| FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS |
6. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS The Corporation establishes a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The standard describes three levels of inputs that may be used to measure fair values: | | Level I: | Quoted prices are available in active markets for identical assets or liabilities as of the reported date. | | | | | | | Level II: | Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments of which can be directly observed. | | | | | | | Level III: | Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgement or estimation. | This hierarchy requires the use of observable market data available. The following table presents the assets reported on the Consolidated Balance Sheets at their fair value on a recurring basis as of June 30, 2026 and December 31, 2025, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. | | | June 30, 2026 | | | (In Thousands) | | Level I | | | Level II | | | Level III | | | Total | | | Obligations of U.S. Government agencies or corporations | | $ | — | | | $ | 60,958 | | | $ | — | | | $ | 60,958 | | | Mortgage-backed securities issued or guaranteed by U.S. Government agencies or corporations: | | | | | | | | | | | | | | | | | | Residential mortgage-backed securities | | | — | | | | 178,040 | | | | — | | | | 178,040 | | | Residential collateralized mortgage obligations | | | — | | | | 5,676 | | | | — | | | | 5,676 | | | Obligations of states and political subdivisions | | | — | | | | 83,267 | | | | — | | | | 83,267 | | | Other debt securities | | | — | | | | 284 | | | | — | | | | 284 | | | Total available-for-sale debt securities | | $ | — | | | $ | 328,225 | | | $ | — | | | $ | 328,225 | | | | | | | | | | | | | | | | | | | | | Marketable equity securities | | $ | 1,616 | | | $ | — | | | $ | — | | | $ | 1,616 | | | | | | | | | | | | | | | | | | | | | Real estate loans held for sale | | $ | — | | | $ | 1,354 | | | $ | — | | | $ | 1,354 | | | | | December 31, 2025 | | | (In Thousands) | | Level I | | | Level II | | | Level III | | | Total | | | Obligations of U.S. Government agencies or corporations | | $ | — | | | $ | 53,603 | | | $ | — | | | $ | 53,603 | | | Mortgage-backed securities issued or guaranteed by U.S. Government agencies or corporations: | | | | | | | | | | | | | | | | | | Residential mortgage-backed securities | | | — | | | | 182,347 | | | | — | | | | 182,347 | | | Residential collateralized mortgage obligations | | | — | | | | 6,217 | | | | — | | | | 6,217 | | | Obligations of states and political subdivisions | | | — | | | | 84,890 | | | | — | | | | 84,890 | | | Other debt securities | | | — | | | | 188 | | | | — | | | | 188 | | | Total available-for-sale debt securities | | $ | — | | | $ | 327,245 | | | $ | — | | | $ | 327,245 | | | | | | | | | | | | | | | | | | | | | Marketable equity securities | | $ | 1,411 | | | $ | — | | | $ | — | | | $ | 1,411 | | | | | | | | | | | | | | | | | | | | | Real estate loans held for sale | | $ | — | | | $ | 847 | | | $ | — | | | $ | 847 | | The fair values of equity securities classified as Level I are derived from quoted market prices in active markets; these assets consist entirely of stocks held in other banks. The fair values of all debt securities classified as Level II are obtained from nationally-recognized third-party pricing agencies. The fair values are derived primarily from cash flow models, which include assumptions for interest rates, credit losses, and prepayment speeds. The significant inputs utilized in the cash flow models are based on market data obtained from sources independent of the Corporation (observable inputs) and are therefore classified as Level II within the fair value hierarchy. The fair values of real estate loans held for sale classified as Level II are derived from observable pricing inputs for similar assets in active markets. The following table presents the assets measured on a nonrecurring basis on the Consolidated Balance Sheets at their fair value as of June 30, 2026 and December 31, 2025, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. | | | June 30, 2026 | | | (In Thousands) | | Level I | | | Level II | | | Level III | | | Total | | | Assets Measured on a Non-recurring Basis: | | | | | | | | | | | | | | | | | | Loans individually evaluated for credit loss | | $ | — | | | $ | — | | | $ | 8,942 | | | $ | 8,942 | | | | | December 31, 2025 | | | (In Thousands) | | Level I | | | Level II | | | Level III | | | Total | | | Assets Measured on a Non-recurring Basis: | | | | | | | | | | | | | | | | | | Loans individually evaluated for credit loss | | $ | — | | | $ | — | | | $ | 7,654 | | | $ | 7,654 | | | Foreclosed assets held for sale | | | — | | | | — | | | | 320 | | | | 320 | | | Total nonrecurring fair value measurements | | $ | — | | | $ | — | | | $ | 7,974 | | | $ | 7,974 | | Loans are individually evaluated for credit loss when they do not share similar risk characteristics as similar loans within their loan pool. Foreclosed assets held for sale consist of real estate acquired by foreclosure. Loans individually evaluated for credit loss are reviewed and evaluated on at least a quarterly basis for individual reserve requirements and adjusted accordingly. The following table provides a listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques on a nonrecurring basis as of June 30, 2026 and December 31, 2025: | | | June 30, 2026 | | | | | Quantitative Information about Level III Fair Value Measurements | | | (In Thousands) | | Fair Value
