v3.26.3
Fair Value of Financial Instruments
 9 Months Ended
Sep. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

NOTE 9 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair values of financial instruments are management's estimate of the values at which the instruments could be exchanged in a transaction between willing parties. These estimates are subjective and may vary significantly from amounts that would be realized in actual transactions. In addition, other significant assets are not considered financial assets including deferred tax assets, bank premises and equipment and intangibles.

Fair Value Measurements:

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities in active markets that the Company has the ability to access.

Available-for-sale securities, when quoted prices are available in an active market, are valued using the quoted price and are classified as Level 1. The quoted prices are not adjusted.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Available-for-sale securities classified as Level 2 are valued using the prices obtained from an independent pricing service. The prices are not adjusted. Securities of obligations of state and political subdivisions are valued using a type of matrix, or grid, pricing in which securities are benchmarked against the treasury rate based on credit rating. Substantially all assumptions used by the independent pricing service are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

Interest rate swaps classified as Level 2 are valued using the prices obtained from an independent pricing service and not adjusted. The fair value of interest rate swaps with a positive fair value are reported as assets while interest rate swaps with a negative fair value are reported as liabilities.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. The Bank holds three local municipals that the Bank evaluates based on the credit strength of the underlying project. The fair value is determined by valuing similar credit payment streams at similar rates.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025, segregated by level within the fair value hierarchy utilized to measure fair value:

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

 

 

(In Thousands)

 

September 30, 2026

 

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

 

 

Significant
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets - (Securities Available-for-Sale)

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

135,517

 

 

$

-

 

 

$

-

 

U.S. Government agencies

 

 

8,849

 

 

 

83,089

 

 

 

-

 

Corporate bonds

 

 

500

 

 

 

-

 

 

 

-

 

Mortgage-backed securities

 

 

-

 

 

 

174,000

 

 

 

-

 

State and local governments

 

 

-

 

 

 

52,577

 

 

 

1,445

 

Total Securities Available-for-Sale

 

$

144,866

 

 

$

309,666

 

 

$

1,445

 

Interest rate swap assets

 

 

 

 

$

275

 

 

 

 

Interest rate swap liabilities

 

$

-

 

 

$

(27

)

 

$

-

 

 

 

 

 

(In Thousands)

 

December 31, 2025

 

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

 

 

Significant
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets - (Securities Available-for-Sale)

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

89,853

 

 

$

-

 

 

$

-

 

U.S. Government agencies

 

 

30,080

 

 

 

101,881

 

 

 

-

 

Corporate bonds

 

 

-

 

 

 

-

 

 

 

-

 

Mortgage-backed securities

 

 

-

 

 

 

143,382

 

 

 

-

 

State and local governments

 

 

1,483

 

 

 

53,938

 

 

 

1,455

 

Total Securities Available-for-Sale

 

$

121,416

 

 

$

299,201

 

 

$

1,455

 

Interest rate swaps assets

 

$

-

 

 

$

-

 

 

$

-

 

Interest rate swaps liabilities

 

$

-

 

 

$

(1,555

)

 

$

-

 

 

The following tables represent the changes in the Level 3 fair-value category of which unobservable inputs are relied upon as of the three and nine months ended September 30, 2026 and September 30, 2025.

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at July 1, 2026

 

$

185

 

 

$

1,258

 

 

$

1,443

 

 

 

 

 

 

 

 

 

 

Change in Fair Value

 

 

-

 

 

 

2

 

 

 

2

 

 

 

 

 

 

 

 

 

 

Payments, Maturities & Calls

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2026

 

$

185

 

 

$

1,260

 

 

$

1,445

 

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at January 1, 2026

 

$

185

 

 

$

1,270

 

 

$

1,455

 

 

 

 

 

 

 

 

 

 

Change in Fair Value

 

 

-

 

 

 

(10

)

 

 

(10

)

 

 

 

 

 

 

 

 

 

Payments, Maturities & Calls

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2026

 

$

185

 

 

$

1,260

 

 

$

1,445

 

 

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at July 1, 2025

 

$

184

 

 

$

1,270

 

 

$

1,454

 

 

 

 

 

 

 

 

 

 

Change in Fair Value

 

 

1

 

 

 

3

 

 

 

4

 

 

 

 

 

 

 

 

 

 

Payments, Maturities & Calls

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2025

 

$

185

 

 

$

1,273

 

 

$

1,458

 

 

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at January 1, 2025

 

$

353

 

 

$

1,274

 

 

$

1,627

 

 

 

 

 

 

 

 

 

 

Change in Fair Value

 

 

2

 

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

Payments, Maturities & Calls

 

 

(170

)

 

 

-

 

 

 

(170

)

 

 

 

 

 

 

 

 

 

Balance at September 30, 2025

 

$

185

 

 

$

1,273

 

 

$

1,458

 

 

Most of the Company's available-for-sale securities, including any bonds issued by local municipalities, have CUSIP numbers or have similar characteristics of those in the municipal markets, making them marketable and comparable as Level 2.

