Fair Value Measurement

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurement

(13) Fair Value Measurement

The Company uses a fair value hierarchy to measure fair value. This hierarchy describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices for identical assets in active markets that are identifiable on the measurement date; Level 2: Significant other observable inputs, such as quoted prices for similar assets, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data; and Level 3: Significant unobservable inputs that reflect the Company’s own view about the assumptions that market participants would use in pricing an asset.

Debt securities: The fair values of securities available-for-sale are determined by 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 inputs).

Equity securities: The Company’s equity securities are not actively traded in an open market. The fair value of these equity securities available-for-sale not actively traded in an open market is determined by using market data inputs for similar securities that are observable (Level 2 inputs).

The fair value of the swap asset/liability: The fair value of the swap asset and liability is based on an external derivative model using data inputs based on similar transactions as of the valuation date and classified Level 2. The changes in fair value of these assets/liabilities had no impact on net income or comprehensive income.

Mortgage servicing rights: Mortgage servicing rights do not trade in an active market with readily observable market data. As a result, the Company estimates the fair value of mortgage servicing rights by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The Company stratifies its mortgage servicing portfolio on the basis of loan type. The assumptions used in the discounted cash flow model are those that the Company believes market participants would use in estimating future net servicing income. Significant assumptions in the valuation of mortgage servicing rights include estimated loan repayment rates, the discount rate, servicing costs, and the timing of cash flows, among other factors. Mortgage servicing rights are classified as Level 3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and estimation.

Assets and liabilities measured at fair value are summarized in the tables below.

	Fair Value Measurements at March 31, 2024 Using:
Assets:	(Level 1)		(Level 2)		(Level 3)
Assets measured at fair value on a recurring basis:
Securities available-for-sale
U.S. Treasury securities and obligations of U.S.    Government agencies	$	—	$	68,042	$	—
Obligations of states and political subdivisions		—		333,451		—
Mortgage-backed securities in government sponsored    entities		—		204,756		—
Total securities available-for-sale		—		606,249		—
Equity securities		—		2,027		—
Swap asset		—		14,682		—
Liabilities measured at fair value on a recurring basis:
Swap liability	$	—	$	14,682	$	—
Assets measured at fair value on a nonrecurring basis:
Mortgage servicing rights	$	—	$	—	$	2,999

	Fair Value Measurements at December 31, 2023 Using:
Assets:	(Level 1)		(Level 2)		(Level 3)
Assets measured at fair value on a recurring basis:
Securities available-for-sale
U.S. Treasury securities and obligations of U.S.    Government agencies	$	—	$	67,658	$	—
Obligations of states and political subdivisions		—		338,599		—
Mortgage-backed securities in government    sponsored entities		—		212,015		—
Total securities available-for-sale		—		618,272		—
Equity securities		—		2,169		—
Swap asset		—		12,481		—
Liabilities measured at fair value on a recurring    basis:
Swap liability		—		12,481		—
Assets measured at fair value on a nonrecurring    basis:
Mortgage servicing rights	$	—	$	—	$	3,018

The following tables present quantitative information about the Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a nonrecurring basis as of March 31, 2024 and December 31, 2023.

	Quantitative Information about Level 3 Fair Value Measurements
March 31, 2024	Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average
Mortgage Servicing     Rights	$	2,999	Discounted Cash Flow	Constant Prepayment     Rate	4.4% - 11.1%	6%
				Discount Rate	12%	12%

	Quantitative Information about Level 3 Fair Value Measurements
December 31, 2023	Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average
Mortgage Servicing     Rights	$	3,018	Discounted Cash Flow	Constant Prepayment     Rate	4.6% - 11%	6%
				Discount Rate	12%	12%

The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at March 31, 2024 were as follows:

March 31, 2024	Carrying Amount		Total Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from financial institutions	$	50,310	$	50,310	$	50,310	$	—	$	—
Other securities		31,360		31,360		31,360		—		—
Loans, held for sale		3,716		3,716		3,716		—		—
Loans, net of allowance		2,859,290		2,735,265		—		—		2,735,265
Bank owned life insurance		61,685		61,685		61,685		—		—
Accrued interest receivable		13,513		13,513		13,513		—		—
Financial Liabilities:
Nonmaturing deposits		2,071,809		2,071,684		2,071,684		—		—
Time deposits		908,886		907,775		—		—		907,775
Short-term FHLB advances		368,500		367,698		367,698		—		—
Long-term FHLB advances		2,211		2,098		—		—		2,098
Other borrowings		8,105		8,105		—		—		8,105
Subordinated debentures		103,984		103,287		—		—		103,287
Accrued interest payable		6,289		6,289		6,289		—		—

The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at December 31, 2023 were as follows:

December 31, 2023	Carrying Amount		Total Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from financial institutions	$	60,406	$	60,406	$	60,406	$	—	$	—
Other securities		29,998		29,998		29,998		—		—
Loans, held for sale		1,725		1,725		1,725		—		—
Loans, net of allowance		2,824,568		2,679,988		—		—		2,679,988
Bank owned life insurance		61,335		61,335		61,335		—		—
Accrued interest receivable		12,819		12,819		12,819		—		—
Financial Liabilities:
Nonmaturing deposits		2,084,216		2,084,216		2,084,216		—		—
Time deposits		900,812		899,443		—		—		899,443
Short-term FHLB advances		338,000		337,267		337,267		—		—
Long-term FHLB advances		2,392		2,419		—		—		2,419
Subordinated debentures		103,943		101,563		—		—		101,563
Other borrowings		9,859		9,859		—		—		15,806
Accrued interest payable		9,525		9,525		9,525		—		—