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Fair Value Disclosures
 9 Months Ended
Sep. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Disclosures Text Block
NOTE 5: FAIR VALUE
Fair Value
Hierarchy
“Fair value” is defined by ASC 820,
Fair Value
Measurements and Disclosures
, and focuses on the exit price, i.e., the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction
occurring in the principal
market (or most advantageous market in the absence of a principal market)
for an asset or liability at the measurement date.
GAAP establishes a fair value hierarchy for valuation inputs that gives the highest
priority to quoted prices in active
markets for identical assets or liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy is as
follows:
Level 1—inputs to the valuation methodology are quoted prices, unadjusted,
for identical assets or liabilities in active
markets.
Level 2—inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets,
quoted prices for identical or similar assets or liabilities in markets that are not
active, or inputs that are observable for the
asset or liability, either directly
or indirectly.
Level 3—inputs to the valuation methodology are unobservable and reflect
the Company’s own assumptions about
the
inputs market participants would use in pricing the asset or liability.
Level changes in fair value measurements
Transfers between levels of the fair value hierarchy
are generally recognized at the end of each reporting period.
The
Company monitors the valuation techniques utilized for each category
of financial assets and liabilities to ascertain when
transfers between levels have been affected.
The nature of the Company’s financial
assets and liabilities generally is such
that transfers in and out of any level are expected to be infrequent.
For the nine months ended September 30, 2025, there
were no transfers between levels and no changes in valuation techniques for
the Company’s financial assets and liabilities.
Assets and liabilities measured at fair value on a recurring
basis
Securities available-for-sale
Fair values of securities available for sale were primarily measured
using Level 2 inputs.
For these securities, the Company
obtains pricing data from third-party pricing services.
These third-party pricing services consider observable data that may
include broker/dealer quotes, market spreads, cash flows, benchmark yields,
reported trades for similar securities, market
consensus prepayment speeds, credit information, and the securities’ terms
and conditions.
On a quarterly basis,
management reviews the pricing data received from the third-party pricing
services for reasonableness given current market
conditions.
As part of its review, management may
obtain non-binding third-party broker/dealer quotes to validate the fair
value measurements.
In addition, management will periodically submit pricing information
provided by the third-party
pricing services to another independent valuation firm on a sample basis.
This independent valuation firm will compare the
prices
provided by the third-party pricing service with its own prices
and will review the significant assumptions and
valuation methodologies used with management.
The following table presents the balances of the assets and liabilities measured at fair
value on a recurring basis as of
September 30, 2025 and December 31, 2024, respectively,
by caption, on the accompanying consolidated balance sheets by
ASC 820 valuation hierarchy (as described above).
Quoted Prices in
Significant
Active Markets
Other
Significant
for
Observable
Unobservable
Identical Assets
Inputs
Inputs
(Dollars in thousands)
Amount
(Level 1)
(Level 2)
(Level 3)
September 30, 2025:
Securities available-for-sale:
Agency obligations
$
53,436
—
53,436
—
Agency MBS
165,583
—
165,583
—
State and political subdivisions
17,401
—
17,401
—
Total securities available
-for-sale
236,420
—
236,420
—
Total
assets at fair value
$
236,420
—
236,420
—
December 31, 2024:
Securities available-for-sale:
Agency obligations
$
52,411
—
52,411
—
Agency MBS
173,676
—
173,676
—
State and political subdivisions
16,925
—
16,925
—
Total securities available
-for-sale
243,012
—
243,012
—
Total
assets at fair value
$
243,012
—
243,012
—
Assets and liabilities measured at fair value on a nonrecurring
basis
Loans held for sale
Loans held for sale are carried at the lower of cost or fair value. Fair values of loans
held for sale are determined using
quoted secondary market prices for similar loans.
Loans held for sale are classified within Level 2 of the fair value
hierarchy.
Collateral dependent loans
Collateral dependent loans are measured at the fair value of the collateral securing
the loan less estimated selling costs. The
fair value of real estate collateral is determined based on real estate appraisals which
are generally based on recent sales of
comparable properties which are then adjusted for property specific factors.
Non-real estate collateral is valued based on
various sources, including third party asset valuations and internally determined
values based on cost adjusted for
depreciation and other judgmentally determined discount factors. Collateral dependent
loans are classified within Level 3 of
the hierarchy due to the unobservable inputs used in determining their fair
value such as collateral values and the borrower's
underlying financial condition.
Mortgage servicing rights, net
MSRs, net, included in other assets on the accompanying consolidated balance
sheets, are carried at the lower of cost or
estimated fair value.
MSRs do not trade in an active market with readily observable prices.
To determine the fair
value of
MSRs, the Company engages an independent third party.
The independent third party’s valuation
model calculates the
present value of estimated future net servicing income using assumptions that
market participants would use in estimating
future net servicing income, including estimates of mortgage prepayment
speeds, discount rates, default rates, costs to
service, escrow account earnings, contractual servicing fee income,
ancillary income, and late fees.
Periodically, the
Company will review broker surveys and other market research to validate
significant assumptions used in the model.
