v3.25.2
Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

NOTE 9 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair values of financial instruments are management's estimate of the values at which the instruments could be exchanged in a transaction between willing parties. These estimates are subjective and may vary significantly from amounts that would be realized in actual transactions. In addition, other significant assets are not considered financial assets including deferred tax assets, bank premises and equipment and intangibles. Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered in any of the estimates.

Fair Value Measurements:

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities in active markets that the Company has the ability to access.

Available-for-sale securities, when quoted prices are available in an active market, are valued using the quoted price and are classified as Level 1.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Available-for-sale securities classified as Level 2 are valued using the prices obtained from an independent pricing service. The prices are not adjusted. Securities of obligations of state and political subdivisions are valued using a type of matrix, or grid, pricing in which securities are benchmarked against the treasury rate based on credit rating. Substantially all assumptions used by the independent pricing service are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

Interest rate swaps classified as Level 2 are valued using the prices obtained from an independent pricing service and not adjusted. The fair value of interest rate swaps with a positive fair value are reported as assets while interest rate swaps with a negative fair value are reported as liabilities.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. The Bank holds three local municipals that the Bank evaluates based on the credit strength of the underlying project. The fair value is determined by valuing similar credit payment streams at similar rates.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

The following summarizes financial assets measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024, segregated by level within the fair value hierarchy utilized to measure fair value:

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

 

 

(In Thousands)

 

June 30, 2025

 

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

 

 

Significant
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets - (Securities Available-for-Sale)

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

95,390

 

 

$

-

 

 

$

-

 

U.S. Government agencies

 

 

20,078

 

 

 

117,588

 

 

 

-

 

Mortgage-backed securities

 

 

-

 

 

 

136,953

 

 

 

-

 

State and local governments

 

 

-

 

 

 

59,639

 

 

 

1,454

 

Total Securities Available-for-Sale

 

$

115,468

 

 

$

314,180

 

 

$

1,454

 

Interest rate swap liabilities

 

$

-

 

 

$

(1,826

)

 

$

-

 

 

 

 

(In Thousands)

 

December 31, 2024

 

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

 

 

Significant
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets - (Securities Available-for-Sale)

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

105,999

 

 

$

-

 

 

$

-

 

U.S. Government agencies

 

 

20,035

 

 

 

115,131

 

 

 

-

 

Mortgage-backed securities

 

 

-

 

 

 

120,631

 

 

 

-

 

State and local governments

 

 

-

 

 

 

63,133

 

 

 

1,627

 

Total Securities Available-for-Sale

 

$

126,034

 

 

$

298,895

 

 

$

1,627

 

Interest rate swaps liabilities

 

$

-

 

 

$

(976

)

 

$

-

 

 

The following tables represent the changes in the Level 3 fair-value category of which unobservable inputs are relied upon as of the three and six months ended June 30, 2025 and June 30, 2024.

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at April 1, 2025

 

$

184

 

 

$

1,276

 

 

$

1,460

 

 

 

 

 

 

 

 

 

 

Change in Fair Value

 

 

-

 

 

 

(6

)

 

 

(6

)

 

 

 

 

 

 

 

 

 

Payments, Maturities & Calls

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2025

 

$

184

 

 

$

1,270

 

 

$

1,454

 

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at January 1, 2025

 

$

353

 

 

$

1,274

 

 

$

1,627

 

 

 

 

 

 

 

 

 

 

Change in Fair Value

 

 

1

 

 

 

(4

)

 

 

(3

)

 

 

 

 

 

 

 

 

 

Payments, Maturities & Calls

 

 

(170

)

 

 

-

 

 

 

(170

)

 

 

 

 

 

 

 

 

 

Balance at June 30, 2025

 

$

184

 

 

$

1,270

 

 

$

1,454

 

 

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at April 1, 2024

 

$

521

 

 

$

1,274

 

 

$

1,795

 

 

 

 

 

 

 

 

 

 

Change in Fair Value

 

 

(1

)

 

 

(8

)

 

 

(9

)

 

 

 

 

 

 

 

 

 

Payments, Maturities & Calls

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2024

 

$

520

 

 

$

1,266

 

 

$

1,786

 

 

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at January 1, 2024

 

$

1,188

 

 

$

1,272

 

 

$

2,460

 

 

 

 

 

 

 

 

 

 

Change in Fair Value

 

 

(3

)

 

 

(6

)

 

 

(9

)

 

 

 

 

 

 

 

 

 

Payments, Maturities & Calls

 

 

(665

)

 

 

-

 

 

 

(665

)

 

 

 

 

 

 

 

 

 

Balance at June 30, 2024

 

$

520

 

 

$

1,266

 

 

$

1,786

 

 

Most of the Company's available-for-sale securities, including any bonds issued by local municipalities, have CUSIP numbers or have similar characteristics of those in the municipal markets, making them marketable and comparable as Level 2.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At June 30, 2025 and December 31, 2024, such assets consist of collateral dependent loans and loan servicing rights. Collateral dependent loans categorized as Level 3 assets consist of non-homogeneous loans that have expected credit losses. The Company may also estimate the fair value of certain nonperforming loans using a discounted cash flow method of future cash flows using management's best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals.)

