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Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

Note 20 - 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.

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of December 31, 2024 and 2023, 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, Bank Premises and Equipment, Construction in Progress, Derivatives (which are included in Other Assets or Other Liabilities), Goodwill, Loan Servicing Rights, Other Real Estate Owned, Bank Owned Life Insurance, Other Assets, Dividends Payable, Accrued Expenses and Other Liabilities.

 

 

 

(In Thousands)

 

 

 

December 31, 2024

 

 

 

December 31, 2023

 

 

 

Carrying

 

 

Fair

 

 

 

 

 

 

 

 

 

 

 

 

Carrying

 

 

Fair

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

Amount

 

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

176,351

 

 

$

176,351

 

 

$

176,351

 

 

$

-

 

 

$

-

 

 

 

$

142,201

 

 

$

142,201

 

 

$

142,201

 

 

$

-

 

 

$

-

 

Interest-bearing time deposits

 

 

2,482

 

 

 

2,472

 

 

 

-

 

 

 

2,472

 

 

 

-

 

 

 

 

2,740

 

 

 

2,725

 

 

 

-

 

 

 

2,725

 

 

 

-

 

Other securities

 

 

14,400

 

 

 

14,400

 

 

 

-

 

 

 

-

 

 

 

14,400

 

 

 

 

17,138

 

 

 

17,138

 

 

 

-

 

 

 

-

 

 

 

17,138

 

Loans held for sale

 

 

2,996

 

 

 

2,996

 

 

 

-

 

 

 

-

 

 

 

2,996

 

 

 

 

1,576

 

 

 

1,552

 

 

 

-

 

 

 

-

 

 

 

1,552

 

Loans, net

 

 

2,536,043

 

 

 

2,485,297

 

 

 

-

 

 

 

-

 

 

 

2,485,297

 

 

 

 

2,556,167

 

 

 

2,396,540

 

 

 

-

 

 

 

-

 

 

 

2,396,540

 

Interest receivable

 

 

12,657

 

 

 

12,657

 

 

 

-

 

 

 

-

 

 

 

12,657

 

 

 

 

11,774

 

 

 

11,774

 

 

 

-

 

 

 

-

 

 

 

11,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing deposits

 

$

1,522,280

 

 

$

1,521,097

 

 

$

-

 

 

$

-

 

 

$

1,521,097

 

 

 

$

1,415,981

 

 

$

1,416,007

 

 

$

-

 

 

$

-

 

 

$

1,416,007

 

Noninterest bearing deposits

 

 

516,904

 

 

 

516,904

 

 

 

516,904

 

 

 

-

 

 

 

-

 

 

 

 

528,465

 

 

 

528,465

 

 

 

528,465

 

 

 

-

 

 

 

-

 

Time deposits

 

 

647,581

 

 

 

644,849

 

 

 

-

 

 

 

-

 

 

 

644,849

 

 

 

 

663,017

 

 

 

656,141

 

 

 

-

 

 

 

-

 

 

 

656,141

 

Total Deposits

 

 

2,686,765

 

 

 

2,682,850

 

 

 

516,904

 

 

 

-

 

 

 

2,165,946

 

 

 

 

2,607,463

 

 

 

2,600,613

 

 

 

528,465

 

 

 

-

 

 

 

2,072,148

 

Fed funds purchased and
   securities sold under
   agreement to repurchase

 

 

27,218

 

 

 

27,218

 

 

 

-

 

 

 

-

 

 

 

27,218

 

 

 

 

28,218

 

 

 

28,218

 

 

 

-

 

 

 

-

 

 

 

28,218

 

Federal Home Loan Bank
 advances

 

 

246,056

 

 

 

245,373

 

 

 

-

 

 

 

-

 

 

 

245,373

 

 

 

 

265,750

 

 

 

260,400

 

 

 

-

 

 

 

-

 

 

 

260,400

 

Subordinated notes

 

 

34,818

 

 

 

31,983

 

 

 

-

 

 

 

31,983

 

 

 

-

 

 

 

 

34,702

 

 

 

30,676

 

 

 

-

 

 

 

30,676

 

 

 

-

 

Interest payable

 

 

6,618

 

 

 

6,618

 

 

 

-

 

 

 

-

 

 

 

6,618

 

 

 

 

5,441

 

 

 

5,441

 

 

 

-

 

 

 

-

 

 

 

5,441

 

Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2024 and 2023, and the valuation techniques used by the Company to determine those fair values. There were no changes to valuation techniques during 2024.

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, securities are valued using the quoted price and are classified as Level 1. The quoted prices are not adjusted.

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.

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 four 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 table summarizes financial assets measured at fair value on a recurring basis as of December 31, 2024 and December 31, 2023 segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value.

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis (In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices in

 

 

Significant

 

 

Significant

 

 

 

Active Markets

 

 

Observable

 

 

Observable

 

 

 

for Identical

 

 

Inputs

 

 

Inputs

 

December 31, 2024

 

Assets (Level 1)

 

 

(Level 2)

 

 

(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

)

 

$

-

 

 

 

 

 

Quoted Prices in

 

 

Significant

 

 

Significant

 

 

 

Active Markets

 

 

Observable

 

 

Observable

 

 

 

for Identical

 

 

Inputs

 

 

Inputs

 

December 31, 2023

 

Assets (Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets-(Securities Available-for-Sale)

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

80,270

 

 

$

-

 

 

$

-

 

U.S. Government agencies

 

 

19,630

 

 

 

108,592

 

 

 

-

 

Mortgage-backed securities

 

 

-

 

 

 

