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Fair Value Measurement
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurement

NOTE 17 - FAIR VALUE MEASUREMENT

GAAP establishes a hierarchal disclosure framework associated with the level of observable pricing utilized in measuring assets and liabilities at fair value. The three broad levels defined by the hierarchy are as follows: 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; Level 3: Significant unobservable inputs that reflect the Company’s own view about the assumptions that market participants would use in pricing an asset.

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 has two types of equity securities, one is not actively traded in an open market, while the other is listed on an exchange and is less frequently traded. The fair value of 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).

Fair value swap asset/liability: The fair value of swap assets and liabilities is based on an external derivative model using data inputs as of the valuation date and classified Level 2.

Collateral Dependent Loans: The Company generally measures the fair value of collateral dependent loans based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value of the collateral dependent loan is less than the carrying amount of the loan, a specific reserve for the loan is made in the allowance for credit losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the table below as a Level 3 measurement.

Assets and liabilities measured at fair value are summarized below.

 

Fair Value Measurements at December 31, 2024 using:

 

 

 

(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

 

$

—

 

 

$

97,387

 

 

$

—

 

Obligations of states and political subdivisions

 

 

—

 

 

 

325,119

 

 

 

—

 

Mortgage-backed securities in government
   sponsored entities

 

 

—

 

 

 

225,561

 

 

 

—

 

Total securities available for sale

 

 

—

 

 

 

648,067

 

 

 

—

 

Equity securities

 

 

—

 

 

 

2,421

 

 

 

—

 

Swap asset

 

 

—

 

 

 

5,308

 

 

 

—

 

Liabilities measured at fair value on a recurring
   basis:

 

 

 

 

 

 

 

 

 

Swap liability

 

 

—

 

 

 

11,638

 

 

 

—

 

Assets measured at fair value on a nonrecurring
   basis:

 

 

 

 

 

 

 

 

 

Collateral-dependent loans

 

$

—

 

 

$

—

 

 

$

19,177

 

 

Fair Value Measurements at December 31, 2023 using:

 

 

 

(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:

 

 

 

 

 

 

 

 

 

Collateral-dependent loans

 

$

—

 

 

$

—

 

 

$

5,083

 

 

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 at December 31, 2024 and 2023.

 

 

 

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2024

 

Fair Value

 

 

Valuation
Technique

 

Unobservable
Input

 

Range

 

Weighted
Average

Collateral-dependent loans

 

$

19,177

 

 

Appraisals which utilize sales comparison, net income and cost approach

 

Discounts for collection issues and changes in market conditions

 

10 - 75%

 

25%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2023

 

Fair Value

 

 

Valuation
Technique

 

Unobservable
Input

 

Range

 

Weighted
Average

Collateral-dependent loans

 

$

5,083

 

 

Appraisals which utilize sales comparison, net income and cost approach

 

Discounts for collection issues and changes in market conditions

 

20 - 50%

 

27%

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value of Financial Instruments

 

Much of the information used to arrive at “fair value” is highly subjective and judgmental in nature and therefore the results may not be precise. Subjective factors include, among other things, estimated cash flows, risk characteristics and interest rates, all of which are subject to change. With the exception of investment securities, the Company’s financial instruments are not readily marketable and market prices do not exist. Since negotiated prices for the instruments, which are not readily marketable, depend greatly on the motivation of the buyer and seller, the amounts that will actually be realized or paid per settlement or maturity of these instruments could be significantly different.

 

The carrying amount of cash and cash equivalents and accrued interest receivable, as a result of their short-term nature, is considered to be equal to fair value and are classified as Level 1.

 

The carrying amount of investments in time deposits is classified as Level 2.

 

It was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability.

 

The Company uses an exit price income approach to determine the fair value of the loan portfolio. The model utilizes a discounted cash flow approach to estimate the fair value of the loans using assumptions for the coupon rates, remaining maturities, prepayment speeds, projected default probabilities, losses given defaults, and estimates of prevailing discount rates. The discounted cash flow approach models the credit losses directly in the projected cash flows. The model applies various assumptions regarding credit, interest, and prepayment risks for the loans based on loan types, payment types and fixed or variable classifications. For all periods presented, the estimated fair value of individually analyzed loans is based on the fair value of the collateral, less estimated cost to sell, or the present value of the loan’s expected future cash flows (discounted at the loan’s effective interest rate). All individually analyzed loans are classified as Level 3 within the valuation hierarchy.

