v3.25.1
Note 6 - Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

6 - FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Financial Instruments Recorded at Fair Value. When measuring fair value, the Corporation uses a fair value hierarchy, which is designed to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy involves three levels of inputs that may be used to measure fair value:

 

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Corporation can access at the measurement date.

 

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable or can be corroborated by observable market data.

 

Level 3: Significant unobservable inputs that reflect the Corporation’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

 

The fair values of the Corporation’s financial assets and liabilities measured at fair value on a recurring basis are set forth in the table that follows. The fair values of AFS securities are determined on a recurring basis using matrix pricing (Level 2 inputs). Matrix pricing, which is a mathematical technique widely used in the industry to value debt securities, does not rely exclusively on quoted prices for the specific securities but rather on the relationship of such securities to other benchmark quoted securities. Where no significant other observable inputs were available, Level 3 inputs were used. The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date resulting in a Level 2 classification.

 

  

Fair Value Measurements Using:

 
      

Quoted Prices

  

Significant

     
      

in Active

  

Other

  

Significant

 
      

Markets for

  

Observable

  

Unobservable

 
      

Identical Assets

  

Inputs

  

Inputs

 

(in thousands)

 

Total

  

(Level 1)

  

(Level 2)

  

(Level 3)

 

March 31, 2025:

                

Financial Assets:

                

Available-for-Sale Securities:

                

State and municipals

 $133,559  $—  $133,443  $116 

Pass-through mortgage securities

  131,195   —   131,195   — 

Collateralized mortgage obligations

  141,287   —   141,287   — 

SBA agency obligations

  94,444   —   94,444   — 

Corporate bonds

  114,865   —   114,865   — 
   615,350   —   615,234   116 

Derivative - interest rate swaps

  873   —   873   — 
  $616,223  $—  $616,107  $116 
                 

Financial Liabilities:

                

Derivative - interest rate swaps

 $574  $—  $574  $— 
                 

December 31, 2024:

                

Financial Assets:

                

Available-for-Sale Securities:

                

State and municipals

 $135,543  $—  $135,407  $136 

Pass-through mortgage securities

  129,440   —   129,440   — 

Collateralized mortgage obligations

  145,059   —   145,059   — 

SBA agency obligations

  101,427   —   101,427   — 

Corporate bonds

  113,310   —   113,310   — 
   624,779   —   624,643   136 

Derivative - interest rate swaps

  1,274   —   1,274   — 
  $626,053  $—  $625,917  $136 
                 

Financial Liabilities:

                

Derivative - interest rate swaps

 $395  $—  $395  $— 

 

State and municipal AFS securities measured using Level 3 inputs. The Bank held three non-rated bond anticipation notes with a book value of $116,000 at March 31, 2025. These bonds have a one year maturity and are issued by local municipalities that are customers of the Bank. Due to the short duration of the bonds, book value approximates fair value at March 31, 2025.

 

There were no assets measured at fair value on a nonrecurring basis at March 31, 2025 and  December 31, 2024.

 
Financial Instruments Not Recorded at Fair Value. Fair value estimates are made at a specific point in time. Such estimates are generally subjective in nature and dependent upon a number of significant assumptions associated with each financial instrument or group of similar financial instruments, including estimates of discount rates, liquidity, risks associated with specific financial instruments, estimates of future cash flows, and relevant available market information. Changes in assumptions could significantly affect the estimates. In addition, fair value estimates do not reflect the value of anticipated future business, premiums or discounts that could result from offering for sale at one time the Corporation’s entire holdings of a particular financial instrument, or the income tax consequences of realizing gains or losses on the sale of financial instruments.

 

The following table sets forth the carrying amounts and estimated fair values of financial instruments that are not recorded at fair value in the Corporation’s financial statements.

 

      

Fair Value Measurements Using:

 
         Quoted Prices  Significant    
         in Active  Other  Significant 
         Markets for  Observable  Unobservable 
  Carrying  Fair  Identical Assets  Inputs  Inputs 

(in thousands)

 

Amount

  

Value

  

(Level 1)

  

(Level 2)

  

(Level 3)

 

March 31, 2025:

                    

Financial Assets:

                    

Cash and cash equivalents

 $67,555  $67,555  $67,555  $—  $— 

Loans, net

  3,135,626   2,900,997   —   —   2,900,997 

Restricted stock

  24,329   n/a   n/a   n/a   n/a 

Accrued interest receivable

  13,303   13,303   —   2,514   10,789 
                     

Financial Liabilities:

                    

Checking deposits

  1,072,766   1,072,766   1,072,766   —   — 

Savings, NOW and money market deposits

  1,587,030   1,587,030   1,587,030   —   — 

Time deposits

  635,789   634,364   —   634,364   — 

Overnight advances

  —   —   —   —   — 

Other borrowings

  360,000   360,382   —   360,382   — 

Accrued interest payable

  5,810   5,810   —   5,810   — 
                     

December 31, 2024:

                    

Financial Assets:

                    

Cash and cash equivalents

 $38,330  $38,330  $38,330  $—  $— 

Loans, net

  3,193,276   2,947,587   —   —   2,947,587 

Restricted stock

  27,712   n/a   n/a   n/a   n/a 

Accrued interest receivable

  13,407   13,407   —   2,701   10,706 
                     

Financial Liabilities:

                    

Checking deposits

  1,074,671   1,074,671   1,074,671   —   — 

Savings, NOW and money market deposits

  1,574,160   1,574,160   1,574,160   —   — 

Time deposits

  616,027   614,245   —   614,245   — 

Overnight advances

  —   —   —   —   — 

Other borrowings

  435,000   434,492   —   434,492   — 

Accrued interest payable

  7,672   7,672   —   7,672   —