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Note 10 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2026

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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.

Assets and liabilities that are measured at fair value are grouped in three levels within the fair value hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

The fair value hierarchy is as follows:

■	Level 1 Inputs – Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

■

Level 2 Inputs – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations for which all significant assumptions are observable or can be corroborated by observable market data.

■	Level 3 Inputs – Valuations are based on unobservable inputs that may include significant management judgment and estimation.

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy at the reporting date, is set forth below.

Available-for-Sale Securities – Securities classified as available-for-sale are reported at fair value utilizing Level 1 (nationally recognized securities exchanges) and Level 2 inputs. For Level 2 inputs securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include but is not limited to dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the bond’s terms and conditions.

Loans Held-for-Sale – These loans are reported at fair value. Fair value is determined based on expected proceeds based on committed sales contracts and commitments of similar loans if not already committed and are considered Level 2 inputs.

Derivative Instruments – The fair value of the interest rate lock commitments, forward TBA mortgage-backed securities and mandatory forward commitments are estimated using quoted or published market prices for similar instruments and adjusted for factors, such as pull-through rate assumptions based on historical information, where appropriate. Interest rate lock commitments are considered Level 3 inputs and forward TBA mortgage-backed securities and mandatory forward commitments are considered Level 2 inputs.

Collateral-Dependent Loans – Individually reviewed collateral-dependent loans are reported at the fair value of the underlying collateral less costs to sell. Collateral-dependent loans are considered Level 3 inputs. Collateral values are estimated using Level 3 inputs based on internally customized discounting criteria.

Real Estate and Other Repossessed Assets – Fair values are determined at the time the loan is foreclosed upon and the asset is transferred from loans. The value is based primarily on third-party appraisals, less costs to sell and are considered Level 3 inputs of the fair value hierarchy. Repossessed assets are reviewed and evaluated periodically for additional impairment and adjusted accordingly.

Mortgage Servicing Rights – The fair value of mortgage servicing rights are estimated using net present value of expected cash flows based on a third party model that incorporates industry assumptions and is adjusted for factors such as prepayment speeds and are considered Level 3 inputs.

The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.

	March 31, 2026
	Level 1		Level 2		Level 3		Total Fair
	Inputs		Inputs		Inputs		Value
	(In Thousands)
Financial assets:
Available-for-sale securities:
U.S. government and agency obligations	$	-	$	3,968	$	-	$	3,968
U.S. treasury obligations		43,926		-		-		43,926
Municipal obligations		-		115,816		-		115,816
Corporate obligations		-		1,970		-		1,970
Mortgage-backed securities		-		25,777		-		25,777
Collateralized mortgage obligations		-		76,899		-		76,899
Asset-backed securities		-		6,531		-		6,531
Loans held-for-sale		-		9,904		-		9,904
Forward TBA mortgage-backed securities		-		231		-		231
Financial liabilities:
Interest rate lock commitments		-		-		101		101
Mandatory forward commitments		-		8		-		8

	December 31, 2025
	Level 1		Level 2		Level 3		Total Fair
	Inputs		Inputs		Inputs		Value
	(In Thousands)
Financial assets:
Available-for-sale securities:
U.S. government and agency obligations	$	-	$	4,155	$	-	$	4,155
U.S. treasury obligations		44,308		-		-		44,308
Municipal obligations		-		118,324		-		118,324
Corporate obligations		-		1,971		-		1,971
Mortgage-backed securities		-		26,494		-		26,494
Collateralized mortgage obligations		-		79,661		-		79,661
Asset-backed securities		-		6,779		-		6,779
Loans held-for-sale		-		7,452		-		7,452
Financial liabilities:
Forward TBA mortgage-backed securities		-		55		-		55
Interest rate lock commitments		-		-		49		49

Certain financial assets may be measured at fair value on a nonrecurring basis. These assets are subject to fair value adjustments that result from the application of lower of cost or fair value accounting or write-downs of individual assets, such as impaired loans that are collateral-dependent, real estate and other repossessed assets and mortgage servicing rights.

The following tables summarize financial assets measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded during the reporting periods presented:

	March 31, 2026
	Level 1		Level 2		Level 3		Total Fair
	Inputs		Inputs		Inputs		Value
	(In Thousands)
Collateral-dependent loans individually evaluated, net of ACL	$	-	$	-	$	58	$	58

	December 31, 2025
	Level 1		Level 2		Level 3		Total Fair
	Inputs		Inputs		Inputs		Value
	(In Thousands)
Collateral-dependent loans individually evaluated, net of ACL	$	-	$	-	$	189	$	189

The following table represents the Bank's financial assets and liabilities measured at fair value on a recurring and nonrecurring basis, the valuation techniques used to measure the fair value of those assets and liabilities, and the significant unobservable inputs and the ranges of values for those inputs.

	Principal	Significant	Range of
	Valuation	Unobservable	Significant Input
Instrument	Technique	Inputs	Values

Collateral-dependent loans individually evaluated	Fair value of underlying collateral	Discount applied to the obtained appraisal		10 - 30%
Real estate and other repossessed assets	Fair value of collateral	Discount applied to the obtained appraisal		10 - 30%
Interest rate lock commitments	Internal pricing model	Pull-through expectations		85 - 96%

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable Level 3 inputs on a recurring basis.

	As of or For the
	Three Months Ended
	March 31,
	2026			2025
	Interest Rate Lock Commitments
	(In Thousands)
Beginning balance	$	(49	)	$	(103	)
Purchases and issuances		(246	)		(18	)
Sales and settlements		194			93
Ending balance	$	(101	)	$	(28	)
Unrealized (losses) gains related to items held during the period	$	(52	)	$	75

The tables below summarize the estimated fair values of financial instruments of the Company, whether or not recognized at fair value on the condensed consolidated statements of condition. The tables are followed by methods and assumptions that were used by the Company in estimating the fair value of the classes of financial instruments.

	March 31, 2026
	Level 1		Level 2		Level 3		Total		Carrying
	Inputs		Inputs		Inputs		Fair Value		Amount
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	53,733	$	-	$	-	$	53,733	$	53,733
FHLB stock		-		2,734		-		2,734		2,734
FRB stock		-		4,131		-		4,131		4,131
Loans receivable, gross		-		-		1,505,005		1,505,005		1,519,286
Mortgage servicing rights		-		-		19,747		19,747		14,909
Financial liabilities:
Time certificates of deposit		-		-		471,506		471,506		472,783
FHLB advances and other borrowings		-		-		27,062		27,062		26,667
Other long-term debt		-		-		44,273		44,273		45,155

	December 31, 2025
	Level 1		Level 2		Level 3		Total		Carrying
	Inputs		Inputs		Inputs		Fair Value		Amount
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	62,962	$	-	$	-	$	62,962	$	62,962
FHLB stock		-		2,650		-		2,650		2,650
FRB stock		-		4,131		-		4,131		4,131
Loans receivable, gross		-		-		1,493,348		1,493,348		1,519,019
Mortgage servicing rights		-		-		20,302		20,302		15,043
Financial liabilities:
Time certificates of deposit		-		-		461,201		461,201		462,172
Federal Funds Purchased		-		-		105		105		105
FHLB advances and other borrowings		-		-		38,447		38,447		37,917
Other long-term debt		-		-		43,905		43,905		45,155