There were no securities that transferred in or out of Level 3 during the nine months ended September 30, 2026 or the twelve months ended December 31, 2025.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At both September 30, 2026 and December 31, 2025, such assets consist of collateral dependent loans and loan servicing rights. Collateral dependent loans categorized as Level 3 assets consist of non-homogeneous loans that have expected credit losses. The Company may also estimate the fair value of certain nonperforming loans using a discounted cash flow method of future cash flows using management's best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals.)

At September 30, 2026 and December 31, 2025, collateral dependent loans categorized as Level 3 were $3.3 million and $860 thousand, respectively. The specific allocation for collateral dependent loans was $118 thousand as of September 30, 2026 and $145 thousand as of December 31, 2025. The specific allocations are accounted for in the allowance for credit losses (see Note 4).

During 2026 and 2025, impairment was recognized on loan servicing rights based upon the independent third party's quarterly valuation. A valuation allowance was established by strata to quantify the likely impairment of the value of the loan servicing rights to the Company. If the carrying amount of an individual strata exceeds the fair value, impairment was recorded on that strata so the servicing asset was carried at fair value. Impairment was $1.4 million and $883 thousand at September 30, 2026 and December 31, 2025, respectively. The impairment amount related to 1-4 family real estate loans was $10 and $5 thousand for the respective time periods with the remainder related to agricultural real estate loans.

The following table presents assets measured at fair value on a nonrecurring basis at September 30, 2026 and December 31, 2025:

 

 

 

(In Thousands)

 

 

 

Assets Measured at Fair Value on a Nonrecurring Basis at September 30, 2026

 

 

 

Balance at
September 30, 2026

 

 

Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)

 

 

Significant
Observable Inputs
(Level 2)

 

 

Significant
Unobservable Inputs
(Level 3)

 

Collateral dependent
   loans

 

$

3,145

 

 

$

-

 

 

$

-

 

 

$

3,145

 

Loan servicing rights

 

 

1,585

 

 

 

-

 

 

 

-

 

 

 

1,585

 

 

 

 

 

(In Thousands)

 

 

 

Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2025

 

 

 

Balance at
December 31, 2025

 

 

Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)

 

 

Significant
Observable Inputs
(Level 2)

 

 

Significant
Unobservable Inputs
(Level 3)

 

Collateral dependent
   loans

 

$

715

 

 

$

-

 

 

$

-

 

 

$

715

 

Loan servicing rights

 

 

1,556

 

 

 

-

 

 

 

-

 

 

 

1,556

 

 

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

 

 

 

(In Thousands)

 

 

 

 

 

 

Range

 

 

Fair Value at

 

 

 

 

 

 

(Weighted

 

September 30, 2026

 

 

Valuation Technique

 

Unobservable Inputs

 

Average)

State and local government

 

$

1,445

 

 

Discounted Cash Flow

 

Credit strength of underlying project
or entity / discount rate

 

3.83-3.89%
(3.88%)

 

 

 

 

 

 

 

 

 

Collateral dependent
   loans

 

 

3,145

 

 

Collateral based
measurements

 

Discount to reflect current market
conditions and ultimate collectability

 

20.00-25.00%
(24.58%)

 

 

 

 

 

 

 

 

 

Loan servicing rights

 

 

1,585

 

 

Discounted Cash Flow

 

Constant prepayment rate and
probability of default / discount rate

 

1.22-605.81%
(47.41%)

 

 

 

 

(In Thousands)

 

 

 

 

 

 

Range

 

 

Fair Value at

 

 

 

 

 

 

(Weighted

 

 

December 31, 2025

 

 

Valuation Technique

 

Unobservable Inputs

 

Average)

State and local government

 

$

1,455

 

 

Discounted Cash Flow

 

Credit strength of underlying project
or entity / discount rate

 

3.26-3.75%
(3.68%)

 

 

 

 

 

 

 

 

 

Collateral dependent
   loans

 

 

715

 

 

Collateral based
measurements

 

Discount to reflect current market
conditions and ultimate collectability

 

20.00-30.00%
(24.68%)

 

 

 

 

 

 

 

 

 

Loan servicing rights

 

 

1,556

 

 

Discounted Cash Flow

 

Constant prepayment rate and
probability of default / discount rate

 

22.72-583.71%
(36.21%)

 

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments not carried at fair value as of September 30, 2026 and December 31, 2025 are reflected below.

