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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2024

DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

13. DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

The following disclosures establish a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The three broad levels defined within this hierarchy are as follows:

Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Equity Securities Without Readily Determinable Fair Values

During 2024, the Company entered into a Registration Rights Agreement with a borrower who, upon emergence from bankruptcy, issued ordinary shares in satisfaction of debt previously contracted. The shares are not listed on any stock exchange. Since the shares do not have a readily determinable fair value, they are carried at cost and evaluated for impairment by management. In addition, if management identifies an observable price change in an orderly transaction for an identical or similar investment of the same issuer, the fair value of the equity securities will be measured and adjusted.

At December 31, 2024, the carrying value of these equity securities was $600,000 which is included in other assets on the Consolidated Balance Sheets. There were no adjustments to the carrying value of equity securities without readily determinable fair values during the year ended December 31, 2024.

Assets and Liabilities Measured and Recorded on a Recurring Basis

Equity securities are reported at fair value utilizing Level 1 inputs. These securities are mutual funds held within a rabbi trust for the Company’s executive deferred compensation plan. The mutual funds held are open-end funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value and to transact at that price.

Securities classified as available for sale are reported at fair value based on measurements obtained from an independent pricing service. The fair value measurements consider observable data that may include dealer quoted market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. It should be noted that available for sale securities are reported at fair value, net of any related allowance for credit losses.

The fair values of the simultaneous interest rate swaps, the interest rate hedges used for interest rate risk management, and the risk participation agreements associated with certain commercial real estate loans are based on an external derivative valuation model using data inputs from similar transactions as of the valuation date and classified Level 2.

The following table presents the assets and liabilities measured and reported on the Consolidated Balance Sheets on a recurring basis at their fair value as of December 31, 2024 and 2023 by level within the fair value hierarchy (in thousands).

FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2024

TOTAL

LEVEL 1

LEVEL 2

LEVEL 3

Equity securities ⁽¹⁾

350

—

Available for sale securities:

U.S. Agency

4,666

—

4,666

—

U.S. Agency mortgage-backed securities

91,534

—

91,534

—

Municipal

8,363

—

8,363

—

Corporate bonds

51,057

363

50,021

673

Interest rate swap asset ⁽¹⁾

4,657

—

4,657

—

Interest rate swap liability ⁽²⁾

(4,691)

—

(4,691)

—

Interest rate hedge ⁽²⁾

(169)

—

(169)

—

Risk participation agreement ⁽²⁾

(207)

—

(207)

—


	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2023
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
Equity securities ⁽¹⁾	$	499	$	499	$	—	$	—
Available for sale securities:
U.S. Agency		5,339		—		5,339		—
U.S. Agency mortgage-backed securities		93,075		—		93,075		—
Municipal		10,360		—		10,360		—
Corporate bonds		56,937		—		56,937		—
Interest rate swap asset ⁽¹⁾		4,582		—		4,582		—
Interest rate swap liability ⁽²⁾		(4,665)		—		(4,665)		—
Interest rate hedge ⁽²⁾		(446)		—		(446)		—
Risk participation agreement ⁽²⁾		(410)		—		(410)		—

(1)	Included within other assets on the Consolidated Balance Sheets.

(2)	Included within other liabilities on the Consolidated Balance Sheets.

Assets Measured and Recorded on a Non-Recurring Basis

The Company evaluates individual loans for expected credit losses when those loans do not share similar risk characteristics with loans evaluated using a collective (pooled) basis. Individually evaluated loans are reported at the fair value of the underlying collateral if the repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on observable market data which at times are discounted using unobservable inputs. At December 31, 2024 and 2023, the Company had no individually evaluated loans using the collateral method which were carried at fair value.

Other real estate owned is measured at fair value based on appraisals, less estimated costs to sell at the date of foreclosure. The Bank’s internal Collections and Assigned Risk Department estimates the fair value of repossessed assets, such as vehicles and equipment, using a formula driven analysis based on automobile or other industry data, less estimated costs to sell at the time of repossession. Valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less costs to sell. Income and expenses from operations and changes in valuation allowance are included in the net expenses from OREO and repossessed assets.

Assets measured and recorded at fair value on a non-recurring basis are summarized below (in thousands, except range data):