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Fair Value Accounting
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Accounting

NOTE 6 – Fair Value Accounting

FASB ASC 820, “Fair Value Measurement and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

  Level 1 – Quoted market price in active markets
 

Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include certain debt and equity securities that are traded in an active exchange market.

   
  Level 2 – Significant other observable inputs
 

Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include fixed income securities and mortgage-backed securities that are held in the Company’s available-for-sale portfolio and valued by a third-party pricing service, as well as certain individually evaluated loans.

   
  Level 3 – Significant unobservable inputs
  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.  These methodologies may result in a significant portion of the fair value being derived from unobservable data.  

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 12 of the Company’s 2023 Annual Report on Form 10-K. See Note 5 for how the derivative asset fair value is determined. The Company’s loan portfolio is initially fair valued using a segmented approach, using the eight categories of loans as disclosed in Note 4 – Loans and Allowance for Credit Losses. Loans are considered a Level 3 classification.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023.

                       
             
       September 30, 2024 
(dollars in thousands)  Level 1   Level 2   Level 3   Total 
Assets                
Securities available for sale                    
Corporate bonds  $-    1,947    -    1,947 
US treasuries   -    924    -    924 
US government agencies   -    16,686    -    16,686 
State and political subdivisions   -    20,023    -    20,023 
Asset-backed securities   -    34,265    -    34,265 
Mortgage-backed securities   -    60,752    -    60,752 
Mortgage loans held for sale   -    8,602    -    8,602 
Mortgage loan interest rate lock commitments   -    354    -    354 
Total assets measured at fair value on a recurring basis  $-    143,553    -    143,553 
Liabilities                    
Derivative liability   -    3,063    -    3,063 
MBS forward sales commitments   -    48    -    48 
Total liabilities measured at fair value on a recurring basis  $-    3,111    -    3,111 

 

 

                         
                 
   December 31, 2023 
(dollars in thousands)  Level 1   Level 2   Level 3   Total 
Assets                
Securities available for sale:                    
Corporate bonds  $-    1,910    -    1,910 
US treasuries   -                 9,394    -    9,394  
US government agencies   -    18,656    -    18,656 
State and political subdivisions   -    19,741    -    19,741 
Asset-backed securities   -    33,236    -    33,236 
Mortgage-backed securities   -    51,765    -    51,765 
Mortgage loans held for sale   -    7,194    -    7,194 
Mortgage loan interest rate lock commitments   -    159    -    159 
Total assets measured at fair value on a recurring basis  $-    142,055    -    142,055 
Liabilities                    
Derivative liability  $-    482    -    482 
MBS forward sales commitments   -    68    -    68 
Total liabilities measured at fair value on a recurring basis  $-    550    -    550 

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis as of September 30, 2024 and December 31, 2023.

                               
                 
   As of September 30, 2024 
(dollars in thousands)   Level 1   Level 2   Level 3   Total 
Assets                
Individually evaluated loans   $-    8,954    1,812    10,766 
Total assets measured at fair value on a nonrecurring basis  $-    8,954    1,812    10,766 

 

   As of December 31, 2023 
(dollars in thousands)  Level 1   Level 2   Level 3   Total 
Assets                
Individually evaluated loans   $-    1,160    2,976    4,136 
Total assets measured at fair value on a nonrecurring basis  $-    1,160    2,976    4,136 

The Company had no liabilities carried at fair value or measured at fair value on a nonrecurring basis.

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of September 30, 2024 and December 31, 2023, the significant unobservable inputs used in the fair value measurements were as follows:

     
  Valuation Technique Significant Unobservable Inputs Range of Inputs
Individually evaluated loans Appraised Value/ Discounted Cash Flows Discounts to appraisals or cash flows for estimated holding and/or selling costs or age of appraisal 0-25%

Fair Value of Financial Instruments

Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash. Certain items are specifically excluded from the disclosure requirements, including the Company’s common stock, premises and equipment and other assets and liabilities.

The estimated fair values of the Company’s financial instruments at September 30, 2024 and December 31, 2023 are as follows:

                                       
             
       September 30, 2024 
(dollars in thousands)  Carrying
Amount		   Fair
Value		   Level 1   Level 2   Level 3 
Financial Assets:                         
Other investments, at cost  $19,640    19,640    -    -    19,640 
Loans1   3,567,000    3,302,316    -    -    3,302,316 
Financial Liabilities:                         
Deposits   3,518,825    3,348,532    -    3,348,532    - 
Subordinated debentures   24,903    28,200    -    28,200    - 
                     
           December 31, 2023 
(dollars in thousands)  Carrying
Amount		   Fair
Value		   Level 1   Level 2   Level 3 
Financial Assets:                         
Other investments, at cost  $19,939    19,939    -    -    19,939 
Loans1   3,557,120    3,337,768    -    -    3,337,768 
Financial Liabilities:                         
Deposits   3,379,564    2,961,182    -    2,961,182    - 
Subordinated debentures   36,322    40,712    -    40,712    - 
1Carrying amount is net of the allowance for credit losses and individually evaluated loans.