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Note 9 - Fair Value Measurement | 9 Months Ended
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Sep. 30, 2025
Notes to Financial Statements |
Fair Value Disclosures [Text Block] | 9. FAIR VALUE MEASUREMENT 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: The Company measures fair value under the fair value hierarchy described below. Level 1: Quoted prices for identical instruments traded in active exchange markets. Level 2: Quoted prices (unadjusted) for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data. Level 3: Model based techniques that use one significant assumption not observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use on pricing the asset or liability. Valuation techniques include management judgment and estimation which may be significant. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings. Fair Value of Financial Instruments FASB ASC 825, Financial Instruments, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The carrying amounts and estimated fair values of the Company’s financial instruments are presented in the following tables whether or not recognized on the Consolidated Balance Sheets at fair value. The carrying amounts and estimated fair values of financial instruments, at September 30, 2025 follows in thousands:
|  |  |  |  |  | Fair Value Measurements at September 30, 2025, Using: |
|  | Carrying Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total Fair Value |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 87,279 |  |  | $ | 87,279 |  |  | $ | - |  |  | $ | - |  |  | $ | 87,279 |
Investment securities |  |  | 484,686 |  |  |  | - |  |  |  | 484,686 |  |  |  | - |  |  |  | 484,686 |
Loans, net |  |  | 1,480,415 |  |  |  | - |  |  |  | - |  |  |  | 1,444,023 |  |  |  | 1,444,023 |
FHLB stock |  |  | 8,804 |  |  |  | - |  |  |  | 8,804 |  |  |  | - |  |  |  | 8,804 |
FRB Stock |  |  | 3,155 |  |  |  | - |  |  |  | 3,155 |  |  |  | - |  |  |  | 3,155 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 1,819,536 |  |  |  | 1,604,947 |  |  |  | - |  |  |  | 213,842 |  |  |  | 1,818,789 |
Repurchase agreements |  |  | 93,863 |  |  |  | - |  |  |  | 93,863 |  |  |  | - |  |  |  | 93,863 |
Borrowings |  |  | 26,705 |  |  |  | - |  |  |  | - |  |  |  | 25,986 |  |  |  | 25,986 |
The carrying amounts and estimated fair values of financial instruments, at December 31, 2024 follows, in thousands:
|  |  |  |  |  | Fair Value Measurements at December 31, 2024, Using: |
Financial assets: |  |  | Carrying Value |  |  |  | Level 1 |  |  |  | Level 2 |  |  |  | Level 3 |  |  |  | Total Fair Value |
Cash and cash equivalents |  | $ | 82,018 |  |  | $ | 82,018 |  |  | $ | - |  |  | $ | - |  |  | $ | 82,018 |
Investment securities |  |  | 437,735 |  |  |  | - |  |  |  | 437,735 |  |  |  | - |  |  |  | 437,735 |
Loans, net |  |  | 1,005,375 |  |  |  | - |  |  |  | - |  |  |  | 981,114 |  |  |  | 981,114 |
FHLB stock |  |  | 6,234 |  |  |  | - |  |  |  | 6,234 |  |  |  | - |  |  |  | 6,234 |
FRB Stock |  |  | 1,380 |  |  |  | - |  |  |  | 1,380 |  |  |  | - |  |  |  | 1,380 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 1,371,101 |  |  |  | 1,276,912 |  |  |  | - |  |  |  | 94,161 |  |  |  | 1,371,073 |
Repurchase agreements |  |  | 22,073 |  |  |  | - |  |  |  | 22,073 |  |  |  | - |  |  |  | 22,073 |
Borrowings |  |  | 15,000 |  |  |  | - |  |  |  | - |  |  |  | 13,967 |  |  |  | 13,967 |
The methods and assumptions used to estimate the fair value of each class of financial instruments not measured at fair value are as follows: Cash and cash equivalents - The carrying values of cash and due from banks are of such short duration that carrying value reasonably approximates fair value. Loans - Loans are generally valued by discounting expected cash flows using market inputs with adjustments based on cohort level assumptions for certain loan types as well as internally developed estimates at a business segment level. Due to the significance of the unobservable market inputs and assumptions, as well as the absence of a liquid secondary market for most loans, these loans are classified as Level 3. Nonaccrual loans are written down and reported at their estimated recovery value which approximates their fair value and classified as Level 3. FHLB/FRB stock -The carrying value of restricted equity investments approximates fair value based on the redemption provisions of the issuer and classified as Level 2. Deposits - The estimated fair value of deposits with no stated maturity, such as demand deposit accounts, money market accounts, and savings accounts was the amount payable on demand at the reporting date. The fair value of time deposits was estimated based on a discounted cash flow technique using Level 3 inputs appropriate to the contractual maturity. Repurchase agreements - The fair value of the repurchase agreement is based on Level 2 inputs. The primary inputs used in the valuation include the market interest rate and the credit quality of the underlying securities. Borrowings - The cash flows were calculated using the contractual features of the borrowing and then discounted using observable market rates. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. Those estimates that are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision are included in Level 3. Changes in assumptions could significantly affect the fair values presented. These estimates do not reflect any premium or discount that could result from offering the Company's entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates. The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2025 and December 31, 2024, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value: Assets and liabilities measured at fair value on a recurring basis at September 30, 2025 are summarized below, in thousands:
|  |  |  |  |  | Fair Value Measurements at |
|  |  |  |  |  | September 30, 2025 Using |
|  |  |  |  |  | Quoted |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Prices in |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active |  |  | Significant |  |  |  |  |
|  |  |  |  |  | Markets for |  |  | Other |  |  | Significant |
|  |  |  |  |  | Identical |  |  | Observable |  |  | Unobservable |
|  |  |  |  |  | Assets |  |  | Inputs |  |  | Inputs |
|  | Total Fair Value |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government-sponsored agencies collateralized by mortgage obligations- residential |  |  | 250,865 |  |  |  | - |  |  |  | 250,865 |  |  |  | - |
U.S. Government agencies collateralized by mortgage obligations-commercial |  |  | 138,938 |  |  |  | - |  |  |  | 138,938 |  |  |  | - |
Obligations of states and political subdivisions |  |  | 94,883 |  |  |  | - |  |  |  | 94,883 |  |  |  | - |
|  | $ | 484,686 |  |  | $ | - |  |  | $ | 484,686 |  |  | $ | - |
Assets and liabilities measured at fair value on a recurring basis at December 31, 2024 are summarized below, in thousands:
|  |  |  |  |  | Fair Value Measurements at |
|  |  |  |  |  | December 31, 2024 Using |
|  |  |  |  |  | Quoted |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Prices in |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active |  |  | Significant |  |  |  |  |
|  |  |  |  |  | Markets for |  |  | Other |  |  | Significant |
|  |  |  |  |  | Identical |  |  | Observable |  |  | Unobservable |
|  |  |  |  |  | Assets |  |  | Inputs |  |  | Inputs |
|  | Total Fair Value |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government-sponsored agencies collateralized by mortgage obligations - residential |  |  | 228,391 |  |  |  | - |  |  |  | 228,391 |  |  |  | - |
U.S. Government-agencies collateralized by mortgage obligations - commercial |  |  | 121,870 |  |  |  | - |  |  |  | 121,870 |  |  |  | - |
Obligations of states and political subdivisions |  |  | 87,474 |  |  |  | - |  |  |  | 87,474 |  |  |  | - |
|  | $ | 437,735 |  |  | $ | - |  |  | $ | 437,735 |  |  | $ | - |
The fair value of securities available-for-sale equals quoted market price, if available. If quoted market prices are not available, fair value is determined using quoted market prices for similar securities or matrix pricing. There were no changes in the valuation techniques used during 2025 or 2024. Transfers between hierarchy measurement levels are recognized by the Company as of the beginning of the reporting period. Changes in fair market value are recorded in other comprehensive income. Assets and liabilities measured at fair value on a non-recurring basis at September 30, 2025 are summarized below, in thousands:
|  |  |  |  |  | Fair Value Measurements at |  |  |  |  |
|  |  |  |  |  | September 30, 2025 Using |  |  |  |  |
|  | Total Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total Losses Nine Months Ended September 30, 2025 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateral-dependent loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 55 |  |  | $ | - |  |  | $ | - |  |  | $ | 55 |  |  | $ | 150 |
Agricultural |  |  | 1,149 |  |  |  | - |  |  |  | - |  |  |  | 1,149 |  |  |  | 890 |
Total |  | $ | 1,204 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,204 |  |  | $ | 1,040 |
Other Real Estate Owned: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RE – Residential |  | $ | 91 |  |  | $ | - |  |  | $ | - |  |  | $ | 91 |  |  | $ | - |
Equity lines of credit |  |  | 23 |  |  |  |  |  |  |  |  |  |  |  | 23 |  |  |  | 27 |
Total |  | $ | 114 |  |  | $ | - |  |  | $ | - |  |  | $ | 114 |  |  | $ | 27 |
Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2024 are summarized below, in thousands:
|  |  |  |  |  | Fair Value Measurements at |  |  |  |  |
|  |  |  |  |  | December 31, 2024 Using |  |  |  |  |
|  | Total Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total Losses Nine Months Ended September 30, 2024 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateral-dependent loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 24 |  |  | $ | - |  |  | $ | - |  |  | $ | 24 |  |  | $ | - |
Other Real Estate Owned: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RE – Residential |  | $ | 91 |  |  | $ | - |  |  | $ | - |  |  | $ | 91 |  |  | $ | - |
The following methods were used to estimate fair value. Collateral-Dependent Loans: The Bank does not record loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these loans to reflect partial write-downs, through charge-offs or specific reserve allowances, that are based on fair value estimates of the underlying collateral. The fair value estimates for collateral-dependent loans are generally based on recent real estate appraisals or broker opinions, obtained from independent third parties, which are frequently adjusted by management to reflect current conditions and estimated selling costs (Level 3). Impairment charges recognized during the three and nine months ended September 30, 2025, related to the above collateral dependent loans, totaled $109,000 and $1,040,000, respectively. There were no impairment changes recognized during the nine months ended September 30, 2024. The collateral-dependent loans at September 30, 2025, consists of seven loans which had been allocated specific credit reserves. The collateral-dependent loans at December 31, 2024, consist solely of one loan which had been allocated a specific credit reserve. Other Real Estate: Nonrecurring adjustments to certain real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. Fair values are generally based on third party appraisals of the property which are commonly adjusted by management to reflect current conditions and selling costs (Level 3). Appraisals for both collateral-dependent loans and other real estate are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Loan Administration Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On a quarterly basis, the Company compares the actual selling price of similar collateral that has been liquidated to the most recent appraised value for unsold properties to determine what additional adjustment, if any, should be made to the appraisal value to arrive at fair value. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2025 and December 31, 2024 (dollars in thousands):
|  |  |  |  |  |  |  |  |  |  |  | Range |  |  | Range |
|  | Fair Value |  |  | Fair Value |  | Valuation |  |  | (Weighted Average) |  |  | (Weighted Average) |
Description |  | 9/30/2025 |  |  | 12/31/2024 |  | Technique | Significant Unobservable Input |  | 9/30/2025 |  |  | 12/31/2024 |
Collateral-dependent loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 55 |  |  | $ | 24 |  | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs |  |  | 37% - 100% (78%) |  |  |  | 53 | %
Agricultural |  |  | 1,149 |  |  |  | - |  | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs |  |  | 2% - 98% (44%) |  |  |  |  |
Total |  | $ | 1,204 |  |  | $ | 24 |  |  |  |  |  |  |  |  |  |  |
Other Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RE – Residential |  | $ | 91 |  |  | $ | 91 |  | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs |  |  | 60 | % |  |  | 60 | %
Equity lines of credit |  |  | 23 |  |  |  | - |  | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs |  |  | 55 | % |  |  |  |
|  | $ | 114 |  |  | $ | 91 |  |  |  |  |  |  |  |  |  |  |

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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/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (bbb)(1) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 2: 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 3: 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 4: 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 5: 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 6: 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 7: 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 8: 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 9: 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 10: 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 11: 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 12: 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 13: 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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