v3.26.1
Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
Financial instruments for which fair value disclosures are required include cash and due from banks, interest-bearing deposits, securities available-for-sale, loans, Federal Home Loan Bank ("FHLB") stock, bank owned life insurance, deposit accounts, and borrowings. Fair value estimates are made at a specific moment in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no active market readily exists for a portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and Due from Banks and Interest Bearing Deposits – Cash and due from banks and interest-bearing deposits in banks are repriced on a short-term basis; as such, the carrying value approximates fair value.
Securities HTM – Fair values for investment securities equals quoted market price if such information is available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.
Loans – The fair value for loans held for investment ("LHFI") is estimated using an exit price methodology. An exit price methodology considers expected cash flows that take into account contractual loan terms, as applicable, prepayment expectations, probability of default, loss severity in the event of default, recovery lag and, in the case of variable rate loans, expectations for future interest rate movements. These cash flows are present valued at a risk adjusted discount rate, which considers the cost of funding, liquidity, servicing costs, and other factors. Because observable quoted prices seldom exist for similar assets carried in loans held for investment, Level 3 inputs are primarily used to determine fair value exit pricing. The fair value of collateral-dependent loans is estimated based on discounted cash flows or underlying collateral values, where applicable.
Deposits – The carrying amount of demand deposits and savings deposits approximates fair value due to those products having no stated maturity. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities and is classified as Level 2.
Short-term Borrowings – The carrying amount of variable rate other borrowings approximates fair value and is classified as Level 1. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar borrowing arrangements and is classified as Level 2.
Subordinated Debt – The fair value of the Company’s subordinated debt securities is based on discounted cash flows using rates for securities with similar terms and remaining maturities and are classified as Level 2.
Financial Instruments with Off-Balance Sheet Risk – With regard to financial instruments with off-balance sheet risk discussed above, it is not practicable to estimate the fair value of future financing commitments.
The carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value, none of which are held for trading purposes, are as follows at June 30, 2026 and December 31, 2025:
Fair Value Measurements at
June 30, 2026 Using:
Carrying
Amount
Level 1Level 2Level 3Total
(Dollars in thousands)
Financial assets
Cash, due from banks, federal funds sold$118,821 $118,821 $— $— $118,821 
Loans, net2,720,485 — — 2,707,693 2,707,693 
Financial liabilities
Deposits$2,830,715 $— $2,705,611 $— $2,705,611 
Short-term Borrowings50,000 — 50,000 — 50,000 
Subordinated debt63,489 — 63,489 — 63,489 
Fair Value Measurements at
December 31, 2025 Using:
Carrying
Amount
Level 1Level 2Level 3Total
(Dollars in thousands)
Financial Assets:
Cash, due from banks, federal funds sold$134,116 $134,116 $— $— $134,116 
Loans, net2,627,281 — — 2,604,086 2,604,086 
Financial liabilities
Deposits$2,795,673 $— $2,692,104 $— $2,692,104 
Short-term Borrowings75,000 — 75,000 — 75,000 
Subordinated debt63,436 — 63,436 — 63,436 
The Company utilizes fair value measurements to record fair value adjustments for certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a monthly basis. Additionally, from time to time, the Company may be required to record other assets at fair value, such as loans held for investment and certain other assets. These nonrecurring fair value adjustments usually involve writing the asset down to fair value or the lower of cost or market value.
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair values. These levels are:
Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.
Securities Available-for-Sale – Securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions, and other factors such as the present value of future cash flows. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury
securities that are traded by dealers or brokers in active over-the-counter markets, and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds, and corporate debt securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. As of June 30, 2026 and December 31, 2025, the Bank does not have any Level 3 securities.
The following tables summarize the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a recurring basis:
June 30, 2026Fair ValueLevel 1Level 2Level 3
(Dollars in thousands)
Securities available-for-sale:
Residential mortgage-backed securities$296,139 $— $296,139 $— 
Commercial mortgage-backed securities5,957 — 5,957 — 
Asset backed securities21,301 — 21,301 — 
Corporate bonds1,944 — 1,944 — 
Total assets at fair value$325,341 $— $325,341 $— 
December 31, 2025Fair ValueLevel 1Level 2Level 3
(Dollars in thousands)
Securities available-for-sale:
Residential mortgage-backed securities$299,389 $— $299,389 $— 
Commercial mortgage-backed securities5,964 — 5,964 — 
Asset backed securities4,828 — 4,828 — 
Corporate bonds1,909 — 1,909 — 
Total assets at fair value$312,090 $— $312,090 $— 
The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower cost or market value that are recognized at fair value less cost to sell, if applicable, at the end of the period.
The following table summarizes the Company’s financial instruments that were measured at fair value on a nonrecurring basis at June 30, 2026 and December 31, 2025:
June 30, 2026
(Dollars in thousands)TotalLevel 1Level 2Level 3
Collateral - Dependent loans, net$33,635 $— $— $33,635 
Total Assets at Fair Value on a nonrecurring basis$33,635 $— $— $33,635 
(Dollars in thousands)December 31, 2025
Collateral - Dependent loans, net$33,712 $— $— $33,712 
Total Assets at Fair Value on a nonrecurring basis$33,712 $— $— $33,712 
Collateral dependent loans – Loans that do not share risk characteristics are evaluated on an individual basis. Expected credit losses for loans individually evaluated are measured based on either the present value of expected future cash flows discounted at the loan’s effective interest rate or the difference between the fair value of the collateral and carrying amount if repayment is expected to be provided substantially through the operation or sale of the collateral. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will recognize an allowance or promptly charge off any amount deemed uncollectible against the Allowance for Credit Losses. Any subsequent recoveries will be limited to the amount previously charged-off. As of June 30, 2026, the fair value of all individually evaluated loans was greater than the carrying amount. As a result, there was no Allowance for Credit Losses applied to these loans.
The following table provides a description of the valuation technique, unobservable inputs, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a nonrecurring basis as of June 30, 2026 and December 31, 2025:
June 30, 2026Fair ValueValuation TechniqueUnobservable Input
Range (Weighted
Average)
(Dollars in thousands)
Financial Instrument
Collateral - Dependent loans, net$33,635 Third party appraisal or broker’s price opinionManagement discount for costs to sell10 %
December 31, 2025Fair ValueValuation TechniqueUnobservable Input
Range (Weighted
Average)
(Dollars in thousands)
Financial Instrument
Collateral - Dependent loans, net$33,712 Third party appraisal or broker’s price opinionManagement discount for costs to sell10 %