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Note 11 - Fair Value Measurement | 6 Months Ended
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Jun. 30, 2024
Notes to Financial Statements |
Fair Value Disclosures [Text Block] | NOTE 11 - FAIR VALUE MEASUREMENT Measurement of fair value under U.S. GAAP establishes a hierarchy that prioritizes observable and unobservable inputs used to measure fair value, as of the measurement date, into three broad levels, which are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and also considers counterparty credit risk in its assessment of fair value. Debt Securities. Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 securities include highly liquid government securities such as U.S. Treasuries and exchange-traded equity securities. For securities traded in secondary markets for which quoted market prices are not available, the Company generally relies on pricing services provided by independent vendors. Such independent pricing services are to advise the Company on the carrying value of the securities available for sale portfolio. As part of the Company’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, the Company investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. The Company has also reviewed and confirmed its determinations in discussions with the pricing service regarding their methods of price discovery. Securities measured with these techniques are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. In cases where Level 1 or Level 2 inputs are not available, as in the case of certain corporate securities, these securities are classified in Level 3 of the hierarchy. Derivative instruments. The fair values of derivatives are determined based on a valuation pricing model using readily available observable market parameters such as interest rate curves, adjusted for counterparty credit risk. These measurements are classified as level 2 within the valuation hierarchy. Loans Individually Evaluated. Loans individually evaluated are measured and reported at fair value when full payment under the loan terms is not probable. Loans individually evaluated are carried at the present value of expected future cash flows using a discounted cash flow calculation, or the fair value of the collateral if the loan is collateral-dependent. Expected cash flows are based on internal inputs reflecting expected default rates on contractual cash flows. This method of estimating fair value does not incorporate the exit-price concept of fair value described in ASC 820-10 and would generally result in a higher value than the exit-price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally determined based on appraisals performed by certified and licensed appraisers using inputs such as absorption rates, capitalization rates and market comparables, adjusted for estimated costs to sell. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as Level 3 within the valuation hierarchy. Loans individually evaluated are subject to nonrecurring fair value adjustment upon initial recognition or subsequent individual evaluation. A portion of the ACL is allocated to loans individually evaluated if the value of such loans is deemed to be less than the unpaid balance. The range of fair value adjustments and weighted average adjustment as of June 30, 2024 was 0% to 75% and 29%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2023 was 0% to 66% and 25% respectively. Loans individually evaluated are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the same factors identified above. The amount recognized to write-down individually evaluated loans that are measured at fair value on a nonrecurring basis was $4.8 million and $5.8 million during the three and six months ended June 30, 2024, respectively, and $4.1 million and $6.3 million during the three and six months ended June 30, 2023, respectively. Other Real Estate Owned. Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at the lower of cost or fair value, less selling costs. Any write-downs to fair value at the time of transfer to OREO are charged to the ACL subsequent to foreclosure. Values are derived from appraisals of underlying collateral and discounted cash flow analysis. Appraisals are performed by certified and licensed appraisers. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the new cost basis. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in absorption rates and market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition, which could result in adjustment to lower the property value estimates indicated in the appraisals. The range of fair value adjustments and weighted average adjustment as of June 30, 2024 was 10% to 100% and 27%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2023 was 25% to 100% and 38.3%, respectively. These measurements are classified as Level 3 within the valuation hierarchy. A loss on the sale and write-downs of OREO and repossessed assets of $1,000 and $96,000 was recognized for the three and six months ended June 30, 2024, respectively, and $5,000 for the three and six months ended June 30, 2023. These charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO. OREO is classified within Level 3 of the hierarchy. There were four residential real estate loans with a balance of $529,000 foreclosed and classified as OREO as of June 30, 2024, compared to three residential real estate loan foreclosures for $360,000 as of December 31, 2023. Four residential real estate loans totaling $426,000 were in the process of being foreclosed as of June 30, 2024. There were three residential real estate loans for $292,000 that were in the process of being foreclosed as of December 31, 2023. The following table presents the Company’s financial assets carried at fair value on a recurring basis as of June 30, 2024 and December 31, 2023. There were no liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023.
