v3.26.1
FAIR VALUE OF ASSETS AND LIABILITIES
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
FAIR VALUE OF ASSETS AND LIABILITIES

11. FAIR VALUE OF ASSETS AND LIABILITIES

 

Determination of Fair Value.

 

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for our various financial instruments. 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. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

 

Methods and assumptions for valuing our financial instruments are set forth below. Estimated fair values are calculated based on the value without regard to any premium or discount that may result from concentrations of ownership of a financial instrument, possible tax ramifications or estimated transaction cost.

 

Securities. The securities measured at fair value in Level 1 are based on quoted market prices in an active exchange market. All other securities are measured at fair value in Level 2 and are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. These securities include government-sponsored enterprise obligations, state and municipal obligations, corporate bonds, residential mortgage-backed securities guaranteed and sponsored by the U.S. government or an agency thereof. Fair value measurements are obtained from a third-party pricing service and are not adjusted by management.

 

Interest rate swaps. The valuation of our interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. We have determined that the majority of the inputs used to value our interest rate derivatives fall within Level 2 of the fair value hierarchy.

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis.

 

Assets and liabilities measured at fair value on a recurring basis are summarized below:

 

                         
   June 30, 2026 
   Level 1   Level 2   Level 3   Total 
   (Dollars in thousands) 
Assets:    
Securities available-for-sale  $—   $170,598   $—   $170,598 
Marketable equity securities   662    —    —    662 
Interest rate swaps   —    4,749    —    4,749 
Total assets  $662   $175,347   $—   $176,009 
                     
Liabilities:                    
Interest rate swaps  $—   $4,749   $—   $4,749 
                     

 

                         
   December 31, 2025 
   Level 1   Level 2   Level 3   Total 
   (Dollars in thousands) 
Assets:    
Securities available-for-sale  $—   $175,800   $—   $175,800 
Marketable equity securities   632    —    —    632 
Interest rate swaps   —    4,963    —    4,963 
Total assets  $632   $180,763   $—   $181,395 
                     
Liabilities:                    
Interest rate swaps  $—   $4,963   $—   $4,963 

 

 

There were no transfers to or from Level 3 for assets measured at fair value on a recurring basis during the six months ended June 30, 2026 or for the year ended December 31, 2025.

 

Assets Measured at Fair Value on a Non-recurring Basis.

 

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. The following tables summarize the fair value hierarchy used to determine the carrying values of the related assets as of June 30, 2026 and December 31, 2025.

 

       Six Months Ended 
   At June 30, 2026   June 30, 2026 
               Total 
   Level 1   Level 2   Level 3   Losses 
   (Dollars in thousands)   (Dollars in thousands) 
Collateral dependent loans  $—   $—   $1,627   $1,800 

 

       Six Months Ended 
   At December 31, 2025   June 30, 2025 
               Total 
   Level 1   Level 2   Level 3   Losses 
   (Dollars in thousands)   (Dollars in thousands) 
Collateral dependent loans  $—   $—   $1   $25 

 

The amount of individually evaluated collateral dependent loans represents the carrying value, net of the related write-down or valuation allowance of collateral dependent loans for which adjustments are based on the estimated fair value of the underlying collateral.  The fair value of collateral dependent loans with specific allocations of the allowance for credit losses on loans is generally based on real estate appraisals performed by independent licensed or certified 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. Management will discount appraisals as deemed necessary based on the date of the appraisal and new information deemed relevant to the valuation. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.

 

 

Summary of Fair Values of Financial Instruments.

 

The estimated fair values of our financial instruments are as follows:

 

                                         
   June 30, 2026 
   Carrying Value   Fair Value 
       Level 1   Level 2   Level 3   Total 
   (Dollars in thousands) 
Assets:                         
Cash and cash equivalents  $37,666   $37,666   $—   $—   $37,666 
Securities held-to-maturity   181,723    4,945    146,244    —    151,189 
Securities available-for-sale   170,598    —    170,598    —    170,598 
Marketable equity securities   662    662    —    —    662 
FHLB and other restricted stock   3,790    —    —    3,790    3,790 
Loans - net   2,173,647    —    —    2,067,682    2,067,682 
Accrued interest receivable   9,008    —    —    9,008    9,008 
Mortgage servicing rights   259    —    801    —    801 
Derivative asset   4,749    —    4,749    —    4,749 
                          
Liabilities:                         
Deposits   2,401,400    —    —    2,398,932    2,398,932 
Short-term borrowings   17,740    —    17,741    —    17,741 
Long-term debt   25,000    —    25,138    —    25,138 
Subordinated debt   19,810    —    23,023    —    23,023 
Accrued interest payable   589    —    —    589    589 
Derivative liabilities   4,749    —    4,749    —    4,749 

 

                                         
   December 31, 2025 
   Carrying Value   Fair Value 
       Level 1   Level 2   Level 3   Total 
   (Dollars in thousands) 
Assets:                    
Cash and cash equivalents  $40,381   $40,381   $—   $—   $40,381 
Securities held-to-maturity   188,800    4,898    153,606    —    158,504 
Securities available-for-sale   175,800    —    175,800    —    175,800 
Marketable equity securities   632    632    —    —    632 
FHLB and other restricted stock   5,359    —    —    5,359    5,359 
Loans - net   2,163,295    —    —    2,061,147    2,061,147 
Accrued interest receivable   8,783    —    —    8,783    8,783 
Mortgage servicing rights   318    —    673    —    673 
Derivative asset   4,963    —    4,963    —    4,963 
                          
Liabilities:                         
Deposits   2,360,908    —    —    2,359,790    2,359,790 
Short-term borrowings   13,270    —    13,286    —    13,286 
Long-term debt   73,000    —    73,601    —    73,601 
Subordinated debt   19,790    —    15,796    —    15,796 
Accrued interest payable   752    —    —    752    752 
Derivative liabilities   4,963    —    4,963    —    4,963