| Fair Value Disclosures [Text Block] |
Note 8 – Fair Value Disclosures and Reporting and Fair Value Measurements
FASB’s standards on financial instruments, and on fair value measurements and disclosures, require public business entities to disclose in their financial statement footnotes the estimated fair values of financial instruments. In addition to disclosure requirements, FASB’s standard on investments requires that debt securities classified as available-for-sale and equity securities with readily determinable fair values be measured and reported at fair value in the statement of financial position. Certain collateral-dependent, individually-evaluated loans are also reported at fair value, as explained in greater detail below, and foreclosed assets are carried at the lower of cost or fair value. FASB’s standard on financial instruments permits companies to report certain other financial assets and liabilities at fair value, but the Company has not elected the fair value option for any of those financial instruments.
Fair value measurement and disclosure standards also establish a framework for measuring fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Further, the standards establish a fair value hierarchy that encourages an entity to maximize the use of observable inputs and limit the use of unobservable inputs when measuring fair values. The standards describe three levels of inputs that may be used to measure fair values:
| ● | Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
| ● | Level 2: Significant observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. |
| ● | Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the factors that market participants would likely consider in pricing an asset or liability. |
Fair value estimates are made at a specific point in time based on relevant market data and information about the financial instruments. Fair value disclosures for deposits include demand deposits, which are, by definition, equal to the amount payable on demand at the reporting date. Fair value calculations for loans reflect exit pricing and incorporate Management’s assumptions with regard to the impact of prepayments on future cash flows and credit quality adjustments based on risk characteristics of various financial instruments, among other things. Since the estimates are subjective and involve uncertainties and matters of significant judgment they cannot be determined with precision, and changes in assumptions could significantly alter the fair values presented.
Fair Value of Financial Instruments
(dollars in thousands, unaudited)
| | September 30, 2026 | |
| | | | | | Fair Value Measurements | |
| | Carrying Amount | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | |
Financial assets: | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 138,307 | | | $ | 138,307 | | | $ | — | | | $ | — | | | $ | 138,307 | |
Securities available-for-sale | | $ | 584,897 | | | $ | — | | | $ | 583,474 | | | $ | 1,423 | | | $ | 584,897 | |
Securities held-to-maturity, net | | $ | 277,577 | | | $ | — | | | $ | 247,495 | | | $ | — | | | $ | 247,495 | |
Loans held for investment, net | | $ | 2,406,861 | | | $ | — | | | $ | — | | | $ | 2,293,087 | | | $ | 2,293,087 | |
| | | | | | | | | | | | | | | | | | | | |
Financial liabilities: | | | | | | | | | | | | | | | | | | | | |
Deposits | | $ | 2,984,741 | | | $ | 1,055,117 | | | $ | 1,927,297 | | | $ | — | | | $ | 2,982,414 | |
Repurchase agreements | | $ | 113,088 | | | $ | — | | | $ | 86,533 | | | $ | — | | | $ | 86,533 | |
Other borrowings | | $ | 52,000 | | | $ | — | | | $ | 51,403 | | | $ | — | | | $ | 51,403 | |
Long-term debt, net | | $ | 49,551 | | | $ | — | | | $ | 49,131 | | | $ | — | | | $ | 49,131 | |
Subordinated debentures | | $ | 36,151 | | | $ | — | | | $ | 35,050 | | | $ | — | | | $ | 35,050 | |
| | December 31, 2025 | |
| | | | | | Fair Value Measurements | |
| | Carrying
Amount | | | Quoted Prices in
Active Markets for
Identical Assets
(Level 1) | | | Significant
Observable
Inputs
(Level 2) | | | Significant
Unobservable
Inputs
(Level 3) | | | Total | |
Financial assets: | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 135,628 | | | $ | 135,628 | | | $ | — | | | $ | — | | | $ | 135,628 | |
Securities available-for-sale | | $ | 625,330 | | | $ | — | | | $ | 624,017 | | | $ | 1,313 | | | $ | 625,330 | |
Securities held-to-maturity, net | | $ | 290,811 | | | $ | — | | | $ | 286,461 | | | $ | — | | | $ | 286,461 | |
Loans held for investment, net | | $ | 2,525,365 | | | $ | — | | | $ | — | | | $ | 2,428,691 | | | $ | 2,428,691 | |