|  | Fair Value Measurements at June 30, 2024 Using |  |  |  |  |
|  | Quoted Prices in |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Active Markets |  |  | Significant Other |  |  | Significant |  |  |  |  |
|  | for Identical |  |  | Observable Inputs |  |  | Unobservable |  |  |  |  |
|  | Assets (Level 1) |  |  | (Level 2) |  |  | Inputs (Level 3) |  |  | Total |
Assets Measured on a Recurring Basis: |  | (In Thousands) |
Available for sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 608,821 |  |  | $ | - |  |  | $ | - |  |  | $ | 608,821 |
Mortgage-backed securities |  |  | - |  |  |  | 241,363 |  |  |  | - |  |  |  | 241,363 |
State and municipal securities |  |  | - |  |  |  | 9,979 |  |  |  | - |  |  |  | 9,979 |
Corporate debt |  |  | - |  |  |  | 314,223 |  |  |  | - |  |  |  | 314,223 |
Total available-for-sale debt securities |  |  | 608,821 |  |  |  | 565,565 |  |  |  | - |  |  |  | 1,174,386 |
Total assets at fair value |  | $ | 608,821 |  |  | $ | 565,565 |  |  | $ | - |  |  | $ | 1,174,386 |
|  | Fair Value Measurements at December 31, 2023 Using |  |  |  |  |
|  | Quoted Prices in |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Active Markets |  |  | Significant Other |  |  | Significant |  |  |  |  |
|  | for Identical |  |  | Observable Inputs |  |  | Unobservable |  |  |  |  |
|  | Assets (Level 1) |  |  | (Level 2) |  |  | Inputs (Level 3) |  |  | Total |
Assets Measured on a Recurring Basis: |  | (In Thousands) |
Available for sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 340,807 |  |  | $ | - |  |  | $ | - |  |  | $ | 340,807 |
Government agency securities |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Mortgage-backed securities |  |  | - |  |  |  | 215,485 |  |  |  | - |  |  |  | 215,485 |
State and municipal securities |  |  | - |  |  |  | 10,223 |  |  |  | - |  |  |  | 10,223 |
Corporate debt |  |  | - |  |  |  | 326,808 |  |  |  | 6,860 |  |  |  | 333,668 |
Total available-for-sale debt securities |  |  | 340,807 |  |  |  | 552,516 |  |  |  | 6,860 |  |  |  | 900,183 |
Total assets at fair value |  | $ | 340,807 |  |  | $ | 552,516 |  |  | $ | 6,860 |  |  | $ | 900,183 |
The following table presents the Company’s financial assets carried at fair value on a nonrecurring basis as of June 30, 2024 and December 31, 2023:
|  | Fair Value Measurements at June 30, 2024 |  |  |  |  |
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total |
Assets Measured on a Nonrecurring Basis: |  | (In Thousands) |
Loans individually evaluated |  | $ | - |  |  | $ | - |  |  | $ | 83,493 |  |  | $ | 83,493 |
Other real estate owned and repossessed assets |  |  | - |  |  |  | - |  |  |  | 1,458 |  |  |  | 1,458 |
Total assets at fair value |  | $ | - |  |  | $ | - |  |  | $ | 84,951 |  |  | $ | 84,951 |
|  | Fair Value Measurements at December 31, 2023 |  |  |  |  |
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total |
Assets Measured on a Nonrecurring Basis: |  | (In Thousands) |
Loans individually evaluated |  | $ | - |  |  | $ | - |  |  | $ | 70,737 |  |  | $ | 70,737 |
Other real estate owned and repossessed assets |  |  | - |  |  |  | - |  |  |  | 995 |  |  |  | 995 |
Total assets at fair value |  | $ | - |  |  | $ | - |  |  | $ | 71,732 |  |  | $ | 71,732 |
There were no liabilities measured at fair value on a non-recurring basis as of June 30, 2024 and December 31, 2023. In the case of the debt securities portfolio, the Company monitors the portfolio to ascertain when transfers between levels have been affected. For the six months ended June 30, 2024, there were two transfers out of Level 3 into Level 2. The table below includes a roll forward of the balance sheet amounts for the three and six months ended June 30, 2024 and June 30, 2023 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy measured at fair value on a recurring basis including changes in fair value due in part to observable factors that are part of the valuation methodology:
|  | For the Three Months Ended June 30, |  |  | For the Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
|  | Available-for-sale Securities |  |  | Available-for-sale Securities |  |  | Available-for-sale Securities |  |  | Available-for-sale Securities |
|  | (In Thousands) |
Fair value, beginning of period |  | $ | - |  |  | $ | 6,860 |  |  | $ | 6,860 |  |  | $ | 10,860 |
Transfers into Level 3 |  |  | - |  |  |  | - |  |  |  |  |  |  |  | - |
Total realized gains included in income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Changes in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period-end |  |  | - |  |  |  | - |  |  |  | (1,329 | ) |  |  | 160 |
Purchases |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Transfers out of Level 3 |  |  | - |  |  |  | - |  |  |  | (5,531 | ) |  |  | (4,160 | )
Fair value, end of period |  | $ | - |  |  | $ | 6,860 |  |  | $ | - |  |  | $ | 6,860 |
The fair value of a financial instrument is the current amount that would be exchanged in a sale between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Current U.S. GAAP excludes certain financial instruments and all nonfinancial instruments from its fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis as of June 30, 2024 and December 31, 2023 were as follows:
|  | June 30, 2024 |  |  | December 31, 2023 |
|  | Carrying |  |  |  |  |  |  | Carrying |  |  |  |  |
|  | Amount |  |  | Fair Value |  |  | Amount |  |  | Fair Value |
|  | (In Thousands) |
Financial Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Level 1 Inputs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1,265,633 |  |  | $ | 1,265,633 |  |  | $ | 2,030,513 |  |  | $ | 2,030,513 |
Held to maturity U.S. Treasury securities |  |  | 274,270 |  |  |  | 250,338 |  |  |  | 508,985 |  |  |  | 484,267 |
Level 2 Inputs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal funds sold |  |  | 11,132 |  |  |  | 11,132 |  |  |  | 100,575 |  |  |  | 100,575 |
Held to maturity debt securities |  |  | 492,735 |  |  |  | 433,646 |  |  |  | 473,429 |  |  |  | 422,674 |
Mortgage loans held for sale |  |  | 11,174 |  |  |  | 11,174 |  |  |  | 5,071 |  |  |  | 5,071 |
Restricted equity securities |  |  | 11,300 |  |  |  | 11,300 |  |  |  | 10,226 |  |  |  | 10,226 |
Level 3 Inputs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Held to maturity debt securities |  |  | 250 |  |  |  | 250 |  |  |  | 250 |  |  |  | 250 |
Loans, net |  |  | 12,174,688 |  |  |  | 11,736,227 |  |  |  | 11,505,512 |  |  |  | 11,032,819 |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Level 2 Inputs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 13,259,392 |  |  | $ | 13,252,073 |  |  | $ | 13,273,511 |  |  | $ | 13,266,640 |
Federal funds purchased |  |  | 1,097,154 |  |  |  | 1,097,154 |  |  |  | 1,256,724 |  |  |  | 1,256,724 |
Other borrowings |  |  | 64,739 |  |  |  | 58,595 |  |  |  | 64,735 |  |  |  | 58,083 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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