v3.26.1
Fair Value Disclosures
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Disclosures Text Block
NOTE 7: FAIR VALUE
Fair Value
Hierarchy
“Fair value” is defined by ASC 820,
Fair Value
Measurements and Disclosures
, as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction occurring in the principal
market (or most advantageous
market in the absence of a principal market) for an asset or liability at the measurement
date.
GAAP establishes a fair value
hierarchy for valuation inputs that gives the highest priority to quoted prices
in active markets for identical assets or
liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy is as follows:
Level 1—inputs to the valuation methodology are quoted prices, unadjusted,
for identical assets or liabilities in active
markets.
Level 2—inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets,
quoted prices for identical or similar assets or liabilities in markets that are not
active, or inputs that are observable for the
asset or liability, either directly
or indirectly.
Level 3—inputs to the valuation methodology are unobservable and reflect
the Company’s own assumptions about
the
inputs market participants would use in pricing the asset or liability.
Level changes in fair value measurements
Transfers between levels of the fair value hierarchy
are generally recognized at the end of each reporting period.
The
Company monitors the valuation techniques utilized for each category
of financial assets and liabilities to ascertain when
transfers between levels have been affected.
The nature of the Company’s financial
assets and liabilities generally is such
that transfers in and out of any level are expected to be infrequent. For the
quarter ended March 31, 2026, there were no
transfers between levels and no changes in valuation techniques for the
Company’s financial assets and liabilities.
Assets and liabilities measured at fair value on a recurring
basis
Securities available-for-sale
Fair values of securities available for sale were primarily measured
using Level 2 inputs.
For these securities, the Company
obtains pricing from third-party pricing services.
These third-party pricing services consider observable data that may
include broker quotes, market spreads, cash flows, market
consensus prepayment speeds, benchmark yields, reported trades
for similar securities, credit information, and the securities’ terms and
conditions.
On a quarterly basis, management
reviews the pricing received from the third-party pricing services for
reasonableness given current market conditions.
As
part of its review, management
may obtain non-binding third-party broker quotes to validate the fair
value measurements.
In addition, management will periodically submit pricing provided by
the third-party pricing services to another
independent valuation firm on a sample basis.
This independent valuation firm will compare the price provided by
the
third-party pricing service with its own price and will review the significant assumptions
and valuation methodologies used
with management.
Interest Rate Swaps
The fair values of the Company’s interest
rate swaps are estimated using a discounted cash flow model.
The model
considers the present value of expected future cash flows under the terms
of the swap and incorporates observable market
data such as: relevant interest rate swap curves, benchmark yield curves
(e.g., SOFR-based or other market-based curves),
and forward interest rate expectations over the contractual term of the instruments.
Because the significant inputs used in
valuing the interest rate swaps are observable in active markets, the Company
classifies these instruments with Level 2 of
the fair value hierarchy.
The following table presents the balances of the assets and liabilities measured at fair
value on a recurring basis as of March
31, 2026 and December 31, 2025, respectively,
by caption, on the accompanying consolidated balance sheets by ASC 820
valuation hierarchy (as described above).
Quoted Prices in
Significant
Active Markets
Other
Significant
for
Observable
Unobservable
Identical Assets
Inputs
Inputs
(Dollars in thousands)
Amount
(Level 1)
(Level 2)
(Level 3)
March 31, 2026:
Securities available-for-sale:
Agency obligations
$
52,641
—
52,641
—
Agency MBS
156,742
—
156,742
—
State and political subdivisions
17,402
—
17,402
—
Total securities available
-for-sale
226,785
—
226,785
—
Other assets - interest rate swaps
21
—
21
—
Total
assets at fair value
$
226,806
—
226,806
—
December 31, 2025:
Securities available-for-sale:
Agency obligations
$
53,784
—
53,784
—
Agency MBS
161,927
—
161,927
—
State and political subdivisions
17,548
—
17,548
—
Total securities available
-for-sale
233,259
—
233,259
—
Total
assets at fair value
$
233,259
—
233,259
—
Other liabilities - interest rate swap
22
—
22
—
Total
liabilities at fair value
$
22
—
22
—
Assets and liabilities measured at fair value on a nonrecurring
basis
Collateral dependent loans
Collateral dependent loans are measured at the fair value of the collateral securing
the loan less estimated selling costs. The
fair value of real estate collateral is determined based on real estate appraisals which
are generally based on recent sales of
comparable properties which are then adjusted for property specific factors.
Non-real estate collateral is valued based on
various sources, including third party asset valuations and internally determined
values based on cost adjusted for
depreciation and other judgmentally determined discount factors. Collateral dependent
loans are classified within Level 3 of
the hierarchy due to the unobservable inputs used in determining their fair
value such as collateral values and the borrower's
underlying financial condition.
Mortgage servicing rights, net
MSRs, net, included in other assets on the accompanying consolidated balance
sheets, are carried at the lower of cost or
estimated fair value.
MSRs do not trade in an active market with readily observable prices.
To determine the fair
value of
MSRs, the Company engages an independent third party.
The independent third party’s valuation
model calculates the
present value of estimated future net servicing income using assumptions that
market participants would use in estimating
future net servicing income, including estimates of prepayment speeds,
discount rate, default rates, cost to service, escrow
account earnings, contractual servicing fee income, ancillary income,
and late fees.