Estimate | | | Valuation Technique | | Unobservable Input | | Range | | Weighted
Average | | | Loans individually evaluated for credit loss: | | | | | | | | | | | | | | | | Commercial Real Estate | | $ | 6,718 | | | Discounted cash flows | | Charge-off rates | | 0-100% | | | 18.40% | | | Commercial Real Estate | | | 1,116 | | | Sales comparison | | Discount to appraised value | | 18-33% | | | 27.65% | | | Residential Real Estate | | | 1,108 | | | Sales comparison | | Discount to appraised value | | 10-43% | | | 24.03% | | | Total loans individually evaluated for credit loss | | $ | 8,942 | | | | | | | | | | | | | | | December 31, 2025 | | | | | Quantitative Information about Level III Fair Value Measurements | | | (In Thousands) | | Fair Value
Estimate | | | Valuation Technique | | Unobservable Input | | Range | | Weighted
Average | | | Loans individually evaluated for credit loss: | | | | | | | | | | | | | | | | Commercial Real Estate | | $ | 6,377 | | | Discounted cash flows | | Charge-off rates | | 0-100% | | | 18.32% | | | Commercial Real Estate | | | 537 | | | Sales comparison | | Discount to appraised value | | 28-33% | | | 30.71% | | | Residential Real Estate | | | 740 | | | Sales comparison | | Discount to appraised value | | 10-57% | | | 30.03% | | | Total loans individually evaluated for credit loss | | $ | 7,654 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreclosed assets held for sale: | | | | | | | | | | | | | | | | Residential Real Estate | | $ | 320 | | | Sales comparison | | Discount to appraised value | | 33-66% | | | 52.94% | | At June 30, 2026 and December 31, 2025, the carrying values and fair values of financial instruments that are not recorded at fair value on the Consolidated Balance Sheets are presented in the table below: | | | June 30, 2026 | | | | | Carrying | | | | | | | | | | | | | | | (In Thousands) | | Amount | | | Fair Value | | | Level I | | | Level II | | | Level III | | | Financial assets: | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | 20,144 | | | $ | 20,144 | | | $ | 20,144 | | | $ | — | | | $ | — | | | Restricted investment in bank stocks, at cost | | | 4,690 | | | | 4,690 | | | | — | | | | 4,690 | | | | — | | | Loans, net | | | 1,195,923 | | | | 1,164,853 | | | | — | | | | — | | | | 1,164,853 | | | Accrued interest receivable | | | 5,567 | | | | 5,567 | | | | — | | | | 5,567 | | | | | | | Mortgage servicing rights | | | 1,372 | | | | 2,031 | | | | — | | | | — | | | | 2,031 | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits | | $ | 1,156,203 | | | $ | 1,154,604 | | | $ | — | | | $ | 765,756 | | | $ | 388,848 | | | Noninterest-bearing deposits | | | 277,392 | | | | 277,392 | | | | — | | | | 277,392 | | | | — | | | Short-term borrowings | | | 24,296 | | | | 24,296 | | | | — | | | | 24,296 | | | | — | | | Accrued interest payable | | | 1,539 | | | | 1,539 | | | | — | | | | 1,539 | | | | — | | | | | December 31, 2025 | | | | | Carrying | | | | | | | | | | | | | | | (In Thousands) | | Amount | | | Fair Value | | | Level I | | | Level II | | | Level III | | | Financial assets: | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | 48,540 | | | $ | 48,540 | | | $ | 48,540 | | | $ | — | | | $ | — | | | Restricted investment in bank stocks, at cost | | | 5,412 | | | | 5,412 | | | | — | | | | 5,412 | | | | — | | | Loans, net | | | 1,167,622 | | | | 1,110,730 | | | | — | | | | — | | | | 1,110,730 | | | Accrued interest receivable | | | 5,063 | | | | 5,063 | | | | — | | | | 5,063 | | | | | | | Mortgage servicing rights | | | 1,490 | | | | 2,074 | | | | — | | | | — | | | | 2,074 | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits | | $ | 1,135,740 | | | $ | 1,134,312 | | | $ | — | | | $ | 758,406 | | | $ | 375,906 | | | Noninterest-bearing deposits | | | 277,012 | | | | 277,012 | | | | — | | | | 277,012 | | | | — | | | Short-term borrowings | | | 12,455 | | | | 12,455 | | | | — | | | | 12,455 | | | | — | | | Long-term borrowings | | | 40,584 | | | | 40,536 | | | | — | | | | — | | | | 40,536 | | | Accrued interest payable | | | 1,644 | | | | 1,644 | | | | — | | | | 1,644 | | | | — | | Fair value is defined as a financial instrument which could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. If a quoted market price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument, but focuses on the exit price of the asset and liability. If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimate losses, and other factors as determined through various option pricing formulas. As many of these assumptions result from judgments made by management based upon estimates that are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in assumptions on which the estimate fair values are based may have a significant impact on the resulting estimated fair values.
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