At June 30, 2025 and December 31, 2024, fair value of collateral dependent loans categorized as Level 3 was $3.6 million and $3.0 million, respectively. The specific allocation for collateral dependent loans was $91 thousand as of June 30, 2025 and $52 thousand as of December 31, 2024. The specific allocations are accounted for in the allowance for credit losses (see Note 4).

During 2025 and 2024, impairment was recognized on loan servicing rights based upon the independent third party's quarterly valuation. A valuation allowance was established by strata to quantify the likely impairment of the value of the loan servicing rights to the Company. If the carrying amount of an individual strata exceeds the fair value, impairment was recorded on that strata so the servicing asset was carried at fair value. Impairment was $87 thousand ($3 thousand on 1-4 family real estate loans and $84 thousand on agricultural real estate loans) at June 30, 2025 compared to $97 thousand ($2 thousand on 1-4 family real estate loans and $95 thousand on agricultural real estate loans) at December 31, 2024.

The following table presents assets measured at fair value on a nonrecurring basis at June 30, 2025 and December 31, 2024:

 

 

 

(In Thousands)

 

 

 

Assets Measured at Fair Value on a Nonrecurring Basis at June 30, 2025

 

 

 

Balance at
June 30, 2025

 

 

Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)

 

 

Significant
Observable Inputs
(Level 2)

 

 

Significant
Unobservable Inputs
(Level 3)

 

Collateral dependent
   loans

 

$

3,597

 

 

$

-

 

 

$

-

 

 

$

3,597

 

Loan servicing rights

 

 

323

 

 

 

-

 

 

 

-

 

 

 

323

 

 

 

 

 

(In Thousands)

 

 

 

Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2024

 

 

 

Balance at
December 31, 2024

 

 

Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)

 

 

Significant
Observable Inputs
(Level 2)

 

 

Significant
Unobservable Inputs
(Level 3)

 

Collateral dependent
   loans

 

$

2,988

 

 

$

-

 

 

$

-

 

 

$

2,988

 

Loan servicing rights

 

 

(4

)

 

 

-

 

 

 

-

 

 

 

(4

)

 

 

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

 

 

 

(In Thousands)

 

 

 

 

 

 

Range

 

 

Fair Value at

 

 

 

 

 

 

(Weighted

 

June 30, 2025

 

 

Valuation Technique

 

Unobservable Inputs

 

Average)

State and local government

 

$

1,454

 

 

Discounted Cash Flow

 

Credit strength of underlying project
or entity / discount rate

 

3.42-4.38%
(4.26%)

 

 

 

 

 

 

 

 

 

Collateral dependent
   loans

 

 

3,597

 

 

Collateral based
measurements

 

Discount to reflect current market
conditions and ultimate collectability

 

20.00-20.00%
(20.00%)

 

 

 

 

 

 

 

 

 

Loan servicing rights

 

 

323

 

 

Discounted Cash Flow

 

Constant prepayment rate and
probability of default / discount rate

 

0.92-556.28%
(21.22%)

 

 

 

 

(In Thousands)

 

 

 

 

 

 

Range

 

 

Fair Value at

 

 

 

 

 

 

(Weighted

 

 

December 31, 2024

 

 

Valuation Technique

 

Unobservable Inputs

 

Average)

State and local government

 

$

1,627

 

 

Discounted Cash Flow

 

Credit strength of underlying project
or entity / discount rate

 

-3.61-4.52%
(4.33%)

 

 

 

 

 

 

 

 

 

Collateral dependent
   loans

 

 

2,988

 

 

Collateral based
measurements

 

Discount to reflect current market
conditions and ultimate collectability

 

20.00-30.00%
(20.78%)

 

 

 

 

 

 

 

 

 

Loan servicing rights

 

 

(4

)

 

Discounted Cash Flow

 

Constant prepayment rate and
probability of default / discount rate

 

9.36-618.70%
(107.90%)

 

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of June 30, 2025 and December 31, 2024 are reflected below. The aggregate fair values in the table below do not represent the total fair value of the Bank’s assets and liabilities. The table excludes the following: available-for-sale securities, premises and equipment, derivatives (which are included in other assets or other liabilities), goodwill, loan servicing rights, bank owned life insurance, other assets, dividends payable, accrued expenses and other liabilities.

