XML 39 R26.htm IDEA: XBRL DOCUMENT
v3.25.1

Note 16 - Fair Value of Financial Instruments | 12 Months Ended
--- | ---
Dec. 31, 2024
Notes to Financial Statements |
Fair Value Disclosures [Text Block] | Note 16 – Fair Values of Financial Instruments The Fair Value Measurements Topic (the “Topic”) establishes a hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Topic describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other 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. Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The fair values of securities available for sale are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges or pricing models utilizing significant observable inputs such as 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. Different judgments and assumptions used in pricing could result in different estimates of value. In certain cases where market data is not readily available because of lack of market activity or little public disclosure, values may be based on unobservable inputs and classified in Level 3 of the fair value hierarchy. The Company evaluates AFS security impairment on a quarterly basis. ASC 326 allows for prospective adoption of previously recorded credit impairment on AFS securities. This allows the Company to maintain the same amortized cost basis of the securities before and after adoption date. At adoption, the Company has $173 thousand of previously recorded credit impairment on collateralized debt obligations. The Company believes this continues to represent the expected credit losses of the amortized cost basis, therefore, has established an ACL for AFS debt securities. The ACL is monitored quarterly and is measured by evaluating the present value of cash flows as compared to the amortized cost basis of the security. To the extent that there are improvements in credit related to these securities, the ACL will be reduced to account for the improvements. If any improvements in credit exceed the amount of previously reduced amortized cost bases, recoveries will be recorded through the income statement in the period received. The allowance for collateralized debt credit losses was at $173 thousand at December 31, 2024 and December 31, 2023. The Company’s subordination for each collateralized debt obligation is calculated by taking the total performing collateral and subtracting the sum of the total collateral within the Company’s class and the total collateral within all senior classes, and then stating this result as a percentage of the total performing collateral. This measure is an indicator of the level of collateral that can default before potential cash flow disruptions may occur. In addition, management calculates subordination assuming future collateral defaults by utilizing the default/deferral assumptions in the Company’s impairment analysis. Subordination assuming future default/deferral assumptions is calculated by deducting future defaults from the current performing collateral. At December 31, 2024 and 2023, management reviewed the subordination levels for each security in context of the level of current collateral defaults and deferrals within each security; the potential for additional defaults and deferrals within each security; the length of time that the security has been in “payment in kind” status; and the Company’s class position within each security. At December 31, 2024 and 2023, the collateralized debt obligations with a cost basis of $2.2 million have been placed in “payment in kind” status. The Company’s securities that are classified as “payment in kind” are a result of not receiving the scheduled quarterly interest payments. For the securities in “payment in kind” status, management anticipates to receive the unpaid contractual interest payments from the issuer, because of the self- correcting cash flow waterfall provisions within the structure of the securities. When a tranche senior to the Company’s position fails the coverage test, the Company’s interest cash flows are paid to the senior tranche and recorded as a reduction of principal. The coverage test represents an over collateralization target by stating the balance of the performing collateral as a percentage of the balance of the Company’s tranche, plus the balance of all senior tranches. The principal reduction in the senior tranche continues until the appropriate coverage test is passed. As a result of the principal reduction in the senior tranche, more cash is available for future payments to the Company’s tranche. Management will not capitalize the “payment in kind” interest payments to the book value of the securities and will keep these securities in non-accrual status until the quarterly interest payments resume. The fair value of the Company’s interest rate swap contracts, both assets and liabilities, are valued by a third- party pricing agent using an income approach and are classified within Level 2 of the valuation hierarchy. The fair value of the Company’s interest rate lock commitments is based on the price of the underlying loans expected to be sold to an investor while taking into consideration the probability the rate lock commitments will close and are classified within Level 2 of the valuation hierarchy. The Company utilized a third party pricing service for classifying and valuing the fair value of collateralized debt obligations held. These securities were categorized as unobservable Level 3 and priced using an Option-Adjusted Discounted Cash flow model to value these securities. The significant inputs to this model include yield, prepayment speed, default rate, and loss severity. Assets and Liabilities Measured at Fair Values on a Recurring Basis There were no transfers to or from Levels 1 and 2 during the years ended December 31, 2024 and 2023. Changes in Level 3 assets relate to the result of changes in estimated fair values, payments received, and sales of securities that have been classified as Level 3 during all of 2024 and 2023. Assets measured at fair value on a recurring basis are summarized below:
