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FAIR VALUE MEASUREMENTS
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
The Company uses fair value measurements when recording and disclosing certain financial assets and liabilities. Securities available-for-sale, equity securities and derivative financial instruments are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record other assets at fair value on a nonrecurring basis, such as loans held-for-sale, IELs, OREO, and certain other assets.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction. In determining fair value, the Company uses various valuation approaches, including market, income and cost approaches. The fair value standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability, which are developed based on market data the Company has obtained from independent sources. Unobservable inputs reflect the Company’s estimates of assumptions that market participants would use in pricing an asset or liability, which are developed based on the best information available in the circumstances.
The fair value hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). 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 an entity has the ability to access as of the measurement date, or observable inputs.
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 an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company recognizes transfers between any of the fair value hierarchy levels at the end of the reporting period in which the transfer occurred.
The following are descriptions of the valuation methodologies that the Company uses for financial instruments recorded at fair value on either a recurring or nonrecurring basis.
Recurring Basis
Securities Available-for-Sale: The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges, if available. This valuation method is classified as Level 1 in the fair value hierarchy. For securities where quoted prices are not available, fair values are calculated on market prices of similar securities, or matrix pricing, which is a mathematical technique, used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Matrix pricing relies on the securities’ relationship to similarly traded securities, benchmark curves, and the benchmarking of like securities. Matrix pricing utilizes observable market inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. In instances where broker quotes are used, these quotes are obtained from market makers or broker-dealers recognized to be market participants. This valuation method is classified as Level 2 in the fair value hierarchy. For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using DCF or other market indicators. This valuation method is classified as Level 3 in the fair value hierarchy.
Equity Securities: The fair values of equity securities are determined by obtaining quoted prices on nationally recognized or foreign securities exchanges, if available. This valuation method is classified as Level 1 in the fair value hierarchy. As of June 30, 2026 and December 31, 2025, Level 1 fair values are available for each of the Company’s equity securities.
Derivative Financial Instruments and Hedging Activities: The Company uses derivative instruments such as interest rate swaps for commercial loans with our customers. Upon entering into swaps with the borrower, the Company entered into offsetting positions with counterparties to minimize risk to the Company. The back-to-back swaps qualify as derivatives, but are not designated as hedging instruments. Interest rate swap contracts involve the risk of dealing with borrower and counterparties and their ability to meet contractual terms. The Company calculates the fair value for derivatives using accepted valuation techniques, including DCF analysis on the expected cash flows of each derivative. Each valuation considers the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, such as interest rate curves and implied volatilities. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty or customer owes the Company, and results in credit risk to the Company. When the fair value of a derivative instrument contract is negative, the Company owes the customer or counterparty, and, therefore, has no risk. Accordingly, interest rate swaps for commercial loans are classified as Level 2.
The Company also enters into commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loans to be held-for-sale are considered to be derivatives. The period of time between issuance of a loan commitment and closing and sale of the loan generally ranges from 15 to 90 days. The Company protects itself from changes in interest rates through the use of best-efforts forward delivery commitments, whereby the Company commits to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed interest rate risk on rate lock commitments due to changes in interest rates.
Nonrecurring Basis
Individually Evaluated Loans: IELs with commitments of $1.0 million or greater and/or based on management’s discretion are evaluated for potential specific reserves and adjusted, if a shortfall exists, to fair value less costs to sell. Fair value is measured based on the value of the underlying collateral securing the loan if repayment is expected solely from the sale or operation of the collateral or present value of estimated future cash flows discounted at the loan’s contractual interest rate if the loan is not determined to be collateral dependent. All loans with a specific reserve are classified as Level 3 in the fair value hierarchy.
Fair value for IELs is determined using several methods. Generally, the fair value of real estate is determined based on appraisals by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of
approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. These routine adjustments are made to adjust the value of a specific property relative to comparable properties for variations in qualities such as location, size, and income production capacity relative to the subject property of the appraisal. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.
Subsequent to the initial impairment date, existing IELs are reevaluated quarterly for additional impairment and adjustments to fair value less costs to sell are made, where appropriate. For IELs, the first stage of our impairment analysis involves inspection of the property in question to affirm the condition has not deteriorated since the previous impairment analysis date. Management also engages in conversations with local real estate professionals and market participants to determine the likely marketing time and value range for the property. The second stage involves an assessment of current trends in the regional market. After thorough consideration of these factors, management will order a new appraisal.
For non-individually evaluated loans, the fair value is determined by updating the present value of estimated future cash flows using the loan’s existing rate to reflect the payment schedule for the remaining life of the loan.
