v3.26.3
FAIR VALUE
 9 Months Ended
Sep. 30, 2026
Fair Value Disclosures [Abstract]  
FAIR VALUE FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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. Certain financial instruments and all non-financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.
The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are:
Level 1 – quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date.
Level 2 – significant other observable inputs other than Level 1 prices such as prices for similar assets and liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
Level 3 – at least one significant unobservable input that reflects a company's own assumptions about the assumptions that market participants would use in pricing an asset or liability.
In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company used the following methods and significant assumptions to estimate fair value for instruments measured on a recurring basis:
Where quoted prices are available in an active market, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, investment securities are classified within Level 2 and fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or DCF. Level 2 investment securities include U.S. agency securities, MBS, obligations of states and political subdivisions and certain corporate, asset-backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. The Company’s investment securities are classified as AFS.
The fair values of interest rate swaps, interest rate caps and risk participation derivatives are determined using models that incorporate readily observable market data into a market standard methodology. This methodology nets the discounted future cash receipts and the discounted expected cash payments. The discounted variable cash receipts and payments are based on expectations of future interest rates derived from observable market interest rate curves. In addition, fair value is adjusted for the effect of nonperformance risk by incorporating credit valuation adjustments for the Company and its counterparties. These assets and liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.
The following table summarizes assets and liabilities measured at fair value on a recurring basis at September 30, 2026 and December 31, 2025:
Level 1Level 2Level 3Total Fair
Value
Measurements
September 30, 2026
Financial Assets
Investment securities:
U.S. Treasury securities$14,166 $— $— $14,166 
U.S. Government Agencies— 1,360 — 1,360 
States and political subdivisions— 187,317 — 187,317 
GSE residential MBSs— 231,591 — 231,591 
GSE commercial MBSs— 10,438 — 10,438 
GSE residential CMOs— 326,910 — 326,910 
Non-agency CMOs— 74,785 2,173 76,958 
Asset-backed— 65,997 3,437 69,434 
Corporate debt
— 961 — 961 
Other313 — — 313 
Loans held for sale— 3,924 — 3,924 
Derivatives— 21,898 — 21,898 
Totals$14,479 $925,181 $5,610 $945,270 
Financial Liabilities
Derivatives$— $24,431 $1 $24,432 
December 31, 2025
Financial Assets
Investment securities:
U.S. Treasury securities$14,211 $— $— $14,211 
U.S. Government Agencies— 1,796 — 1,796 
States and political subdivisions— 196,482 5,666 202,148 
GSE residential MBSs— 234,103 — 234,103 
GSE commercial MBSs— 6,171 — 6,171 
GSE residential CMOs— 354,003 — 354,003 
Non-agency CMOs— 50,161 9,662 59,823 
Asset-backed— 78,250 — 78,250 
Corporate debt
— 1,992 — 1,992 
Other243 — — 243 
Loans held for sale— 6,090 — 6,090 
Derivatives— 14,638 38 14,676 
Totals$14,454 $943,686 $15,366 $973,506 
Financial Liabilities
Derivatives$— $15,138 $— $15,138 
The Company had one CMO and two asset-backed securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at September 30, 2026 compared to one municipal bond and two CMOs at December 31, 2025. The Level 3 valuation is based on a non-executable broker quote, which is considered a significant unobservable input. Such quotes are updated as available and may remain constant for a period of time for certain broker-quoted securities that do not move with the market or that are not interest rate sensitive as a result of their structure or overall attributes.
The Company’s residential mortgage LHFS are recorded at fair value utilizing Level 2 measurements. This fair value measurement is determined based upon third party quotes obtained on similar loans. For LHFS, for which the fair value option has been elected, the aggregate fair value was less than the aggregate principal balance by $49 thousand at September 30, 2026 and greater than the aggregate principal balance by $129 thousand at December 31, 2025.
The determination of the fair value of interest rate lock commitments on residential mortgages is based on agreed upon pricing with the respective investor on each loan and includes a pull through percentage. The pull through percentage represents an estimate of loans in the pipeline to be delivered to an investor versus the total loans committed for delivery. Significant changes in this input could result in a significantly higher or lower fair value measurement. As the pull through percentage is a significant unobservable input, this is deemed a Level 3 valuation input. The average pull through percentage, which is based upon historical experience, was 92% as of September 30, 2026. An increase or decrease of 5% in the pull through assumption would result in a positive or negative change of $1 thousand in the fair value of interest rate lock commitments at September 30, 2026.
The following provides details of the Level 3 fair value measurement activity for the periods ended September 30, 2026 and 2025:
Investment securities:
Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
Balance, beginning of period$6,016 $16,140 $15,328 $16,920 
Unrealized gains (losses) included in OCI49 60 1,161 (492)
Purchases— — 4,860 — 
Net (premium amortization) discount accretion(1)17 92 49 
Principal payments and other(454)(216)(4,322)(476)
Transfers into level 3— — 7,182 — 
Transfers out of level 3— — (18,691)— 
Balance, end of period$5,610 $16,001 $5,610 $16,001 

Interest rate lock commitments on residential mortgages:
Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
Balance, beginning of period$68 $55 $38 $20 
Total (losses) gains included in earnings(69)34 (39)69 
Balance, end of period$(1)$89 $(1)$89 
Certain financial assets are measured at fair value on a nonrecurring basis. Adjustments to the fair value of these assets usually result from the application of lower of cost or market accounting or write-downs of individual assets. The Company used the following methods and significant assumptions to estimate fair value for these financial assets.
During the three months ended September 30, 2026, there were no investment securities transferred into Level 3 and no investment securities transferred out of Level 3. There were four transfers into Level 3 and four transfers out of Level 3 during the nine months ended September 30, 2026. There were no transfers into or out of Level 3 during the three and nine months ended September 30, 2025.
Individually Evaluated Loans
Loans individually evaluated for credit expected losses include nonaccrual loans and other loans that do not share similar risk characteristics to loans in the CECL loan pools, which have been classified as Level 3. Individually evaluated loans with an allocation to the ACL are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for credit losses on the consolidated statements of income.
The measurement of loss associated with loans evaluated individually for all loan classes was based on either the observable market price of the loan, the fair value of the collateral, or DCF. For collateral-dependent loans, fair value was measured based on the value of the collateral securing the loan, less estimated costs to sell. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The value of the real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction, or if management adjusts the appraisal value, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal, if deemed significant, or the net book value on the applicable business’
financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivable collateral are based on financial statement balances or aging reports (Level 3).
Changes in the fair value of individually evaluated loans still held and considered in the determination of the provision for credit losses were increases of $637 thousand and $883 thousand for the three and nine months ended September 30, 2026, respectively, compared to decreases of $929 thousand and $1.5 million for the three and nine months ended September 30, 2025.
Foreclosed Real Estate
OREO property acquired through foreclosure is initially recorded at the fair value of the property at the transfer date less estimated selling cost. Subsequently, OREO is carried at the lower of its carrying value or the fair value less estimated selling cost. Fair value is usually determined based upon an independent third-party appraisal of the property or occasionally upon a recent sales offer. During the nine months ended September 30, 2026, the Company transferred two loans into OREO with a total fair value of $1.1 million, to which there were no subsequent write-downs. There were no loans transferred into OREO during the three months ended September 30, 2026. During the three and nine months ended September 30, 2026, the Company sold its OREO with a fair value of $1.1 million. During the nine months ended September 30, 2025, the Company sold its OREO with a fair value of $138 thousand. The Company did not sell any OREO during the three months ended September 30, 2025. At both September 30, 2026 and December 31, 2025, the OREO balance was zero.
Mortgage Servicing Rights
MSRs are evaluated for impairment by comparing the carrying value to the fair value, which is determined through a DCF valuation that utilizes inputs that focus on loan-level characteristics, prepayment speeds, servicing costs, the discount rate and delinquency rates. To the extent the amortized cost of the MSRs exceeds their estimated fair values, a valuation allowance is established for such impairment. Fair value adjustments on the MSRs only occurs if there is an impairment charge. At September 30, 2026, the fair value of the MSR was $5.8 million, which exceeded the carrying value of $3.1 million. At December 31, 2025, the fair value of the MSR was $5.5 million, which exceeded the carrying value of $3.3 million. At September 30, 2026 and December 31, 2025, the MSR impairment reserve was nominal and $41 thousand, respectively. For the three and nine months ended September 30, 2026, there was an impairment valuation allowance reversal of zero and $41 thousand, respectively, in mortgage banking activities on the unaudited condensed consolidated statements of income. For the three and nine months ended September 30, 2025, there was a nominal impairment valuation allowance adjustment in mortgage banking activities on the unaudited condensed consolidated statements of income.
