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Fair Value Measurements

12 Months Ended

Dec. 31, 2024

Fair Value Measurements [Abstract]

Fair Value Measurements

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Note 21 – Fair value measurements

Financial instruments measured at fair value on recurring basis.

Determination of Fair Value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of FASB ASC 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market and in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, which focuses on exit price in the principal or most advantageous market for an asset or liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

Fair Value Hierarchy

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

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, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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Note 21 – Fair value measurements (continued)

Securities

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow.

Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Currently, all of the Company’s securities are considered to be Level 2 securities.

Derivatives Assets/Liabilities – Interest Rate Lock Commitments (IRLCs)

The Company recognizes IRLCs at fair value based on the price of the underlying loans obtained from an investor for loans that will be delivered on a best efforts basis while taking into consideration the probability that the rate lock commitments will close. All of the Company’s IRLCs are classified as Level 3.

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Note 21 – Fair value measurements (continued)

The following table summarizes the Company’s financial assets that were measured at fair value on a recurring basis during the period:



			Fair Value at December 31, 2024
			Quoted Prices		Significant		Significant
			in Active		Other		Unobservable
	Balance as of		Markets for		Observable		Inputs
(dollars in thousands)	December 31,		Identical Assets		Inputs		(Level 3)
Description	2024		(Level 1)		(Level 2)
U.S. agency obligations	$	73,060	$	—	$	73,060	$	—
Mortgage-backed securities		58,973		—		58,973		—
Municipals		41,561		—		41,561		—
Corporates		14,322		—		14,322		—
Total available-for-sale securities	$	187,916	$	—	$	187,916	$	—
IRLCs – asset		42		—		—		42
Total assets at fair value	$	187,958	$	—	$	187,916	$	42



			Fair Value at December 31, 2023
			Quoted Prices		Significant		Significant
			in Active		Other		Unobservable
	Balance as of		Markets for		Observable		Inputs
(dollars in thousands)	December 31,		Identical Assets		Inputs		(Level 3)
Description	2023		(Level 1)		(Level 2)
U.S. Treasuries	$	4,947	$	—	$	4,947	$	—
U.S. agency obligations		60,955		—		60,955		—
Mortgage-backed securities		95,079		—		95,079		—
Municipals		40,789		—		40,789		—
Corporates		14,740		—		14,740		—
Total available-for-sale securities	$	216,510	$	—	$	216,510	$	—
IRLCs – asset		129		—		—		129
Total assets at fair value	$	216,639	$	—	$	216,510	$	129

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Note 21 – Fair value measurements (continued)

The following table provides additional quantitative information about assets measured at fair value on a recurring basis and for which we have utilized Level 3 inputs to determine fair value:


	Quantitative information about Level 3 Fair Value Measurements for December 31, 2024
	(dollars in thousands)
		Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
IRLCs - asset	$	42	Market approach	Range of pull through rate	85%

	Quantitative information about Level 3 Fair Value Measurements for December 31, 2023
	(dollars in thousands)
		Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
IRLCs - asset	$	129	Market approach	Range of pull through rate	85%

Assets measured at fair value on a nonrecurring basis.

Loans held for sale

Loans held for sale are measured at lower of cost or fair value. Under ASC 820, market value is to represent fair value. Management obtains quotes or bids on all or part of these loans directly from the purchasing financial institutions. Premiums received or to be received on the quotes or bids are indicative of the fact that cost is lower than fair value. Because quotes and bids on loans held for sale are available in active markets, loans held for sale are considered to be Level 2. No nonrecurring fair value adjustments were recorded during the years ended December 31, 2024 and 2023. Gains and losses on the sale of loans are recorded in noninterest income on the Consolidated Statements of Income.

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Note 21 – Fair value measurements (continued)

Collateral Dependent Loans with an ACL

In accordance with ASC 326, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice. As of December 31, 2024 and 2023, we had no collateral dependent loans with an ACL.