Periodically, the Company
will review
broker surveys and other market research to validate significant assumptions
used in the model.
The significant
unobservable inputs include prepayment speeds or the constant prepayment
rate (“CPR”) and the weighted average
discount rate.
Because the valuation of MSRs requires the use of significant unobservable inputs, all of
the Company’s
MSRs are classified within Level 3 of the valuation hierarchy.
The following table presents the balances of the assets and liabilities measured at fair
value on a nonrecurring basis as of
March 31, 2026 and December 31, 2025, respectively,
by caption, on the accompanying consolidated balance sheets and by
ASC 820 valuation hierarchy (as described above):
Quoted Prices in
Active Markets
Other
Significant
for
Observable
Unobservable
Carrying
Identical Assets
Inputs
Inputs
(Dollars in thousands)
Amount
(Level 1)
(Level 2)
(Level 3)
March 31, 2026:
Other assets
(2)
$
753
—
—
753
Total assets at fair value
$
753
—
—
753
December 31, 2025:
Loans, net
(1)
$
378
—
—
378
Other assets
(2)
771
—
—
771
Total assets at fair value
$
1,149
—
—
1,149
(1)
Loans considered collateral dependent under ASC 326
Financial Instruments - Credit Losses
.
(2)
Represents MSRs, net, carried at lower of cost or estimated
fair value.
Quantitative Disclosures for Level 3 Fair Value
Measurements
At March 31, 2026 and December 31, 2025, the Company had no Level 3 assets measured
at fair value on a recurring basis.
For Level 3 assets measured at fair value on a non-recurring basis at March 31,
2026 and December 31, 2025, the
significant unobservable inputs used in the fair value measurements are
presented below.
Range of
Weighted
Carrying
Significant
Unobservable
Average
(Dollars in thousands)
Amount
Valuation Technique
Unobservable Input
Inputs
of Input
March 31, 2026:
Mortgage servicing rights, net
$
753
Discounted cash flow
Prepayment speed or CPR
7.0
-
7.4
%
7.0
%
Discount rate
9.5
-
11.5
9.5
December 31, 2025:
Collateral dependent loans
$
378
Appraisal
Appraisal discounts
10.0
-
10.0
%
10.0
%
Mortgage servicing rights, net
771
Discounted cash flow
Prepayment speed or CPR
6.8
-
8.4
8.2
Discount rate
9.5
-
11.5
9.5
Fair Value
of Financial Instruments
ASC 825,
Financial Instruments
, requires disclosure of fair value information about financial instruments,
whether or not
recognized on the face of the balance sheet, for which it is practicable to
estimate that value. The assumptions used in the
estimation of the fair value of the Company’s
financial instruments are explained below.
Where quoted market prices are
not available, fair values are based on estimates using discounted cash flow
analyses. Discounted cash flows can be
significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. The
following fair value estimates cannot be substantiated by comparison to
independent markets and should not be considered
representative of the liquidation value of the Company’s
financial instruments, but rather are good-faith estimates of the fair
value of financial instruments held by the Company.
ASC 825 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements.
The following methods and assumptions were used by the Company in estimating
the fair value of its financial instruments:
Loans, net
Fair values for loans were calculated using discounted cash flows. The discount
rates reflected current rates at which similar
loans would be made for the same remaining maturities. Expected future
cash flows were projected based on contractual
cash flows, adjusted for estimated prepayments.
The fair value of loans was measured using an exit price notion.
Loans held for sale
Loans held for sale are recorded at the lower of cost or fair value.
Fair values are determined using quoted secondary
market prices for similar loans.
Time Deposits
Fair values for time deposits were estimated using discounted cash flows
.
The discount rates were based on rates currently
offered for deposits with similar remaining maturities.
The carrying value, related estimated fair value,
and placement in the fair value hierarchy of the Company’s
financial
instruments at March 31, 2026 and December 31, 2025 are presented below.
This table excludes financial instruments
recorded at fair value on a recurring basis, and financial instruments for
which the carrying amount approximates fair value.
Financial assets for which fair value approximates carrying value included cash
and cash equivalents.
Financial liabilities
for which fair value approximates carrying value included noninterest
-bearing demand deposits, interest-bearing demand
deposits, and savings deposits.
Fair value approximates carrying value in these financial liabilities due to these
products
having no stated maturity.
Additionally, financial liabilities for
which fair value approximates carrying value included
overnight borrowings such as federal funds purchased and securities sold under
agreements to repurchase.
The following table summarizes our fair value estimates:
Fair Value Hierarchy
Carrying
Estimated
Level 1
Level 2
Level 3
(Dollars in thousands)
amount
fair value
inputs
inputs
Inputs
March 31, 2026:
Financial Assets:
Loans, net (1)
$
575,264
$
561,030
—
—
$
561,030
Financial Liabilities:
Time Deposits
$
180,957
$
180,076
—
180,076
$
—
December 31, 2025:
Financial Assets:
Loans, net (1)
$
558,178
$
542,382
—
—
$
542,382
Loans held for sale
172
179
—
179
—
Financial Liabilities:
Time Deposits
$
176,801
$
176,137
—
176,137
$
—
(
1) Represents loans, net of allowance for credit losses.
The fair value of loans was measured using an
exit price notion.