 

 

 

 

(In Thousands)

 

 

 

June 30, 2025

 

 

 

Carrying

 

 

Fair

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

88,231

 

 

$

88,231

 

 

$

88,231

 

 

$

-

 

 

$

-

 

Interest-bearing time deposits

 

 

1,992

 

 

 

1,996

 

 

 

-

 

 

 

1,996

 

 

 

-

 

Other securities

 

 

13,994

 

 

 

13,994

 

 

 

-

 

 

 

-

 

 

 

13,994

 

Loans held for sale

 

 

6,359

 

 

 

6,359

 

 

 

-

 

 

 

-

 

 

 

6,339

 

Loans, net

 

 

2,599,917

 

 

 

2,570,022

 

 

 

-

 

 

 

-

 

 

 

2,570,022

 

Interest receivable

 

 

13,789

 

 

 

13,789

 

 

 

-

 

 

 

-

 

 

 

13,789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest bearing deposits

 

$

497,804

 

 

$

497,804

 

 

$

497,804

 

 

$

-

 

 

$

-

 

Interest bearing deposits

 

 

1,591,070

 

 

 

1,590,604

 

 

 

-

 

 

 

-

 

 

 

1,590,604

 

Time deposits

 

 

621,455

 

 

 

619,389

 

 

 

-

 

 

 

-

 

 

 

619,389

 

Total Deposits

 

 

2,710,329

 

 

 

2,707,797

 

 

 

497,804

 

 

 

-

 

 

 

2,209,993

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds purchased and securities sold under
   agreement to repurchase

 

 

27,562

 

 

 

27,562

 

 

 

-

 

 

 

-

 

 

 

27,562

 

Federal Home Loan Bank advances

 

 

188,445

 

 

 

189,174

 

 

 

-

 

 

 

-

 

 

 

189,174

 

Subordinated notes, net of unamortized issuance costs

 

 

34,875

 

 

 

32,809

 

 

 

-

 

 

 

32,809

 

 

 

-

 

Interest payable

 

 

6,626

 

 

 

6,626

 

 

 

-

 

 

 

-

 

 

 

6,626

 

 

 

 

(In Thousands)

 

 

 

December 31, 2024

 

 

 

Carrying

 

 

Fair

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

176,351

 

 

$

176,351

 

 

$

176,351

 

 

$

-

 

 

$

-

 

Interest-bearing time deposits

 

 

2,482

 

 

 

2,472

 

 

 

-

 

 

 

2,472

 

 

 

-

 

Other securities

 

 

14,400

 

 

 

14,400

 

 

 

-

 

 

 

-

 

 

 

14,400

 

Loans held for sale

 

 

2,996

 

 

 

2,996

 

 

 

-

 

 

 

-

 

 

 

2,996

 

Loans, net

 

 

2,536,043

 

 

 

2,485,297

 

 

 

-

 

 

 

-

 

 

 

2,485,297

 

Interest receivable

 

 

12,657

 

 

 

12,657

 

 

 

-

 

 

 

-

 

 

 

12,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest bearing deposits

 

$

516,904

 

 

$

516,904

 

 

$

516,904

 

 

$

-

 

 

$

-

 

Interest bearing deposits

 

 

1,522,280

 

 

 

1,521,097

 

 

 

-

 

 

 

-

 

 

 

1,521,097

 

Time deposits

 

 

647,581

 

 

 

644,849

 

 

 

-

 

 

 

-

 

 

 

644,849

 

Total Deposits

 

 

2,686,765

 

 

 

2,682,850

 

 

 

516,904

 

 

 

-

 

 

 

2,165,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds purchased and securities sold under
   agreement to repurchase

 

 

27,218

 

 

 

27,218

 

 

 

-

 

 

 

-

 

 

 

27,218

 

Federal Home Loan Bank advances

 

 

246,056

 

 

 

245,373

 

 

 

-

 

 

 

-

 

 

 

245,373

 

Subordinated notes, net of unamortized issuance costs

 

 

34,818

 

 

 

31,983

 

 

 

-

 

 

 

31,983

 

 

 

-

 

Interest payable

 

 

6,618

 

 

 

6,618

 

 

 

-

 

 

 

-

 

 

 

6,618