FAIR VALUE MEASUREMENTS
The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at the dates presented:
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| | December 31, 2025 |
| (Dollars in Thousands) | | Carrying Value | | Quoted Prices In Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Assets | | | | | | | | |
| Securities Available-for-Sale: | | | | | | | | |
| | | | | | | | |
| U.S. Government Agency Securities | | $ | 19,375 | | | $ | — | | | $ | 19,375 | | | $ | — | |
| Residential Mortgage-Backed Securities | | 76,773 | | | — | | | 76,773 | | | — | |
| Commercial Mortgage-Backed Securities | | 25,122 | | | — | | | 25,122 | | | — | |
| Other Commercial Mortgage-Backed Securities | | 24,254 | | | — | | | 24,254 | | | — | |
| Asset Backed Securities | | 94,797 | | | — | | | 94,797 | | | — | |
| Collateralized Mortgage Obligations | | 161,820 | | | — | | | 161,820 | | | — | |
| States and Political Subdivisions | | 234,224 | | | — | | | 234,224 | | | — | |
| Corporate Notes | | 55,247 | | | — | | | 51,967 | | | 3,280 | |
| Total Securities Available-for-Sale | | 691,612 | | | — | | | 688,332 | | | 3,280 | |
| Equity Securities | | 10,291 | | | 10,291 | | | — | | | — | |
| | | | | | | | |
| Derivatives | | 10,182 | | | — | | | 10,182 | | | — | |
| Total | | $ | 712,085 | | | $ | 10,291 | | | $ | 698,514 | | | $ | 3,280 | |
| | | | | | | | |
| Liabilities | | | | | | | | |
| Derivatives | | $ | 10,089 | | | $ | — | | | $ | 10,089 | | | $ | — | |
| Total | | $ | 10,089 | | | $ | — | | | $ | 10,089 | | | $ | — | |
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| | December 31, 2024 |
| (Dollars in Thousands) | | Carrying Value | | Quoted Prices In Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Assets | | | | | | | | |
| Securities Available-for-Sale: | | | | | | | | |
| | | | | | | | |
| U.S. Government Agency Securities | | $ | 26,950 | | | $ | — | | | $ | 26,950 | | | $ | — | |
| Residential Mortgage-Backed Securities | | 96,153 | | | — | | | 96,153 | | | — | |
| Commercial Mortgage-Backed Securities | | 21,587 | | | — | | | 21,587 | | | — | |
| Other Commercial Mortgage-Backed Securities | | 21,970 | | | — | | | 21,970 | | | — | |
| Asset Backed Securities | | 118,521 | | | — | | | 118,521 | | | — | |
| Collateralized Mortgage Obligations | | 148,588 | | | — | | | 148,588 | | | — | |
| States and Political Subdivisions | | 221,181 | | | — | | | 221,181 | | | — | |
| Corporate Notes | | 63,450 | | | — | | | 55,692 | | | 7,758 | |
| Total Securities Available-for-Sale | | 718,400 | | | — | | | 710,642 | | | 7,758 | |
| Equity Securities | | 10,041 | | | 10,041 | | | — | | | — | |
| Portfolio Loan Pool Subject to Fair Value Hedge | | 622 | | | — | | | 622 | | | — | |
| Derivatives | | 17,356 | | | — | | | 17,356 | | | — | |
| Total | | $ | 746,419 | | | $ | 10,041 | | | $ | 728,620 | | | $ | 7,758 | |
| | | | | | | | |
| Liabilities | | | | | | | | |
| Derivatives | | $ | 17,710 | | | $ | — | | | $ | 17,710 | | | $ | — | |
| Total | | $ | 17,710 | | | $ | — | | | $ | 17,710 | | | $ | — | |
The Company invests in subordinated debt securities issued by other financial institutions that are classified as Corporate Notes in the tables above. At December 31, 2025, the Company held one such security with an aggregate fair value of $3.3 million, compared to two securities with an aggregate fair value of $7.8 million at December 31, 2024 that were classified within Level 3 of the fair value hierarchy due to the absence of observable market inputs and limited trading activity. The decrease of $4.5 million in the fair value of Level 3 classified Corporate Notes in the tables above between December 31, 2024 and December 31, 2025 was primarily attributable to the issuer’s call and subsequent redemption of one subordinated debt security with a principal balance of $5.0 million during the fourth quarter of 2025.