82,132

 

 

 

-

 

State and local governments

 

 

-

 

 

 

65,394

 

 

 

2,460

 

Total Securities Available-for-Sale

 

$

99,900

 

 

$

256,118

 

 

$

2,460

 

Interest rate swaps liabilities

 

$

-

 

 

$

(2,679

)

 

$

-

 

 

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local

 

 

State and Local

 

 

State and Local

 

 

 

Governments

 

 

Governments

 

 

Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at January 1, 2024

 

$

1,188

 

 

$

1,272

 

 

$

2,460

 

Change in Fair Value

 

 

-

 

 

 

2

 

 

 

2

 

Purchases

 

 

-

 

 

 

-

 

 

 

-

 

Sales

 

 

-

 

 

 

-

 

 

 

-

 

Payments & Maturities

 

 

(835

)

 

 

-

 

 

 

(835

)

Balance at December 31, 2024

 

$

353

 

 

$

1,274

 

 

$

1,627

 

 

 

 

 

(In Thousands)

 

 

 

Fair Value Measurements Using Significant

 

 

 

Unobservable Inputs (Level 3)

 

 

 

State and Local

 

 

State and Local

 

 

State and Local

 

 

 

Governments

 

 

Governments

 

 

Governments

 

 

 

Tax-Exempt

 

 

Taxable

 

 

Total

 

Balance at January 1, 2023

 

$

2,071

 

 

$

1,274

 

 

$

3,345

 

Change in Fair Value

 

 

38

 

 

 

(2

)

 

 

36

 

Purchases

 

 

-

 

 

 

-

 

 

 

-

 

Sales

 

 

-

 

 

 

-

 

 

 

-

 

Payments & Maturities

 

 

(921

)

 

 

-

 

 

 

(921

)

Balance at December 31, 2023

 

$

1,188

 

 

$

1,272

 

 

$

2,460

 

 

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.

There were no securities that transferred in or out of Level 3 during 2024.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a nonrecurring basis. At December 31, 2024 and 2023, 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 estimated realizable values of available collateral are typically based on outside appraisals.

At December 31, 2024, collateral dependent loans categorized as Level 3 were $3.0 million and $22.7 million at December 31, 2023. The specific allocation for collateral dependent loans was $52 thousand as of December 31, 2024 and $386 thousand as of December 31, 2023. The specific allocations are accounted for in the allowance for credit losses (see Note 4).

During 2024 and 2023, impairment was recognized on loan servicing rights based upon the independent third party’s quarterly valuations. 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 $97 thousand ($2 thousand on 1-4 family real estate loans and $95 thousand on agricultural real estate loans) at December 31, 2024 compared to $7 thousand ($2 thousand on 1-4 family real estate loans and $5 thousand on agricultural real estate loans) at December 31, 2023.

Other real estate is reported at the lower of either the fair value of the real estate, minus the estimated costs to sell the asset, or the cost of the asset. The determination of the fair value of the real estate relies primarily on appraisals from third parties. If the fair value of the real estate, minus the estimated costs to sell the asset, is less than the asset’s cost, the deficiency is recognized as a valuation allowance against the asset through a charge to expense. The valuation allowance is therefore increased or decreased, through charges or credits to expense, for changes in the asset’s fair value or estimated selling costs.

The following tables present assets measured at fair value on a nonrecurring basis:

 

 

 

($ in Thousands)

 

 

 

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

 

 

 

 

 

 

Quoted Prices in

 

 

 

 

 

 

 

 

 

 

 

 

Markets for

 

 

Significant

 

 

Significant

 

 

 

Balance at

 

 

Identical

 

 

Observable Inputs

 

 

Unobservable Inputs

 

 

 

December 31, 2024

 

 

Assets (Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Collateral dependent
    loans

 

$

2,988

 

 

$

-

 

 

$

-

 

 

$

2,988

 

Loan servicing
    rights

 

 

(4

)

 

 

-

 

 

 

-

 

 

 

(4

)

 

 

 

 

($ in Thousands)

 

 

 

Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2023

 

 

 

 

 

 

Quoted Prices in

 

 

 

 

 

 

 

 

 

 

 

 

Markets for

 

 

Significant

 

 

Significant

 

 

 

Balance at

 

 

Identical

 

 

Observable Inputs

 

 

Unobservable Inputs

 

 

 

December 31, 2023

 

 

Assets (Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Collateral dependent
    loans

 

$

22,676

 

 

$

-

 

 

$

-

 

 

$

22,676

 

Loan servicing
    rights

 

 

58

 

 

 

-

 

 

 

-

 

 

 

58

 

 

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

 

 

 

(In Thousands)

 

 

 

 

 

 

 

 

 

Fair Value at December 31, 2024

 

 

Valuation Technique

 

Unobservable Inputs

 

Range
(Weighted 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%)

 

 

 

 

(In Thousands)

 

 

 

 

 

 

 

 

 

Fair Value at December 31, 2023

 

 

Valuation Technique

 

Unobservable Inputs

 

Range
(Weighted Average)

State and local
   government

 

$

2,460

 

 

Discounted Cash Flow

 

Credit strength of underlying project or entity / Discount rate

 

-0.17-4.92%
(3.49%)

Collateral dependent
   loans

 

 

22,676

 

 

Collateral based measurements

 

Discount to reflect current market conditions and ultimate collectability

 

0.00-50.00%
(0.41%)

Loan servicing
    rights

 

 

58

 

 

Discounted Cash Flow

 

Constant prepayment rate and probability of default / Discount rate

 

5.11-22.80%
(10.87%)