Other Real Estate Owned

Certain assets such as other real estate owned (OREO) are measured at fair value less cost to sell. We believe that the fair value component in its valuation follows the provisions of ASC 820.

Real estate acquired through foreclosure is transferred to other real estate owned (“OREO”). The measurement of loss associated with OREO at the date of transfer from loans is based on the fair value of the collateral less anticipated selling costs compared to the unpaid loan balance. Subsequent changes in fair value are recorded in noninterest expense on the Consolidated Statements of Income. The value of OREO properties is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Bank using market data.

Any fair value adjustments are recorded in the period incurred and expensed against current earnings. The carrying values of all OREO are considered to be Level 3.

The following table summarizes the Company’s loans individually evaluated and OREO measured at fair value on a nonrecurring basis during the period.

There was no OREO as of December 31, 2024 and 2023.

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Note 21 – Fair value measurements (continued)


		Fair Value at December 31, 2024
			Quoted Prices	Significant
(dollars in thousands)			in Active	Other	Significant
	Balance as of		Markets for	Observable	Unobservable
	December 31,		Identical Assets	Inputs	Inputs
Description	2024		(Level 1)	(Level 2)	(Level 3)

Loans individually evaluated*	$ 76		$ -	$ -	$ 76


		Fair Value at December 31, 2023
			Quoted Prices	Significant
(dollars in thousands)			in Active	Other	Significant
	Balance as of		Markets for	Observable	Unobservable
	December 31,		Identical Assets	Inputs	Inputs
Description	2023		(Level 1)	(Level 2)	(Level 3)

Loans individually evaluated*	$ 89		$ -	$ -	$ 89

*Includes loans charged down to the net realizable value of the collateral.

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. Fair values for December 31, 2024 and 2023 were estimated using an exit price notion.

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Note 21 – Fair value measurements (continued)



			Fair Value Measurements at December 31, 2024 using
			Quoted Prices		Significant
			in Active		Other		Significant
(dollars in thousands)				Markets for	Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
Assets	Amounts		(Level 1)		(Level 2)		(Level 3)		Balance
Cash and due from banks	$	23,287	$	23,287	$	—	$	—	$	23,287
Fed funds sold		50,022		50,022		—		—		50,022
Securities
Available-for-sale		187,916		—		187,916		—		187,916
Held-to-maturity		3,606		—		3,170		—		3,170
Restricted stock		1,821		—		1,821		—		1,821
Loans, net		636,552		—		—		613,984		613,984
Loans held for sale		3,616		—		3,616		—		3,616
Interest receivable		3,065		—		3,065		—		3,065
BOLI		22,907		—		22,907		—		22,907
Derivatives		42		—		—		42		42
Liabilities
Deposits	$	882,404	$	—	$	881,921	$	—	$	881,921
Capital notes, net		10,048		—		9,836		—		9,836
Other borrowings		9,300		—		8,929		—		8,929
Interest payable		722		—		722		—		722



(dollars in thousands)			Fair Value Measurements at December 31, 2023 using
	Carrying
Assets	Amounts		(Level 1)		(Level 2)		(Level 3)		Balance
Cash and due from banks	$	25,613	$	25,613	$	—	$	—	$	25,613
Fed funds sold		49,225		49,225		—		—		49,225
Securities
Available-for-sale		216,510		—		216,510		—		216,510
Held-to-maturity		3,622		—		3,231		—		3,231
Restricted stock		1,541		—		1,541		—		1,541
Loans, net		601,921		—		—		566,655		566,655
Loans held for sale		1,258		—		1,258		—		1,258
Interest receivable		2,835		—		2,835		—		2,835
BOLI		21,586		—		21,586		—		21,586
Derivatives		129		—		—		129		129
Liabilities
Deposits	$	878,459	$	—	$	876,846	$	—	$	876,846
Capital notes, net		10,042		—		9,854		—		9,854
Other borrowings		9,890		—		9,861		—		9,861
Interest payable		480		—		480		—		480