| Fair value estimates |
7. Fair value estimates: The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosure under GAAP. Fair value estimates are calculated without attempting to estimate the value of anticipated future business and the value of certain assets and liabilities that are not considered financial. Accordingly, such assets and liabilities are excluded from disclosure requirements. In accordance with FASB ASC 820, “Fair Value Measurements and Disclosures,” fair value is the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets. In many cases, these values cannot be realized in immediate settlement of the instrument. Current fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction that is not a forced liquidation or distressed sale between participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with GAAP, the Company groups its assets and liabilities generally measured at fair value into three levels based on market information or other fair value estimates in which the assets and liabilities are traded or valued and the reliability of the assumptions used to determine fair value. These levels include: | ● | Level 1: Unadjusted quoted prices of identical assets or liabilities in active markets that the entity has the ability to access as of 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; or other inputs that are observable or can be corroborated by observable market data. |
| ● | Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value estimate. The following methods and assumptions were used by the Company to calculate fair values and related carrying amounts of financial instruments: Investment securities: The fair values of U.S. Treasury securities and marketable equity securities are based on quoted market prices from active exchange markets and are considered to be Level 1 inputs. The fair values of debt securities are calculated on market prices of similar instruments using a matrix pricing model, which are considered to be Level 2 inputs. Interest rate swaps and floors: The Company’s interest rate swaps and options are reported at fair value utilizing Level 2 inputs. Values of these instruments are obtained through an independent pricing source utilizing information which may include market observed quotations for interest rate, forward rates, rate volatility, and volatility surface. Derivative contracts create exposure to interest rate movements as well as risks from the potential of non-performance of the counterparty. Individually evaluated loans: Fair values for individually evaluated loans are estimated using underlying collateral values, where applicable. Other real estate owned: Other real estate owned ("OREO") represents properties that the Company has acquired through foreclosure by either accepting a deed in lieu of foreclosure, or by taking possession of assets that collateralized a loan, and former bank premises that are no longer used for operations or for future expansion. The Company reports OREO at the lower of cost or fair value less estimated cost to sell, adjusted periodically based on a current appraisal. Write-downs and any gain or loss upon the sale of OREO is recorded in other non-interest income. OREO is reported in other assets on the consolidated balance sheets. The carrying value of OREO was $1.3 million at June 30, 2026, and $1.7 million at December 31, 2025. Other real estate owned is classified within Level 3 in the fair value hierarchy based on appraisals, letters of intent or agreements of sale received from third parties. Assets and liabilities measured at fair value on a recurring basis at June 30, 2026 and December 31, 2025 are summarized as follows: | | | | | | | | | | | | | | | | At June 30, 2026 | | | | Fair Value Measurement Using | | | | | | Quoted Prices in | | Significant | | Significant | | | | | | Active Markets for | | Other Observable | | Unobservable | | | | | | Identical Assets | | Inputs | | Inputs | | (Dollars in thousands) | | Amount | | (Level 1) | | (Level 2) | | (Level 3) | | U.S. Treasury securities | | $ | 18,003 | | $ | 18,003 | | $ | | | $ | | | State and municipals: | | | | | | | | | | | | | | Taxable | | | 57,253 | | | | | | 57,253 | | | | | Tax-exempt | | | 142,829 | | | | | | 142,829 | | | | | Residential mortgage-backed securities: | | | | | | | | | | | | | | U.S. government agencies | | | 20,020 | | | | | | 20,020 | | | | | U.S. government-sponsored enterprises | | | 137,947 | | | | | | 137,947 | | | | | Commercial mortgage-backed securities: | | | | | | | | | | | | | | U.S. government-sponsored enterprises | | | 1,658 | | | | | | 1,658 | | | | | Private collateralized mortgage obligations | | | 48,046 | | | | | | 48,046 | | | | | Asset backed securities | | | 14,590 | | | | | | 14,590 | | | | | Corporate debt