The fair value of these Level 3 securities is estimated by benchmarking to similar instruments with observable market data classified as Level 2. Valuation techniques incorporate comparable financial ratio analysis and qualitative assessments specific to the industry in which the underlying issuers operate. Key factors considered include capital adequacy, asset quality trends, management effectiveness, core earnings capacity, liquidity profile, and on and off-balance sheet interest rate exposures.
Financial assets measured at fair value on a nonrecurring basis at December 31, 2025 and 2024 are summarized below:
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| | December 31, 2025 |
| (Dollars in Thousands) | | Level 1 | | Level 2 | | Level 3 | | Fair Value |
| OREO | | $ | — | | | $ | — | | | $ | 142 | | | $ | 142 | |
| Individually Evaluated Loans | | $ | — | | | $ | — | | | $ | 22,809 | | | $ | 22,809 | |
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| | December 31, 2024 |
| (Dollars in Thousands) | | Level 1 | | Level 2 | | Level 3 | | Fair Value |
| OREO | | $ | — | | | $ | — | | | $ | 659 | | | $ | 659 | |
| Individually Evaluated Loans | | $ | — | | | $ | — | | | $ | 579 | | | $ | 579 | |
The Company had three IELs totaling $22.8 million that were measured at fair value on a nonrecurring basis at December 31, 2025, compared to one totaling $0.6 million at December 31, 2024.
The Company’s largest credit relationship is classified as an IEL with a net carrying amount of $196.0 million at December 31, 2025, compared to $221.7 million at December 31, 2024. In estimating fair value, management utilized DCF techniques incorporating various assumptions related to the timing and amount of expected recoveries under multiple collection scenarios.
These valuation techniques resulted in a valuation allowance of $18.0 million at December 31, 2025, compared to $30.3 million at December 31, 2024.
OREO, which is measured at the lower of carrying amount or fair value less costs to sell, had a net carrying amount of $0.1 million as of December 31, 2025, compared to $0.7 million at December 31, 2024. The decrease was primarily attributable to property sales during 2025. OREO write-downs of $0.5 million were recorded during the year ended December 31, 2025, compared to $0.2 million of write-downs recorded during the year ended December 31, 2024.
The following tables summarize the Company’s assets that were measured at fair value on a nonrecurring basis as of December 31, 2025 and 2024:
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| | December 31, 2025 |
| (Dollars in Thousands) | | Fair Value | | Valuation Technique | | Unobservable Inputs | | Weighted Range | | Average |
| Assets | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Individually Evaluated Loans | | $ | 22,809 | | | Appraisals | | Estimated Selling Costs | | 3.5% | —% | 6.0% | | 5.9 | % |
| | | | | | | | | | | | |
| Total Individually Evaluated Loans | | $ | 22,809 | | | | | | | | | | | |
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| OREO | | 142 | | | Discounted Internal Valuations | | Management's Subjective Discount | | | | 5.0% | | 5.0 | % |
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| Total OREO | | $ | 142 | | | | | | | | | | | |
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| | December 31, 2024 |
| (Dollars in Thousands) | | Fair Value | | Valuation Technique | | Unobservable Inputs | | Weighted Range | | Average |
| Assets | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Individually Evaluated Loans | | $ | 579 | | | Discounted Appraisals | | Estimated Selling Costs | | | | 3.5% | | 3.5 | % |
| Total Individually Evaluated Loans | | $ | 579 | | | | | | | | | | | |
| | | | | | | | | | | | |
| OREO | | $ | 143 | | | Internal Valuations | | Estimated Selling Costs | | | | 5.0% | | 5.0 | % |
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| OREO | | 516 | | | Discounted Internal Valuations | | Management’s Subject Discount | | 0.0% | — | 24.0% | | 24.0 | % |
| Total OREO | | $ | 659 | | | | | | | | | | | |
A baseline discount rate has been established for use in impairment and fair value measurements. This baseline rate was developed through back-testing against historical OREO sales and reflects an average recovery rate based on transaction size and asset type within the population analyzed. Management considers the specific facts and circumstances of each IEL and may apply judgment to adjust the baseline discount rate when appropriate.
