Fair Value

9 Months Ended

Sep. 30, 2026

NOTE 6 – FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are 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 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 company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of asset and liability:

Securities available for sale: The fair value of securities available for sale is determined using pricing models that vary based on asset class and include available trade, bid and other market information or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).

Derivatives: The fair value of derivatives, which includes interest rate lock commitments and interest rate swaps, is based on valuation models using observable market data as of the measurement date (Level 2).

Loans held for sale: Loans held for sale are carried at fair value, as determined by outstanding commitments from third-party investors (Level 2).

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:


	Fair Value Measurements at September 30, 2026 using Significant Other Observable Inputs
	(Level 2)
	(unaudited)
Financial Assets:
Securities available for sale:
Corporate debt	$	7,950
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury		996
Collateralized mortgage obligations		7,586
Total securities available for sale	$	16,532
Loans held for sale	$	2,431
Derivative assets	$	7,224
Financial Liabilities:
Derivative liabilities	$	7,224


	Fair Value Measurements at December 31, 2025 using Significant Other Observable Inputs
	(Level 2)
Financial Assets:
Securities available for sale:
Corporate debt	$	8,400
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury		1,000
Collateralized mortgage obligations		8,096
Total securities available for sale	$	17,496
Loans held for sale	$	5,611
Derivative assets	$	3,578
Financial Liabilities:
Derivative liabilities	$	3,578

The Company had no assets or liabilities measured at fair value on a recurring basis that were measured using Level 1 or Level 3 inputs at September 30, 2026 or December 31, 2025. There were no transfers of assets or liabilities measured at fair value between levels during the periods ended September 30, 2026 and December 31, 2025.

Assets and liabilities measured at fair value on a non-recurring basis at September 30, 2026 are summarized below:


Fair Value Measurements at September 30, 2026 Using
Significant Unobservable Inputs (Level 3)
(unaudited)
Individually Evaluated loans:
Commercial	$	5,981
Real Estate:
Commercial:
Owner occupied		376
Construction		631
Total individually evaluated loans	$	6,988

Of the $6,988 of individually evaluated loans at September 30, 2026, $1,472 was guaranteed by the SBA.

Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2025 are summarized below.


Fair Value Measurements at December 31, 2025 Using
Significant Unobservable Inputs (Level 3)

Individually Evaluated loans:
Commercial	$	595
Real Estate:
Commercial:
Owner occupied		313
Total individually evaluated loans	$	908

During the three and nine months ended September 30, 2026, there were charge-offs totaling $978 on individually evaluated collateral dependent commercial loans. There were no charge-offs on individually evaluated collateral dependent loans during the three and nine months ended September 30, 2025.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2026:


		Fair Value	Valuation Technique(s)	Unobservable Inputs	Weighted Average
Individually evaluated loans:
Commercial	$	5,981	Comparable sales approach	Adjustment for differences between the stated value and net realizable value	2.89%
Real estate:
Commercial:
Owner occupied		376	Comparable sales approach	Adjustment for differences between the comparable market transactions	4.00%
Construction		631	Comparable sales approach	Adjustment for differences between the comparable market transactions	10.39%

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2025:


		Fair Value	Valuation Technique(s)	Unobservable Inputs	Weighted Average
Individually evaluated loans:
Commercial	$	595	Comparable sales approach	Adjustment for differences between the stated value and net realizable value	8.00%
Real estate:
Commercial:
Owner occupied		313	Comparable sales approach	Adjustment for differences between the comparable market transactions	4.00%

Financial Instruments Recorded Using Fair Value Option

The Company has elected the fair value option for loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans were 90 days or more past due or on nonaccrual as of September 30, 2026 or December 31, 2025.

As of September 30, 2026 and December 31, 2025, the aggregate fair value, contractual balance and gain or loss on loans held for sale were as follows:


	September 30, 2026		December 31, 2025
	(unaudited)
Aggregate fair value	$	2,431	$	5,611
Contractual balance		2,431		5,611
Gain (loss)	$	—	$	—

The total amount of gains and losses from changes in fair value included in earnings for the three and nine months ended September 30, 2026 and 2025 for loans held for sale were:


	Three months ended September 30,				Nine months ended September 30,
	2026		2025		2026		2025
	(unaudited)				(unaudited)
Interest income	$	68	$	40	$	170	$	117
Interest expense		—		—		—		—
Change in fair value		—		—		—		—
Total change in fair value	$	68	$	40	$	170	$	117

The carrying amounts and estimated fair values of financial instruments at September 30, 2026 were as follows:


	Fair Value Measurements at September 30, 2026 Using:
	Carrying
(unaudited)	Value			Level 1				Level 2				Level 3				Total
Financial Assets
Cash and cash equivalents	$	248,596		$		248,596		$		—		$		—		$		248,596
Interest-bearing deposits in other financial institutions		100				100				—				—				100
Securities available for sale		16,532				—				16,532				—				16,532
Loans held for sale		2,431				—				2,431				—				2,431
Loans and leases, net		1,838,293				—				—				1,788,020				1,788,020
FHLB and FRB stock (1)		8,389			n/a				n/a				n/a				n/a
Accrued interest receivable		8,658				304				166				8,188				8,658
Derivative assets		7,224				—				7,224				—				7,224
Financial Liabilities
Deposits	$	(1,857,184	)	$		(1,159,605	)	$		(694,809	)	$		—		$		(1,854,414	)
FHLB advances and other debt		(99,240	)			—				(102,546	)			—				(102,546	)
Advances by borrowers for taxes and insurance		(1,472	)			—				—				(1,472	)			(1,472	)
Subordinated debentures		(15,068	)			—				(17,106	)			—				(17,106	)
Accrued interest payable		(2,871	)			(338	)			(2,533	)			—				(2,871	)
Derivative liabilities		(7,224	)			—				(7,224	)			—				(7,224	)

(1) It is not practical to determine the fair value of FHLB and FRB stock due to restrictions placed on its transferability.

The carrying amounts and estimated fair values of financial instruments at December 31, 2025 were as follows:


	Fair Value Measurements at December 31, 2025 Using:
	Carrying
	Value			Level 1				Level 2				Level 3				Total
Financial Assets
Cash and cash equivalents	$	258,972		$		258,972		$		—		$		—		$		258,972
Interest-bearing deposits in other financial institutions		100				100				—				—				100
Securities available for sale		17,496				—				17,496				—				17,496
Loans held for sale		5,611				—				5,611				—				5,611
Loans and leases, net		1,738,854				—				—				1,725,771				1,725,771
FHLB and FRB stock (1)		8,354			n/a				n/a				n/a				n/a
Accrued interest receivable		8,655				212				107				8,336				8,655
Derivative assets		3,578				—				3,578				—				3,578
Financial Liabilities
Deposits	$	(1,780,689	)	$		(1,084,276	)	$		(697,492	)	$		—		$		(1,781,768	)
FHLB advances and other debt		(100,964	)			—				(106,248	)			—				(106,248	)
Advances by borrowers for taxes and insurance		(2,523	)			—				—				(2,523	)			(2,523	)
Subordinated debentures		(15,039	)			—				(17,550	)			—				(17,550	)
Accrued interest payable		(2,513	)			(377	)			(2,136	)			—				(2,513	)
Derivative liabilities		(3,578	)			—				(3,578	)			—				(3,578	)

(1) It is not practical to determine the fair value of FHLB and FRB stock due to restrictions placed on its transferability.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details