| | | | | | | | | | | | | | | | | | | | |
Financial liabilities: | | | | | | | | | | | | | | | | | | | | |
Deposits | | $ | 2,876,436 | | | $ | 995,623 | | | $ | 1,992,616 | | | $ | — | | | $ | 2,988,239 | |
Repurchase agreements | | $ | 130,853 | | | $ | — | | | $ | 107,084 | | | $ | — | | | $ | 107,084 | |
Other borrowings | | $ | 302,700 | | | $ | — | | | $ | 302,629 | | | $ | — | | | $ | 302,629 | |
Long-term debt, net | | $ | 49,483 | | | $ | — | | | $ | 49,472 | | | $ | — | | | $ | 49,472 | |
Subordinated debentures | | $ | 36,017 | | | $ | — | | | $ | 36,276 | | | $ | — | | | $ | 36,276 | |
For financial asset categories carried on the consolidated balance sheet at fair value and measured on a recurring basis as of September 30, 2026, and December 31, 2025, the Company used the following methods and significant assumptions:
| ● | Investment securities: Fair values are determined by obtaining quoted prices on nationally recognized securities exchanges or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on their relationship to other benchmark quoted securities. For securities where quoted prices or market prices of similar securities are not available, fair values are estimated using broker expertise and other market indicators (Level 3). For bonds that are hand priced, actual recent trades for the exact bond are used in determining the price, adjusted for changes in market conditions since the time of the observable trade. For bonds, where no recent observable trades have occurred, our brokers consider recent trades made for similar bonds, issued by banks with similar financial position or credit and adjusted for changes in conditions since the time of the observable trades. Significant changes in any of those inputs in isolation would have resulted in a significantly higher or lower fair value measurement. |
Fair Value Measurements – Recurring
(dollars in thousands, unaudited)
| | Fair Value Measurements at September 30, 2026, using | | | | | |
| | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | | | Realized Gain/(Loss) (Level 3) | |
Securities: | | | | | | | | | | | | | | | | | | | | |
U.S. government agencies | | $ | — | | | $ | 22,678 | | | $ | — | | | $ | 22,678 | | | $ | — | |
Mortgage-backed securities | | | — | | | | 272,334 | | | | — | | | | 272,334 | | | | — | |
State and political subdivisions | | | — | | | | 47,511 | | | | — | | | | 47,511 | | | | — | |
Corporate bonds | | | — | | | | 82,413 | | | | 1,423 | | | | 83,836 | | | | — | |
Collateralized loan obligations | | | — | | | | 158,538 | | | | — | | | | 158,538 | | | | — | |
Total available-for-sale securities | | $ | — | | | $ | 583,474 | | | $ | 1,423 | | | $ | 584,897 | | | $ | — | |
| | Fair Value Measurements at December 31, 2025, using | | | | | |
| | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | | | Realized Gain/(Loss) (Level 3) | |
Securities: | | | | | | | | | | | | | | | | | | | | |
U.S. government agencies | | $ | — | | | $ | 32,901 | | | $ | — | | | $ | 32,901 | | | $ | — | |
Mortgage-backed securities | | | — | | | | 259,760 | | | | — | | | | 259,760 | | | | — | |
State and political subdivisions | | | — | | | | 46,921 | | | | — | | | | 46,921 | | | | — | |
Corporate bonds | | | — | | | | 85,154 | | | | 1,313 | | | | 86,467 | | | | — | |
Collateralized loan obligations | | | — | | | | 199,281 | | | | — | | | | 199,281 | | | | — | |
Total available-for-sale securities | | $ | — | | | $ | 624,017 | | | $ | 1,313 | | | $ | 625,330 | | | $ | — | |
The following tables present quantitative information about recurring Level 3 fair value measurements at September 30, 2026, and December 31, 2025 (dollars in thousands):
| | | | | | | | | Range | |
| | Fair | | Valuation | | Unobservable | | | | | | | | Weighted | |
September 30, 2026 | | Value | | Technique(s) | | Input(s) | | Min | | | Max | | | Average | |
Corporate Bonds | | $ | 1,423 | | Broker estimate | | Discount rate | | N/A | | | N/A | | | N/A | |
| | | | | | | | | Range | |
| | Fair | | Valuation | | Unobservable | | | | | | | | Weighted | |
December 31, 2025 | | Value | | Technique(s) | | Input(s) | | Min | | | Max | | | Average | |
Corporate Bonds | | $ | 1,313 | | Broker estimate | | Discount rate | | N/A | | | N/A | | | N/A | |
The significant unobservable inputs utilized in the fair value measurement of the Company’s corporate bonds included risk profile and market conditions, and are not quantifiable inputs. Differing unobservable input assumptions, such as a change in market conditions, may have resulted in reduced or increased fair value.