OREO is evaluated at the time of acquisition and is recorded at fair value as determined by an appraisal or evaluation, less costs to sell. After acquisition, most OREO assets are revalued every twelve months, or more frequently when deemed necessary by management based upon changes in market or collateral conditions. For smaller OREO assets with existing carrying values less than $0.5 million, management may elect to re-value the assets, at minimum, once every twenty-four months based on the size of the exposure. Fair value, when recorded, is generally based upon appraisals by approved, independent state certified appraisers. Appraisals on OREO may be discounted based on our historical knowledge, changes in market conditions from the time of appraisal or other information available to us. OREO and other repossessed assets marked to fair value are classified as Level 3. At June 30, 2026, OREO assets were in compliance with the OREO policy as described above, except for $0.2 million related to two residential mortgage loans that are not currently marketed for sale as the Company is still in the process of determining a market value for listing the properties.
The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at the dates presented:
June 30, 2026
(Dollars in Thousands)Carrying ValueQuoted Prices In Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets
Securities Available-for-Sale:
U.S. Government Agency Securities$16,153 $— $16,153 $— 
Residential Mortgage-Backed Securities61,450 — 61,450 — 
Commercial Mortgage-Backed Securities20,910 — 20,910 — 
Other Commercial Mortgage-Backed Securities21,261 — 21,261 — 
Asset Backed Securities 105,594 — 105,594 — 
Collateralized Mortgage Obligations192,539 — 192,539 — 
States and Political Subdivisions166,313 — 166,313 — 
Corporate Notes56,082 — 49,797 6,285 
Total Securities Available-for-Sale640,302 — 634,017 6,285 
Equity Securities12,676 12,676 — — 
Derivatives10,938 — 10,938 — 
Total$663,916 $12,676 $644,955 $6,285 
Liabilities
Derivatives$11,392 $— $11,392 $— 
Total$11,392 $— $11,392 $— 
December 31, 2025
(Dollars in Thousands)Carrying ValueQuoted Prices In Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets
Securities Available-for-Sale:
U.S. Government Agency Securities$19,375 $— $19,375 $— 
Residential Mortgage-Backed Securities76,773 — 76,773 — 
Commercial Mortgage-Backed Securities25,122 — 25,122 — 
Other Commercial Mortgage-Backed Securities24,254 — 24,254 — 
Asset Backed Securities94,797 — 94,797 — 
Collateralized Mortgage Obligations161,820 — 161,820 — 
States and Political Subdivisions234,224 — 234,224 — 
Corporate Notes55,247 — 51,967 3,280 
Total Securities Available-for-Sale691,612 — 688,332 3,280 
Equity Securities10,291 10,291 — — 
Derivatives10,182 — 10,182 — 
Total$712,085 $10,291 $698,514 $3,280 
Liabilities
Derivatives$10,089 $— $10,089 $— 
Total$10,089 $— $10,089 $— 
The Company invests in subordinated debt securities issued by other financial institutions that are classified as Corporate Notes in the tables above. At June 30, 2026, the Company held two such securities with an aggregate fair value of $6.3 million, and at December 31, 2025, the Company held one such security with an aggregate fair value of $3.3 million all of which were classified within Level 3 of the fair value hierarchy due to the absence of observable market inputs and limited trading activity. These Level 3 assets increased compared to December 31, 2025, reflecting the addition of a $3.0 million corporate bond during the second quarter of 2026.
The fair value of these Level 3 securities is estimated by benchmarking to similar instruments with observable market data classified as Level 2. Valuation techniques incorporate comparable financial ratio analysis and qualitative assessments specific to the industry in which the underlying issuers operate. Key factors considered include capital adequacy, asset quality trends, management effectiveness, core earnings capacity, liquidity profile, and on and off-balance sheet interest rate exposures.
Financial assets measured at fair value on a nonrecurring basis at the dates presented are summarized below:
June 30, 2026
(Dollars in Thousands)Level 1Level 2Level 3Fair Value
OREO$— $— $3,356 $3,356 
Individually Evaluated Loans$— $— $30,779 $30,779 
December 31, 2025
(Dollars in Thousands)Level 1Level 2Level 3Fair Value
OREO$— $— $142 $142 
Individually Evaluated Loans$— $— $22,809 $22,809 
The Company had three IEL relationships consisting of seven loans totaling $30.8 million that were measured at fair value on a nonrecurring basis at June 30, 2026, compared to three IEL relationships consisting of eight loans totaling $22.8 million at December 31, 2025.
The Company’s largest credit relationship, previously classified as an IEL had a net carrying value of zero at June 30, 2026, compared to $196.0 million at December 31, 2025, as a result of the Loan Sale Transaction during the first quarter of 2026. Prior to the Loan Sale Transaction, in estimating fair value, management utilized DCF techniques incorporating various assumptions related to the timing and amount of expected recoveries under multiple collection scenarios. These valuation
techniques resulted in a valuation allowance of zero at June 30, 2026, compared to $18.0 million at December 31, 2025, as the previously established specific reserves were released in connection with the Loan Sale Transaction during the first quarter of 2026.