 

 

 

(In Thousands)

 

 

 

September 30, 2026

 

 

 

Carrying

 

 

Fair

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

205,811

 

 

$

205,811

 

 

$

205,811

 

 

$

-

 

 

$

-

 

Interest-bearing time deposits

 

 

518

 

 

 

518

 

 

 

-

 

 

 

518

 

 

 

-

 

Other securities

 

 

10,681

 

 

 

10,681

 

 

 

-

 

 

 

-

 

 

 

10,681

 

Loans held for sale

 

 

2,527

 

 

 

2,527

 

 

 

-

 

 

 

-

 

 

 

2,527

 

Loans, net

 

 

2,709,358

 

 

 

2,595,400

 

 

 

-

 

 

 

-

 

 

 

2,595,400

 

Interest receivable

 

 

16,580

 

 

 

16,580

 

 

 

-

 

 

 

-

 

 

 

16,580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

518,286

 

 

$

518,286

 

 

$

518,286

 

 

$

-

 

 

$

-

 

Interest-bearing deposits

 

 

1,756,336

 

 

 

1,754,961

 

 

 

-

 

 

 

-

 

 

 

1,754,961

 

Time deposits

 

 

687,870

 

 

 

683,772

 

 

 

-

 

 

 

-

 

 

 

683,772

 

Total Deposits

 

 

2,962,492

 

 

 

2,957,019

 

 

 

518,286

 

 

 

-

 

 

 

2,438,733

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds purchased and securities sold under
   agreement to repurchase

 

 

15,168

 

 

 

15,168

 

 

 

-

 

 

 

-

 

 

 

15,168

 

Federal Home Loan Bank advances

 

 

167,903

 

 

 

167,534

 

 

 

-

 

 

 

-

 

 

 

167,534

 

Subordinated notes, net of unamortized issuance costs

 

 

35,000

 

 

 

34,443

 

 

 

-

 

 

 

34,443

 

 

 

-

 

Interest payable

 

 

5,563

 

 

 

5,563

 

 

 

-

 

 

 

-

 

 

 

5,563

 

 

 

 

 

(In Thousands)

 

 

 

December 31, 2025

 

 

 

Carrying

 

 

Fair

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

97,718

 

 

$

97,718

 

 

$

97,718

 

 

$

-

 

 

$

-

 

Interest-bearing time deposits

 

 

1,498

 

 

 

1,491

 

 

 

-

 

 

 

1,491

 

 

 

-

 

Other securities

 

 

13,032

 

 

 

13,032

 

 

 

-

 

 

 

-

 

 

 

13,032

 

Loans held for sale

 

 

3,934

 

 

 

3,934

 

 

 

-

 

 

 

-

 

 

 

3,934

 

Loans, net

 

 

2,685,990

 

 

 

2,653,152

 

 

 

-

 

 

 

-

 

 

 

2,653,152

 

Interest receivable

 

 

13,621

 

 

 

13,621

 

 

 

-

 

 

 

-

 

 

 

13,621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

527,327

 

 

$

527,327

 

 

$

527,327

 

 

$

-

 

 

$

-

 

Interest-bearing deposits

 

 

1,605,623

 

 

 

1,605,435

 

 

 

-

 

 

 

-

 

 

 

1,605,435

 

Time deposits

 

 

597,785

 

 

 

596,189

 

 

 

-

 

 

 

-

 

 

 

596,189

 

Total Deposits

 

 

2,730,735

 

 

 

2,728,951

 

 

 

527,327

 

 

 

-

 

 

 

2,201,624

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds purchased and securities sold under
   agreement to repurchase

 

 

37,718

 

 

 

37,718

 

 

 

-

 

 

 

-

 

 

 

37,718

 

Federal Home Loan Bank advances

 

 

227,377

 

 

 

228,232

 

 

 

-

 

 

 

-

 

 

 

228,232

 

Subordinated notes, net of unamortized issuance costs

 

 

34,933

 

 

 

33,834

 

 

 

-

 

 

 

33,834

 

 

 

-

 

Interest payable

 

 

5,950

 

 

 

5,950

 

 

 

-

 

 

 

-

 

 

 

5,950