 

Mortgage servicing rights' fair value is calculated based off a discount rate, prepayment speeds and default rate and are classified at Level 3.

 

The fair values of noninterest-bearing deposits are considered equal to the amount payable on demand at the reporting date (i.e., carrying value) and are classified as Level 1. The fair value of savings, NOW and certain money market accounts are equal to their carrying amounts and are a Level 1 classification. Fair values of fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on

certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 3 classification.

 

The fair values of subordinated debentures are estimated using a discounted cash flow calculation that applies interest rates currently being offered on subordinated debentures to the schedule of maturities on the subordinated debt tranches resulting in a Level 3 classification.

 

FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 3 classification.

 

The carrying amount and fair value of financial instruments carried at amortized cost were as follows:

 

December 31, 2024

 

Carrying
Amount

 

 

Total
Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from financial institutions

 

$

63,155

 

 

$

63,155

 

 

$

63,155

 

 

$

—

 

 

$

—

 

Investments in time deposits

 

 

1,450

 

 

 

1,450

 

 

 

—

 

 

$

1,450

 

 

 

—

 

Other securities

 

 

30,352

 

 

 

30,352

 

 

 

30,352

 

 

 

—

 

 

 

—

 

Loans, held for sale

 

 

665

 

 

 

665

 

 

 

665

 

 

 

—

 

 

 

—

 

Loans, net of allowance for credit losses

 

 

3,041,561

 

 

 

2,919,899

 

 

 

—

 

 

 

—

 

 

 

2,919,899

 

Mortgage servicing rights

 

 

2,877

 

 

 

3,854

 

 

 

—

 

 

 

—

 

 

 

3,854

 

Accrued interest receivable

 

 

13,453

 

 

 

13,453

 

 

 

13,453

 

 

 

—

 

 

 

—

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonmaturing deposits

 

 

2,266,916

 

 

 

2,266,916

 

 

 

2,266,916

 

 

 

—

 

 

 

—

 

Time deposits

 

 

944,954

 

 

 

948,734

 

 

 

—

 

 

 

—

 

 

 

948,734

 

Short-term FHLB advances

 

 

339,000

 

 

 

339,000

 

 

 

339,000

 

 

 

—

 

 

 

—

 

Long-term FHLB advances

 

 

1,501

 

 

 

1,418

 

 

 

—

 

 

 

—

 

 

 

1,418

 

Subordinated debentures

 

 

104,089

 

 

 

101,175

 

 

 

—

 

 

 

—

 

 

 

101,175

 

Other borrowings

 

 

6,293

 

 

 

6,293

 

 

 

—

 

 

 

—

 

 

 

6,293

 

Accrued interest payable

 

 

9,518

 

 

 

9,518

 

 

 

9,518

 

 

 

—

 

 

 

—

 

 

 

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

 

 

$

—

 

 

$

—

 

Investments in time deposits

 

 

1,225

 

 

 

1,225

 

 

 

—

 

 

$

1,225

 

 

 

—

 

Other securities

 

 

29,998

 

 

 

29,998

 

 

 

29,998

 

 

 

—

 

 

 

—

 

Loans, held for sale

 

 

1,725

 

 

 

1,725

 

 

 

1,725

 

 

 

—

 

 

 

—

 

Loans, net of allowance for credit losses

 

 

2,824,568

 

 

 

2,679,988

 

 

 

—

 

 

 

—

 

 

 

2,679,988

 

Mortgage servicing rights

 

 

3,018

 

 

 

3,018

 

 

 

—

 

 

 

—

 

 

 

3,018

 

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

 

 

 

—

 

 

 

—

 

 

 

9,859

 

Accrued interest payable

 

 

9,525

 

 

 

9,525

 

 

 

9,525

 

 

 

—

 

 

 

—