The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2026 and 2025:
Fair Value Measurements - Level 3 Recurring | | | | | | | | |
(dollars in thousands, unaudited) | | | | | | | | |
| | Corporate Bonds | |
| | 2026 | | | 2025 | |
Balance of recurring Level 3 assets at January 1, | | $ | 1,313 | | | $ | 55,653 | |
Total gains or losses for the period: | | | | | | | | |
Included in other comprehensive income | | | 110 | | | | 132 | |
Purchases | | | — | | | | — | |
Transfers out of Level 3 | | | — | | | | (54,553 | ) |
Balance of recurring Level 3 assets at September 30, | | $ | 1,423 | | | $ | 1,232 | |
Corporate bonds with a fair value of $54.5 million as of December 31, 2024, were transferred from Level 3 to Level 2 in the third quarter of 2025 because observable market data became available for the securities.
For financial asset categories carried on the consolidated balance sheet at fair value and measured on a nonrecurring basis as of September 30, 2026, and December 31, 2025, the Company used the following methods and significant assumptions:
| ● | Individually evaluated collateral dependent loans: Measured based on the fair value of collateral when foreclosure is probable, or repayment is expected through the sale or operation of collateral and borrower is experiencing financial difficulty. For real estate loans, fair value of the loan’s collateral is determined by third party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property. For example, land is generally based on the sales comparable method while construction is based on the income and/or sales comparable methods. The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach. The Company reviews the third-party appraisal for appropriateness and adjusts the value downward to consider selling and closing costs, which typically range from 5% to 10% of the appraised value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on Management’s historical knowledge, changes in market conditions from the time of the valuation, and Management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Collateral-dependent loans are evaluated on a quarterly basis and adjusted in accordance with the allowance for credit losses policy. |
| ● | Foreclosed assets: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired or when foreclosure is imminent. Repossessed real estate (known as other real estate owned, or “OREO”) and other foreclosed assets are reported at fair value on a non-recurring basis. Fair values of OREO are based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may use a single valuation approach or a combination of approaches including sales comparison, cost approach, and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Management also incorporates assumptions regarding market trends or other relevant factors and selling and commission costs ranging from 5% to 10%. Such adjustments can be significant and typically result in a Level 3 classification of the unobservable inputs for determining fair value. Fair values for any other foreclosed assets are represented by estimated sales processed as determined using reasonably available sources. The valuation technique used for Level 3 non-recurring OREO is primarily the sales comparison approach less estimated selling costs. |
Fair Value Measurements – Nonrecurring
(dollars in thousands, unaudited)
| | Fair Value Measurements at December 31, 2025, using | |
| | | | | | | | | | | | | | | | |
| | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | |
Individually evaluated collateral dependent loans | | | | | | | | | | | | | | | | |
Real estate: | | | | | | | | | | | | | | | | |
Farmland | | $ | — | | | $ | — | | | $ | 1,699 | | | $ | 1,699 | |
Total real estate | | | — | | | | — | | | | 1,699 | | | | 1,699 | |
Other commercial | | | — | | | | — | | | | 1,183 | | | | 1,183 | |
Total collateral dependent loans | | | — | | | | — | | | | 2,882 | | | | 2,882 | |
Foreclosed assets | | | — | | | | — | | | | 1,565 | | | | 1,565 | |
Total assets measured on a nonrecurring basis | | $ | | | | $ | | | | $ | 4,447 | | | $ | 4,447 | |
The table above includes collateral dependent loan balances for which a specific reserve has been established. There were no collateral dependent loans for which a specific reserve had been established as of September 30, 2026. Information on the Company’s total collateral dependent loan balances and specific loss reserves associated with those balances is included in Note 10 below.
The unobservable inputs are based on Management’s best estimates of appropriate discounts in arriving at fair market value. Adjusting any of those inputs could result in a significantly lower or higher fair value measurement.
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