The
significant unobservable inputs include mortgage prepayment speeds
or the constant prepayment rate (“CPR”) and the
weighted average discount rate.
Because the valuation of MSRs requires the use of significant unobservable inputs,
all of
the Company’s MSRs are classified within
Level 3 of the valuation hierarchy.
The following table presents the balances of the assets and liabilities measured at fair
value on a nonrecurring basis as of
September 30, 2025 and December 31, 2024, respectively,
by caption, on the accompanying consolidated balance sheets
and by FASB ASC 820
valuation hierarchy (as described above):
Quoted Prices in
Active Markets
Other
Significant
for
Observable
Unobservable
Carrying
Identical Assets
Inputs
Inputs
(Dollars in thousands)
Amount
(Level 1)
(Level 2)
(Level 3)
September 30, 2025:
Loans held for sale
$
145
—
145
—
Other assets
(2)
806
—
—
806
Total assets at fair value
$
951
—
145
806
December 31, 2024:
Loans, net
(1)
$
503
—
—
503
Other assets
(2)
892
—
—
892
Total assets at fair value
$
1,395
—
—
1,395
(1)
Loans considered collateral dependent under ASC 326.
(2)
Represents MSRs, net, carried at lower of cost or estimated
fair value.
Quantitative Disclosures for Level 3 Fair Value
Measurements
At September 30, 2025 and December 31, 2024, the Company had no Level
3 assets measured at fair value on a recurring
basis.
For Level 3 assets measured at fair value on a non-recurring basis at September
30, 2025 and December 31, 2024,
the significant unobservable inputs used in the fair value measurements
and the range of such inputs with respect to such
assets are presented below.
Range of
Weighted
Carrying
Significant
Unobservable
Average
(Dollars in thousands)
Amount
Valuation Technique
Unobservable Input
Inputs
of Input
September 30, 2025:
Mortgage servicing rights, net
$
806
Discounted cash flow
Prepayment speed or CPR
6.4
-
11.2
%
7.9
%
Discount rate
9.5
-
11.5
9.5
December 31, 2024:
Collateral dependent loans
$
503
Appraisal
Appraisal discounts
10.0
-
10.0
%
10.0
%
Mortgage servicing rights, net
892
Discounted cash flow
Prepayment speed or CPR
6.7
-
11.2
7.3
Discount rate
10.0
-
12.0
10.0
Fair Value
of Financial Instruments
ASC 825,
Financial Instruments
, requires disclosure of fair value information about financial instruments,
whether or not
recognized on the face of the balance sheet, where it is practicable to
estimate that value. The assumptions used in the
estimation of the fair value of the Company’s
financial instruments are explained below.
Where quoted market prices are
not available, fair values are based on estimates using discounted cash flow
analyses. Discounted cash flows can be
significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. The
following fair value estimates cannot be substantiated by comparison to
independent markets and should not be considered
representative of the liquidation value of the Company’s
financial instruments, but rather are good-faith estimates of the fair
value of financial instruments held by the Company.
ASC 825 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements.
The following methods and assumptions were used by the Company in estimating
the fair value of its financial instruments:
Loans, net
Fair values for loans were calculated using discounted cash flows. The discount
rates reflected current rates at which similar
loans would be made for the same remaining maturities. Expected
future cash flows were projected based on contractual
cash flows, adjusted for estimated prepayments.
The fair value of loans was measured using an exit price notion.
Loans held for sale
Fair values of loans held for sale are determined using quoted secondary
market prices for similar loans.
Time Deposits
Fair values for time deposits were estimated using discounted cash
flows.
The discount rates were based on rates currently
offered for deposits with similar remaining maturities.
The carrying value, related estimated fair value,
and placement in the fair value hierarchy of the Company’s
financial
instruments at September 30, 2025
and December 31, 2024 are presented
below.
This table excludes financial instruments
for which the carrying amount approximates fair value.
Financial assets for which fair value approximates carrying value
included cash and cash equivalents.
Financial liabilities for which fair value approximates carrying value
included
noninterest-bearing demand deposits, interest-bearing demand deposits, and
savings deposits.
Fair value approximates
carrying value in these financial liabilities due to these products having
no stated maturity.
Additionally, financial
liabilities for which fair value approximates carrying value included overnight
borrowings such as federal funds purchased
and securities sold under agreements to repurchase.
The following table summarizes our fair value estimates:
Fair Value Hierarchy
Carrying
Estimated
Level 1
Level 2
Level 3
(Dollars in thousands)
amount
fair value
inputs
inputs
Inputs
September 30, 2025:
Financial Assets:
Loans, net (1)
$
551,221
$
534,754
—
—
$
534,754
Loans held for sale
145
148
—
148
—
Financial Liabilities:
Time Deposits
$
180,957
$
180,076
—
180,076
$
—
December 31, 2024:
Financial Assets:
Loans, net (1)
$
557,146
$
532,344
—
—
$
532,344
Financial Liabilities:
Time Deposits
$
191,247
$
190,636
—
190,636
$
—
(
1) Represents loans, net of allowance for credit losses.
The fair value of loans was measured using an
exit price notion.