|  |  |  |  |  | Fair Value Measurements at December 31, 2024 Using |
(Dollars in thousands) |  | Estimated Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contracts |  | $ | 5,486 |  |  | $ | - |  |  | $ | 5,486 |  |  | $ | - |
Interest rate lock commitments |  |  | 82 |  |  |  | - |  |  |  | 82 |  |  |  | - |
Available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
US government sponsored entities |  |  | 8,061 |  |  |  | - |  |  |  | 8,061 |  |  |  | - |
Collateralized mortgage obligations and residential mortgage-backed securities |  |  | 109,325 |  |  |  | - |  |  |  | 109,325 |  |  |  | - |
Municipal securities |  |  | 214,749 |  |  |  | - |  |  |  | 214,749 |  |  |  | - |
Collateralized debt obligations |  |  | 1,419 |  |  |  | - |  |  |  | - |  |  |  | 1,419 |
Total securities available-for-sale |  | $ | 333,554 |  |  | $ | - |  |  | $ | 332,135 |  |  | $ | 1,419 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contracts |  | $ | 5,486 |  |  | $ | - |  |  | $ | 5,486 |  |  | $ | - |
|  |  |  |  |  | Fair Value Measurements at December 31, 2023 Using |
(Dollars in thousands) |  | Estimated Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contracts |  | $ | 5,591 |  |  | $ | - |  |  | $ | 5,591 |  |  | $ | - |
Interest rate lock commitments |  |  | 35 |  |  |  | - |  |  |  | 35 |  |  |  | - |
Available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
US government sponsored entities |  |  | 7,883 |  |  |  | - |  |  |  | 7,883 |  |  |  | - |
Collateralized mortgage obligations and residential mortgage-backed securities |  |  | 123,464 |  |  |  | - |  |  |  | 123,464 |  |  |  | - |
Municipal securities |  |  | 238,670 |  |  |  | - |  |  |  | 238,670 |  |  |  | - |
Collateralized debt obligations |  |  | 1,357 |  |  |  | - |  |  |  | - |  |  |  | 1,357 |
Total securities available-for-sale |  | $ | 371,374 |  |  | $ | - |  |  | $ | 370,017 |  |  | $ | 1,357 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contracts |  | $ | 5,591 |  |  | $ | - |  |  | $ | 5,591 |  |  | $ | - |
A reconciliation of available-for-sale securities, which require significant adjustment based on unobservable data, is presented below:
|  | (Dollars in thousands) |
|  | Estimated Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
|  | Available-for- sale securities |
Beginning balance, January 1, 2024 |  | $ | 1,357 |
Principal payments |  |  | (14 | )
Total unrealized gains, included in other comprehensive income |  |  | 76 |
Ending balance, December 31, 2024 |  | $ | 1,419 |
Beginning balance, January 1, 2023 |  | $ | 1,048 |
Principal payments |  |  | (3 | )
Total unrealized gains, included in other comprehensive loss |  |  | 312 |
Ending balance, December 31, 2023 |  | $ | 1,357 |
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis Assets and liabilities measured at fair value on a non-recurring basis are summarized below:
|  |  |  |  |  | Fair Value Measurements at December 31, 2024 Using |
(Dollars in thousands) |  | Estimated Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Collateral dependent loans |  | $ | 1,496 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,496 |
|  |  |  |  |  | (Dollars in thousands) |
|  |  |  |  |  | Fair Value Measurements at December 31, 2023 Using |
(Dollars in thousands) |  | Estimated Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Collateral dependent loans |  | $ | 8,673 |  |  | $ | - |  |  | $ | - |  |  | $ | 8,673 |
Significant (Level 3) Inputs The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.
|  | Fair Value at |  |  | Valuation |  | Significate Unobservable |  |  |  |  |  |  | Weighted-Average |
(Dollars in thousands) |  | December 31, 2024 |  |  | Technique |  | Inputs |  | Range |  |  | Range |
Collateral dependent loans |  | $ | 1,496 |  |  | Fair value of collateral |  | Discount for type of property and current market conditions |  | 0% | - | 80% |  |  |  | 8% |
|  | Fair Value at |  |  | Valuation |  | Significate Unobservable |  |  |  |  |  |  | Weighted-Average |
(Dollars in thousands) |  | December 31, 2023 |  |  | Technique |  | Inputs |  | Range |  |  | Range |
Collateral dependent loans |  | $ | 8,673 |  |  | Fair value of collateral |  | Discount for type of property and current market conditions |  | 0% | - | 80% |  |  |  | 17% |
The following table shows carrying values and related estimated fair values of financial instruments as of the dates indicated. Estimated fair values are further categorized by the inputs used to measure fair value. Items that are not financial instruments are not included.