The carrying values and estimated fair values of the Company’s financial instruments at December 31, 2025 and December 31, 2024 are presented in the accompanying tables. Fair values are estimated in accordance with the exit price notion under ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. In accordance with U.S. GAAP, the Company is required to disclose the estimated fair value of financial instruments carried at amortized cost when quoted market prices are not readily available.
Estimated fair values are derived using present value techniques or other valuation methodologies and are significantly affected by the assumptions applied, including discount rates and expected future cash flows. Because these estimates are based on models and assumptions rather than observable market transactions, they may not be realized upon immediate settlement. Accordingly, the aggregate fair values presented do not necessarily represent the underlying value of the Company.
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| | | | Fair Value Measurements at December 31, 2025 |
| (Dollars in Thousands) | | Carrying Value | | Level 1 | | Level 2 | | Level 3 | | Total |
| Financial Assets: | | | | | | | | | | |
| Cash and Cash Equivalents | | $ | 105,163 | | | $ | 36,936 | | | $ | 68,227 | | | $ | — | | | $ | 105,163 | |
| Securities Available-for-Sale | | 691,612 | | | — | | | 688,332 | | | 3,280 | | | 691,612 | |
| Equity Securities | | 10,291 | | | 10,291 | | | — | | | — | | | 10,291 | |
| Loans Held-for-Sale | | 339 | | | — | | | — | | | 339 | | | 339 | |
| Portfolio Loans, net | | 3,808,069 | | | — | | | — | | | 3,711,795 | | | 3,711,795 | |
| | | | | | | | | | |
| Other Restricted Stock, at Cost | | 16,830 | | | — | | | — | | | NA | | NA |
| Other Assets- Interest Rate Derivatives | | 10,182 | | | — | | | 10,182 | | | — | | | 10,182 | |
| Accrued Interest Receivable | | 17,797 | | | — | | | 3,683 | | | 14,114 | | | 17,797 | |
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| Financial Liabilities: | | | | | | | | | | |
| Deposits | | $ | 4,210,889 | | | $ | 620,473 | | | $ | 1,688,317 | | | $ | 1,917,786 | | | $ | 4,226,576 | |
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| Other Liabilities- Interest Rate Derivatives | | 10,089 | | | — | | | 10,089 | | | — | | | 10,089 | |
| FHLB Borrowings | | 178,500 | | | — | | | — | | | 178,552 | | | 178,552 | |
| | | | | | | | | | |
| Accrued Interest Payable | | 6,971 | | | — | | | — | | | 6,971 | | | 6,971 | |
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| | | | Fair Value Measurements at December 31, 2024 |
| (Dollars in Thousands) | | Carrying Value | | Level 1 | | Level 2 | | Level 3 | | Total |
| Financial Assets: | | | | | | | | | | |
| Cash and Cash Equivalents | | $ | 131,171 | | | $ | 39,608 | | | $ | 91,563 | | | $ | — | | | $ | 131,171 | |
| Securities Available-for-Sale | | 718,400 | | | — | | | 710,642 | | | 7,758 | | | 718,400 | |
| | | | | | | | | | |
| Equity Securities | | 10,041 | | | 10,041 | | | — | | | — | | | 10,041 | |
| Portfolio Loans, net | | 3,549,226 | | | — | | | — | | | 3,379,192 | | | 3,379,192 | |
| | | | | | | | | | |
| Federal Home Loan Bank Stock, at Cost | | 6,487 | | | — | | | — | | | NA | | NA |
| Other Assets- Interest Rate Derivatives | | 17,356 | | | — | | | 17,356 | | | — | | | 17,356 | |
| Accrued Interest Receivable | | 17,842 | | | — | | | 4,406 | | | 13,436 | | | 17,842 | |
| | | | | | | | | | |
| Financial Liabilities: | | | | | | | | | | |
| Deposits | | $ | 4,153,421 | | | $ | 634,436 | | | $ | 1,594,615 | | | $ | 1,937,914 | | | $ | 4,166,965 | |
| | | | | | | | | | |
| Other Liabilities- Interest Rate Derivatives | | 17,710 | | | — | | | 17,710 | | | — | | | 17,710 | |
| FHLB Borrowings | | 70,000 | | | — | | | — | | | 69,604 | | | 69,604 | |
| | | | | | | | | | |
| Accrued Interest Payable | | 8,218 | | | — | | | 5 | | | 8,213 | | | 8,218 | |