OREO, which is measured at the lower of carrying amount or fair value less costs to sell, had a net carrying amount of $3.4 million as of June 30, 2026, compared to $0.1 million at December 31, 2025. The increase was primarily attributable to two nonperforming residential mortgage loans totaling $2.9 million that were transferred to OREO during the first quarter of 2026.
The following tables summarize the Company’s assets that were measured at fair value on a nonrecurring basis at the dates presented:
June 30, 2026
(Dollars in Thousands)Fair ValueValuation TechniqueUnobservable InputsWeighted RangeAverage
Assets
Individually Evaluated Loans$30,779 AppraisalsEstimated Selling Costs3.0%—%9.6%6.5 %
Total Individually Evaluated Loans$30,779 
OREO$2,122 AppraisalsEstimated Selling Costs0.0%—%6.0%3.7 %
OREO143 Internal ValuationsEstimated Selling Costs5.0%5.0 %
OREO1,091 Discounted Internal ValuationsManagement's Subject Discount24.0%24.0 %
Total OREO$3,356 
December 31, 2025
(Dollars in Thousands)Fair ValueValuation TechniqueUnobservable InputsWeighted RangeAverage
Assets
Individually Evaluated Loans$22,809  AppraisalsEstimated Selling Costs3.5%—6.0%5.9 %
Total Individually Evaluated Loans$22,809 
OREO142 Discounted Internal ValuationsManagement’s Subject Discount 5.0%5.0 %
Total OREO$142 
A baseline discount rate has been established for use in impairment and fair value measurements. This baseline rate was developed through back-testing against historical OREO sales and reflects an average recovery rate based on transaction size and asset type within the population analyzed. Management considers the specific facts and circumstances of each IEL and may apply judgment to adjust the baseline discount rate when appropriate.
The carrying values and estimated fair values of the Company’s financial instruments at June 30, 2026 and December 31, 2025 are presented in the accompanying tables. Fair values are estimated in accordance with the exit price notion under ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. In accordance with U.S. GAAP, the Company is required to disclose the estimated fair value of financial instruments carried at amortized cost when quoted market prices are not readily available.
Estimated fair values are derived using present value techniques or other valuation methodologies and are significantly affected by the assumptions applied, including discount rates and expected future cash flows. Because these estimates are based on models and assumptions rather than observable market transactions, they may not be realized upon immediate settlement. Accordingly, the aggregate fair values presented do not necessarily represent the underlying value of the Company.
Fair Value Measurements at June 30, 2026
(Dollars in Thousands)Carrying ValueLevel 1Level 2Level 3Total
Financial Assets:
Cash and Cash Equivalents$276,535 $41,101 $235,434 $— $276,535 
Securities Available-for-Sale640,302 — 634,017 6,285 640,302 
Equity Securities12,676 12,676 — — 12,676 
Loans Held-for-Sale467 — — 467 467 
Portfolio Loans, net3,679,424 — — 3,586,854 3,586,854 
Other Restricted Stock, at Cost8,476 — — NANA
Other Assets- Interest Rate Derivatives10,938 — 10,938 — 10,938 
Accrued Interest Receivable16,890 36 3,165 13,689 16,890 
Financial Liabilities:
Deposits$4,197,556 $655,482 $1,695,658 $1,861,684 $4,212,824 
Other Liabilities- Interest Rate Derivatives11,392 — 11,392 — 11,392 
Accrued Interest Payable5,891 — — 5,891 5,891 
Fair Value Measurements at December 31, 2025
(Dollars in Thousands)Carrying ValueLevel 1Level 2Level 3Total
Financial Assets:
Cash and Cash Equivalents$105,163 $36,935 $68,228 $— $105,163 
Securities Available-for-Sale691,612 — 688,332 3,280 691,612 
Equity Securities10,291 10,291 — — 10,291 
Loans Held-for-Sale339 — — 339 339 
Portfolio Loans, net3,808,069 — — 3,711,795 3,711,795 
Other Restricted Stock, at Cost16,830 — — NANA
Other Assets- Interest Rate Derivatives10,182 — 10,182 — 10,182 
Accrued Interest Receivable17,797 — 3,683 14,114 17,797 
Financial Liabilities:
Deposits$4,210,889 $620,473 $1,688,317 $1,917,786 $4,226,576 
Other Liabilities- Interest Rate Derivatives10,089 — 10,089 — 10,089 
FHLB Borrowings178,500 — — 178,552 178,552 
Accrued Interest Payable6,971 — — 6,971 6,971