The following table summarizes assets measured at fair value on a nonrecurring basis at September 30, 2026 and December 31, 2025:
Level 1Level 2Level 3Total
Fair Value
Measurements
September 30, 2026
Individually Evaluated Loans
Commercial real estate:
Owner occupied$— $— $1,150 $1,150 
Non-owner occupied residential— — 24 24 
Acquisition and development:
Commercial and land development— — 79 79 
Commercial and industrial— — 1,601 1,601 
Residential mortgage:
First lien— — 1,031 1,031 
Total individually evaluated loans$— $— $3,885 $3,885 
December 31, 2025
Individually Evaluated Loans
Commercial real estate:
Owner occupied$— $— $1,664 $1,664 
Non-owner occupied residential— — 31 31 
Acquisition and development:
Commercial and land development— — 832 832 
Commercial and industrial— — 2,494 2,494 
Residential mortgage:
First lien— — 834 834 
Home equity - lines of credit— — 9 9 
Total individually evaluated loans
$— $— $5,864 $5,864 
Mortgage servicing rights$— $— $536 $536 
The following table presents additional qualitative information about assets measured on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:
Fair Value
Estimate		Valuation
Techniques
Unobservable Input (1)
Range
September 30, 2026
Individually evaluated loans$3,885 Appraisal of collateralManagement adjustments on appraisals for property type and recent activity
10.00% - 84.00% discount
 - Management adjustments for liquidation expenses
8.76% - 30.00% discount
December 31, 2025
Individually evaluated loans
$5,864 Appraisal of collateralManagement adjustments on appraisals for property type and recent activity
10.00% - 84.00% discount
 - Management adjustments for liquidation expenses
8.28% - 65.04% discount
Mortgage servicing rights$536 Income approach - DCFWeighted average CPR6.86%
- Weighted average discount rate9.02%
(1) Discount rates can vary due to factors such as costs that may be assumed by the Bank to liquidate the property in addition to adjustments to the appraised value of the collateral securing the loan. Adjustments may be applied to valuations deemed deficient to ensure the fair value is reasonable.
Fair values of financial instruments
GAAP requires disclosure of the fair value of financial assets and liabilities, including those that are not measured and reported at fair value on a recurring or nonrecurring basis. The following table presents carrying amounts and estimated fair values of the financial assets and liabilities at September 30, 2026 and December 31, 2025:
Carrying
Amount		Fair ValueLevel 1Level 2Level 3
September 30, 2026
Financial Assets
Cash and due from banks$48,690 $48,690 $48,690 $— $— 
Interest-bearing deposits with banks76,956 76,956 76,956 — — 
Restricted investments in bank stock32,514 n/an/an/an/a
Investment securities919,448 919,448 14,479 899,359 5,610 
Loans held for sale3,924 3,924 — 3,924 — 
Loans, net of allowance for credit losses4,161,598 4,059,702 — — 4,059,702 
Derivatives21,898 21,898 — 21,898 — 
Accrued interest receivable20,733 20,733 — 4,600 16,133 
Financial Liabilities
Deposits4,581,910 4,579,112 — 4,579,112 — 
FHLB advances and other borrowings417,252 416,628 — 416,628 — 
Subordinated notes and trust preferred debt8,109 8,645 — 8,645 — 
Derivatives24,431 24,431 — 24,431 — 
Accrued interest payable2,729 2,729 — 2,729 — 
Off-balance sheet instruments— — — — — 
December 31, 2025
Financial Assets
Cash and due from banks$42,083 $42,083 $42,083 $— $— 
Interest-bearing deposits with banks107,691 107,691 107,691 — — 
Restricted investments in bank stock26,717 n/an/an/an/a
Investment securities952,740 952,740 14,454 922,958 15,328 
Loans held for sale6,090 6,090 — 6,090 — 
Loans, net of allowance for loan losses3,973,012 3,934,248 — — 3,934,248 
Derivatives14,676 14,676 — 14,638 38 
Accrued interest receivable21,473 21,473 — 5,026 16,447 
Financial Liabilities
Deposits4,528,774 4,527,619 — 4,527,619 — 
Securities sold under agreements to repurchase24,542 24,542 — 24,542 — 
FHLB advances and other borrowings274,701 274,765 — 274,765 — 
Subordinated notes and trust preferred debt37,122 38,861 — 38,861 — 
Derivatives15,138 15,138 — 15,138 — 
Accrued interest payable3,497 3,497 — 3,497 — 
Off-balance sheet instruments— — — — — 
In accordance with the Company's adoption of ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, the methods utilized to measure the fair value of financial instruments at September 30, 2026 and December 31, 2025 represent an approximation of exit price; however, an actual exit price may differ.