to be measured and carried at fair value. The fair value of other real estate owned is based on recent real estate appraisals which are generally updated annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales, cost, and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Appraisals for other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by either the Company or the Company's appraisal services vendor. Once received, management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Management compares the best-efforts price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraised value to arrive at fair value.    
Repossessed Assets: Repossessed assets are recorded at fair value less estimated costs to sell upon the transfer of a loan to repossessed assets. The fair value of a repossessed asset, upon initial recognition, is estimated using a market approach or based on observable market data, such as a current appraisal, recent sale price of similar assets, or assumptions specific to the individual property or equipment, such as management applied discounts used to further reduce values to a net realizable value when observable inputs become stale.
Assets measured at fair value on a recurring basis at March 31, 2026 are summarized below. There were no liabilities carried at fair value on a recurring basis at March 31, 2026.
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Financial assets
Investment securities available for sale
$— $28,531 $— $28,531 
Government guaranteed loans HFI, at fair value
— — 51,807 51,807 
Assets measured at fair value on a recurring basis at December 31, 2025 are summarized below. There were no liabilities carried at fair value on a recurring basis at December 31, 2025.
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Financial assets
Investment securities available for sale
$— $29,363 $— $29,363 
Government guaranteed loans HFI, at fair value
— — 54,076 54,076 
There were no transfers between levels for assets and liabilities recorded at fair value on a recurring basis during the reported periods.
Financial Instruments Recorded Using Fair Value Option
The Company elected the fair value option for certain of its government guaranteed loans HFI as the Company believed that fair value was the best indicator of the resolution of those loans at that time. Depending on market conditions and liquidity needs of the Company, management determined whether it was advantageous to hold or sell government guaranteed loans on a loan-by-loan basis. The portion of these loans guaranteed by the government are generally readily marketable in the secondary market and the portion of the loans that are not guaranteed may be sold periodically to other third party financial institutions. Interest income on these loans is recorded based on the contractual term of the loan and in accordance with the Company’s policy on other loans HFI.
The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of HFI government guaranteed loans measured at fair value at March 31, 2026 and December 31, 2025.
March 31, 2026
Total Loans
Nonaccrual(1)
90 Days or More Past Due(1)
Fair Value Carrying AmountUnpaid Principal BalanceFair Value Gain (Loss)Fair Value Carrying AmountUnpaid Principal BalanceFair Value Gain (Loss)Fair Value Carrying AmountUnpaid Principal BalanceFair Value Gain (Loss)
Real estate - commercial
$10,279 $10,160 $119 $418 $439 $(21)$— $— $— 
Commercial and industrial
41,528 48,690 (7,162)1,020 8,409 (7,389)— — — 
Total loans HFI, at fair value$51,807 $58,850 $(7,043)$1,438 $8,848 $(7,410)$— $— $— 
December 31, 2025
Total Loans
Nonaccrual(1)
90 Days or More Past Due(1)
Fair Value Carrying AmountUnpaid Principal BalanceFair Value Gain (Loss)Fair Value Carrying AmountUnpaid Principal BalanceFair Value Gain (Loss)Fair Value Carrying AmountUnpaid Principal BalanceFair Value Gain (Loss)
Real estate - commercial
$10,348 $10,420 $(72)$— $— $— $— $— $— 
Commercial and industrial
43,728 50,165 (6,437)1,491 2,630 (1,139)— — — 
Total loans HFI, at fair value$54,076 $60,585 $(6,509)$1,491 $2,630 $(1,139)$— $— $— 
(1) The nonaccrual and 90 days or more past due loan balances do not include the portion of government guaranteed loan balances.
The total amount of net gains and losses from changes in fair value and interest income included in earnings for the three months ended March 31, 2026 and March 31, 2025 for government guaranteed loans HFI, at fair value, were as follows:
Three Months Ended March 31,
20262025
Interest income$1,147 $1,777 
Change in fair value(533)(755)
Total gain, net
$614 $1,022 
Changes in fair value for government guaranteed loans HFI, at fair value, were included in Government guaranteed loans fair value loss, net on the Condensed Consolidated Statements of Income.
The table below presents a reconciliation of government guaranteed loans HFI, at fair value, which were valued on a recurring basis and used significant unobservable inputs (Level 3) for the three months ended March 31, 2026 and March 31, 2025:
 Three Months Ended March 31,
20262025
Balance of government guaranteed loans HFI at fair value, beginning of period
$54,076 $60,833 
New government guaranteed originations at fair value— 4,760 
Loans sold— (5,606)
Principal payments
(1,736)(1,331)
Total fair value gains (losses) during the period
(533)(755)
Balance of government guaranteed loans HFI at fair value, end of period
$51,807 $57,901 
The Company’s valuation of government guaranteed loans HFI, at fair value, was supported by an analysis prepared by an independent third party and approved by management. The approach to determine fair value involved several steps: 1) identifying each loan’s unique characteristics, including balance, payment type, term, coupon, age, and principal and interest payment; 2) projecting these loan level characteristics for the life of each loan; and 3) performing discounted cash flow modeling.
The following table provides information about the valuation techniques and unobservable inputs used in the valuation of government guaranteed loans HFI that fall within Level 3 of the fair value hierarchy at March 31, 2026 and December 31, 2025:
Fair ValueValuation
Technique		Unobservable InputsRange (Weighted Average)
March 31, 2026
Government guaranteed loans HFI, at fair value
$51,807 DiscountedDiscount rate
4.93%-8.43% (7.38%)
cash flowConditional prepayment rate
6.82%-18.62% (11.31%)
December 31, 2025
Government guaranteed loans HFI, at fair value
$54,076 DiscountedDiscount rate
5.27%-8.77% (7.75%)
cash flowConditional prepayment rate
8.61%-18.58% (11.16%)
The significant unobservable inputs impacting the fair value measurement of government guaranteed loans HFI, at fair value, include discount rates and conditional prepayment rates. Increases in discount rates or prepayment rates would result in a lower fair value measurement. Although the prepayment rate and discount rate are not directly interrelated, they generally move in opposite directions. The discount rates and conditional prepayment rates were weighted by the relative principal balance outstanding of these loans.
Assets measured at fair value on a nonrecurring basis at March 31, 2026 are summarized below:
 Fair ValueValuation Technique(s)Significant
Unobservable
Input(s)		Discount % AmountValuation Level
Individually evaluated loans
$2,628 Discounted appraisals, estimated net realizable value of collateralCollateral discounts10%3
Other real estate owned
$400 Discounted appraisals, estimated net realizable value of collateralCollateral discounts10%3
Repossessed assets
$583 Discounted appraisals, estimated net realizable value of collateralCollateral discounts10%3
Assets measured at fair value on a nonrecurring basis at December 31, 2025 are summarized below:
Fair ValueValuation Technique(s)Significant
Unobservable
Input(s)		Discount % AmountValuation level
Individually evaluated loans
$2,628 Discounted appraisals, estimated net realizable value of collateralCollateral discounts
10%
3
Other real estate owned$400 Discounted appraisals, estimated net realizable value of collateralCollateral discounts10%3
Repossessed assets$263 Discounted appraisals, estimated net realizable value of collateralCollateral discounts10%3
Fair Value of Financial Instruments
The carrying values and estimated fair values of financial instruments not carried at fair value, at March 31, 2026 and December 31, 2025 are as follows:
March 31, 2026December 31, 2025
LevelCarrying ValueFair ValueCarrying ValueFair Value
Assets:
Cash and cash equivalents
1$134,465 $134,465 $206,982 $206,982 
Investment securities held to maturity
22,491 2,378 2,493 2,384 
Nonmarketable equity securities, at cost
24,662 4,662 4,656 4,656 
Loans HFI, at amortized cost
3857,987 875,190 887,822 900,200 
Accrued interest receivable
27,683 7,683 8,421 8,421 
Government guaranteed loan servicing rights
311,334 14,653 12,580 16,041 
Liabilities:
Noninterest-bearing deposit accounts
2$111,476 $111,476 $95,731 $95,731 
Interest-bearing transaction accounts
2153,860 153,860 231,227 231,227 
Savings and money market deposit accounts
2432,781 432,781 454,639 454,639 
Time deposits
2387,752 388,050 402,341 403,394 
Subordinated notes
26,099 5,725 5,962 5,877 
Notes payable
21,479 1,476 1,593 1,590 
Accrued interest payable
2958 958 1,133 1,133