securities | | | 17,056 | | | | | | 17,056 | | | | | Negotiable certificates of deposit | | | 742 | | | | | | 742 | | | | | Equity securities | | | 2,748 | | | 2,748 | | | | | | | | Total investment securities | | $ | 460,892 | | $ | 20,751 | | $ | 440,141 | | $ | | | Interest rate swap-other assets | | $ | 14,333 | | | | | $ | 14,333 | | | | | Interest rate swap-other liabilities | | $ | (14,074) | | | | | $ | (14,074) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | At December 31, 2025 | | | | Fair Value Measurement Using | | | | | | | Quoted Prices in | | Significant | | Significant | | | | | | Active Markets for | | Other Observable | | Unobservable | | | | | | Identical Assets | | Inputs | | Inputs | | (Dollars in thousands) | | Amount | | (Level 1) | | (Level 2) | | (Level 3) | | U.S. Treasury securities | | $ | 30,998 | | $ | 30,998 | | $ | | | $ | | | State and municipals: | | | | | | | | | | | | | | Taxable | | | 61,622 | | | | | | 61,622 | | | | | Tax-exempt | | | 125,117 | | | | | | 125,117 | | | | | Residential mortgage-backed securities: | | | | | | | | | | | | | | U.S. government agencies | | | 42,699 | | | | | | 42,699 | | | | | U.S. government-sponsored enterprises | | | 160,080 | | | | | | 160,080 | | | | | Commercial mortgage-backed securities: | | | | | | | | | | | | | | U.S. government-sponsored enterprises | | | 1,770 | | | | | | 1,770 | | | | | Private collateralized mortgage obligations | | | 48,484 | | | | | | 48,484 | | | | | Asset backed securities | | | 16,267 | | | | | | 16,267 | | | | | Corporate debt securities | | | 24,794 | | | | | | 23,806 | | | 988 | | Negotiable certificates of deposit | | | 732 | | | | | | 732 | | | | | Equity securities | | | 2,598 | | | 2,598 | | | | | | | | Total investment securities | | $ | 515,161 | | $ | 33,596 | | $ | 480,577 | | $ | 988 | | Interest rate swap-other assets | | $ | 15,583 | | | | | $ | 15,583 | | | | | Interest rate swap-other liabilities | | $ | (15,345) | | | | | $ | (15,345) | | | | | | | | | | | | | | | | | | |
Assets and liabilities measured at fair value on a nonrecurring basis at June 30, 2026, and December 31, 2025, are summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2026 | | | | Fair Value Measurement | | | | | | | | | | | | | Quoted Prices in | | Significant | | Significant | | | | | | | | | | | | Active Markets for | | Other Observable | | Unobservable | | | | | Recorded | | Valuation | | | Fair | | Identical Assets | | Inputs | | Inputs | | (Dollars in thousands) | | | Investments | | Allowance | | | Value | | (Level 1) | | (Level 2) | | (Level 3) | | Loans individually evaluated for impairment | | $ | 12,354 | | $ | 1,092 | | $ | 11,262 | | $ | | | $ | | | $ | 11,262 | | Other real estate owned | | $ | 1,341 | | $ | | | $ | 1,341 | | $ | | | $ | | | $ | 1,341 | |
| | | | | | | | | | | | | | | | | | | | | | | December 31, 2025 | | | | Fair Value Measurement | | | | | | | | | | | | | Quoted Prices in | | Significant | | Significant | | | | | | | | | | | | Active Markets for | | Other Observable | | Unobservable | | | | | Recorded | | | Valuation | | | Fair | | Identical Assets | | Inputs | | Inputs | | (Dollars in thousands) | | | Investment | | Allowance | | | Value | | (Level 1) | | (Level 2) | | (Level 3) | | Loans individually evaluated for impairment | | $ | 10,203 | | $ | 1,332 | | $ | 8,871 | | $ | | | $ | | | $ | 8,871 | | Other real estate owned | | $ | 1,682 | | $ | | | $ | 1,682 | | $ | | | $ | | | $ | 1,682 | |
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis at June 30, 2026, and December 31, 2025, and for which the Company has utilized Level 3 inputs to determine fair value: | | | | | | | | | | | | | Quantitative Information about Level 3 Fair Value Measurements | | (Dollars in thousands, except percents) | | Fair Value | | | | | | Range | | June 30, 2026 | | Estimate | | Valuation Techniques | | Unobservable Input | | (Weighted Average) | | Loans individually evaluated for credit loss | | $ | 11,262 | | Appraisal of collateral | | Appraisal adjustments | | 0.0% to 85.0% (66.6)% | | | | | | | | | Liquidation expenses | | 0.0% to 0.0% (0.0)% | | Other real estate owned | | $ | 1,341 | | Appraisal of collateral | | Appraisal adjustments | | 0.0% to 10.0% (5.6)% | | | | | | | | | Liquidation expenses | | 0.0% to 10.0% (4.9)% | |
| | | | | | | | | | | | | Quantitative Information about Level 3 Fair Value Measurements | | (Dollars in thousands, except percents) | | Fair Value | | | | | | Range | | December 31, 2025 | | Estimate | | Valuation Techniques | | Unobservable Input | | (Weighted Average) | | Loans individually evaluated for credit loss | | $ | 8,871 | | Appraisal of collateral | | Appraisal adjustments | | 0.0% to 100.0% (52.4)% | | | | | | | | | Liquidation expenses | | 0.0% to 12.2% (0.26)% | | Other real estate owned | | $ | 1,682 | | Appraisal of collateral | | Appraisal adjustments | | 10.0% to 25.0% (16.9)% | | | | | | | | | Liquidation expenses | | 0.0% to 0.0% (0.0)% | |
Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable. Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraisal. The carrying and fair values of the Company’s financial instruments at June 30, 2026, and December 31, 2025, and their placement within the fair value hierarchy are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Hierarchy | | | | | | | | | | Quoted | | | | | | | | | | | | | | | | Prices in | | | | | | | | | | | | | | | | Active | | Significant | | | | | | | | | | | | | Markets for | | Other | | Significant | | | | | | | | | | Identical | | Observable | | Unobservable | | (Dollars in thousands) | | Carrying | | Fair | | Assets | | Inputs | | Inputs | | June 30, 2026 | | Value | | Value | | (Level 1) | | (Level 2) | | (Level 3) | | Financial assets: | | | | | | | | | | | | | | | | | Cash and due from banks | | $ | 256,250 | | $ | 256,250 | | $ | 256,250 | | $ | | | $ | | | Investment securities: | | | | | | | | | | | | | | | | | Available for sale | | | 458,144 | | | 458,144 | | | 18,003 | | | 440,141 | | | - | | Held to maturity | | | 68,723 | | | 59,311 | | | | | | 59,311 | | | | | Equity securities | | | 2,748 | | | 2,748 | | | 2,748 | | | | | | | | Loans held for sale | | | 718 | | | 718 | | | | | | 718 | | | | | Net loans | | | 4,260,510 | | | 4,211,861 | | | | | | | | | 4,211,861 | | Accrued interest receivable | | | 17,770 | | | 17,770 | | | | | | 17,770 | | | | | Mortgage servicing rights | | | 1,267 | | | 2,196 | | | | | | 2,196 | | | | | Restricted equity securities (FHLB and other) | | | 14,331 | | | 14,331 | | | | | | 14,331 | | | | | Other assets - interest rate swaps | | | 14,333 | | | 14,333 | | | | | | 14,333 | | | | | Total | | $ | 5,094,794 | | $ | 5,037,662 | | | | | | | | | | | Financial liabilities: | | | | | | | | | | | | | | | | | Deposits | | $ | 4,508,852 | | $ | 4,505,086 | | $ | | | $ | 4,505,086 | | $ | | | Short-term borrowings | | | 85,331 | | | 85,250 | | | | | | 85,250 | | | | | Long-term debt | | | 154,472 | | | 154,379 | | | | | | 154,379 | | | | | Subordinated debt | | | 83,392 | | | 90,382 | | | | | | 90,382 | | | | | Junior subordinated debt | | | 8,194 | | | 11,667 | | | | | | 11,667 | | | | | Accrued interest payable | | | 4,727 | | | 4,727 | | | | | | 4,727 | | | | | Other liabilities - interest rate swaps | | | 14,074 | | | 14,074 | | | | | | 14,074 | | | | | Total | | $ | 4,859,042 | | $ | 4,865,565 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Hierarchy | | | | | | | | | | Quoted | | | | | | | | | | | | | | | | Prices in | | | | | | | | | | | | | | | | Active | | Significant | | | | | | | | | | | | | Markets for | | Other | | Significant | | | | | | | | | | Identical | | Observable | | Unobservable | | (Dollars in thousands) | | Carrying | | Fair | | Assets | | Inputs | | Inputs | | December 31, 2025 | | Value | | Value | | (Level 1) | | (Level 2) | | (Level 3) | | Financial assets: | | | | | | | | | | | | | | | | | Cash and due from banks | | $ | 268,984 | | $ | 268,984 | | $ | 268,984 | | $ | | | $ | | | Investment securities: | | | | | | | | | | | | | | | | | Available for sale | | | 512,563 | | | 512,563 | | | 30,998 | | | 480,577 | | | 988 | | Held to maturity | | | 72,047 | | | 62,798 | | | | | | 62,798 | | | | | Equity securities | | | 2,598 | | | 2,598 | | | 2,598 | | | | | | | | Loans held for sale | | | 805 | | | 805 | | | | | | 805 | | | | | Net loans | | | 4,027,889 | | | 3,953,431 | | | | | | | | | 3,953,431 | | Accrued interest receivable | | | 17,633 | | | 17,633 | | | | | | 17,633 | | | | | Mortgage servicing rights | | | 1,211 | | | 2,099 | | | | | | 2,099 | | | | | Restricted equity securities (FHLB and other) | | | 12,457 | | | 12,457 | | | | | | 12,457 | | | | | Other assets - interest rate swaps | | | 15,583 | | | 15,583 | | | | | | 15,583 | | | | | Total | | $ | 4,931,770 | | $ | 4,848,951 | | | | | | | | | | | Financial liabilities: | | | | | | | | | | | | | | | | | Deposits | | $ | 4,434,069 | | $ | 4,431,901 | | $ | | | $ | 4,431,901 | | $ | | | Short-term borrowings | | | 32,721 | | | 32,904 | | | | | | 32,904 | | | | | Long-term debt | | | 134,352 | | | 134,982 | | | | | | 134,982 | | | | | Subordinated debt | | | 83,187 | | | 86,456 | | | | | | 86,456 | | | | | Junior subordinated debt | | | 8,140 | | | 7,293 | | | | | | 7,293 | | | | | Accrued interest payable | | | 6,792 | | | 6,792 | | | | | | 6,792 | | | | | Other liabilities - interest rate swaps | | | 15,345 | | | 15,345 | | | | | | 15,345 | | | | | Total | | $ | 4,714,606 | | $ | 4,715,673 | | | | | | | | | | |
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