|  | December 31, 2024 |  |  | Estimated Fair Value Measurements at December 31, 2024 Using |
(Dollars in thousands) |  | Carrying Value |  |  | Estimated Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 70,584 |  |  | $ | 70,584 |  |  | $ | 70,584 |  |  | $ | - |  |  | $ | - |
Loans held-for-sale |  |  | 1,253 |  |  |  | 1,277 |  |  |  | - |  |  |  | 1,277 |  |  |  | - |
Loans receivable, net |  |  | 1,492,065 |  |  |  | 1,435,148 |  |  |  | - |  |  |  | - |  |  |  | 1,435,148 |
Federal Home Loan Bank stock |  |  | 6,547 |  |  |  | 6,547 |  |  |  | - |  |  |  | 6,547 |  |  |  | - |
Accrued interest receivable |  |  | 7,721 |  |  |  | 7,721 |  |  |  | - |  |  |  | 7,721 |  |  |  | - |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-interest bearing deposits |  |  | 263,324 |  |  |  | 263,324 |  |  |  | 263,324 |  |  |  | - |  |  |  | - |
Interest bearing deposits |  |  | 1,497,242 |  |  |  | 1,496,638 |  |  |  | 936,989 |  |  |  | 559,649 |  |  |  | - |
Repurchase agreements |  |  | 40,116 |  |  |  | 39,960 |  |  |  | 32,364 |  |  |  | 7,596 |  |  |  | - |
Borrowed funds |  |  | 65,000 |  |  |  | 63,432 |  |  |  | - |  |  |  | 63,432 |  |  |  | - |
Accrued interest payable |  |  | 620 |  |  |  | 620 |  |  |  | - |  |  |  | 620 |  |  |  | - |
|  | December 31, 2023 |  |  | Estimated Fair Value Measurements at December 31, 2023 Using |
(Dollars in thousands) |  | Carrying Value |  |  | Estimated Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 86,008 |  |  | $ | 86,008 |  |  | $ | 86,008 |  |  | $ | - |  |  | $ | - |
Loans held-for-sale |  |  | 340 |  |  |  | 349 |  |  |  | - |  |  |  | 349 |  |  |  | - |
Loans receivable, net |  |  | 1,493,827 |  |  |  | 1,412,069 |  |  |  | - |  |  |  | - |  |  |  | 1,412,069 |
Federal Home Loan Bank stock |  |  | 6,547 |  |  |  | 6,547 |  |  |  | - |  |  |  | 6,547 |  |  |  | - |
Accrued interest receivable |  |  | 8,045 |  |  |  | 8,045 |  |  |  | - |  |  |  | 8,045 |  |  |  | - |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-interest bearing deposits |  |  | 295,594 |  |  |  | 295,594 |  |  |  | 295,594 |  |  |  | - |  |  |  | - |
Interest bearing deposits |  |  | 1,517,827 |  |  |  | 1,513,640 |  |  |  | 985,710 |  |  |  | 527,930 |  |  |  | - |
Repurchase agreements |  |  | 38,124 |  |  |  | 37,938 |  |  |  | 31,033 |  |  |  | 6,905 |  |  |  | - |
Borrowed funds |  |  | 80,000 |  |  |  | 79,791 |  |  |  | - |  |  |  | 79,791 |  |  |  | - |
Accrued interest payable |  |  | 3,065 |  |  |  | 3,065 |  |  |  | - |  |  |  | 3,065 |  |  |  | - |
The following methods were used to estimate the fair value of financial instruments presented in the preceding table for the periods ended December 31, 2024 and 2023: Cash and cash equivalent carrying amounts approximate fair value. Loans held-for-sale comprise residential mortgages and are priced based on values established by the secondary mortgage markets (Level 2). The estimated fair value for net loans receivable is based on the exit price notion which is the exchange price that would be received to transfer the loans at the most advantageous market price in an orderly transaction between market participants on the measurement date (Level 3). Federal Home Loan Bank stock is estimated at book value due to restrictions that limit the sale or transfer of the security. Fair values of accrued interest receivable and payable approximate book value, as the carrying values are determined using the observable interest rate, balance, and last payment date. Non-interest and interest bearing deposits, which include checking, savings, and money market deposits, are estimated to have fair values based on the amount payable as of the reporting date (Level 1). The fair value of fixed-maturity certificates of deposit (included in interest bearing deposits) are based on estimates of the rate the Company would pay on similar deposits, applied for the time period until maturity (Level 2). Estimated fair values for short-term repurchase agreements, which represent sweeps from demand deposits to accounts secured by pledged securities, are estimated based on the amount payable as of the reporting date (Level 1). Longer-term repurchase agreements, with contractual maturity dates of three months or more, are based on estimates of the rate the Company would pay on similar deposits, applied for the time period until maturity (Level 2). The fair value of FHLB Advances are estimated by discounting the future cash flows using quoted rates from the FHLB for similar advances with similar maturities (Level 2). The estimated fair value of other financial instruments, and off- balance sheet loan commitments, approximate cost and are not considered significant to this presentation.

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration