Annual report [Section 13 and 15(d), not S-K Item 405]

FAIR VALUE MEASUREMENTS

v3.25.0.1
FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2024
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS
Note 22
FAIR VALUE
 
MEASUREMENTS
The fair value of an asset or liability is the exchange price that would be received
 
were the Bank to sell that asset or paid to
transfer that liability (exit price) in an orderly transaction occurring in the principal
 
market (or most advantageous market in the
absence of a principal market) for such asset or liability.
 
In estimating fair value, the Company utilizes valuation techniques that
are consistent with the market approach, the income approach and/or
 
the cost approach.
 
Such valuation techniques are
consistently applied.
 
Inputs to valuation techniques include the assumptions that market participants would
 
use in pricing an asset
or liability.
 
ASC Topic 820 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 -
Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting
 
entity has
the ability to access at the measurement date
.
●
Level 2 Inputs -
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
 
either
directly or indirectly.
 
These might include quoted prices for similar assets or liabilities in active markets, quoted prices
for identical or similar assets or liabilities in markets that are not active,
 
inputs other than quoted prices that are
observable for the asset or liability (such as interest rates, volatilities, prepayment
 
speeds, credit risks, etc.) or inputs that
are derived principally from, or corroborated, by market data by correlation
 
or other means
.
●
Level 3 Inputs -
Unobservable inputs for determining the fair values of assets or liabilities that reflect an
 
entity’s own
assumptions about the assumptions that market participants would
 
use in pricing the assets or liabilities.
Assets and Liabilities Measured at Fair Value
 
on a Recurring Basis
Securities Available for Sale.
 
U.S. Treasury securities are reported at fair value
 
utilizing Level 1 inputs.
 
Other securities
classified as AFS are reported at fair value utilizing Level 2 inputs.
 
For these securities, the Company obtains fair value
measurements from an independent pricing service.
 
The fair value measurements consider observable data that may include
dealer quotes, market spreads, cash flows, the U.S. Treasury
 
yield curve, live trading levels, trade execution data, credit
information and the bond’s
 
terms and conditions, among other things.
In general, the Company does not purchase securities that have a complicated structure.
 
The Company’s entire portfolio consists
of traditional investments, nearly all of which are U.S. Treasury
 
obligations, federal agency bullet or mortgage pass-through
securities, or general obligation or revenue based municipal bonds.
 
Pricing for such instruments is easily obtained.
 
At least
annually, the Company
 
will validate prices supplied by the independent pricing service by comparing them
 
to prices obtained
from an independent third-party source.
Equity Securities.
Investments securities classified as equity securities are carried at cost and the share of
 
earnings or losses is
reported through net income as an adjustment to the investment balance.
 
These securities are not readily marketable and therefore
are classified as a Level 3 input within the fair value hierarchy.
Loans Held for Sale
. The fair value of residential mortgage loans held for sale based on Level 2 inputs is determined,
 
when
possible, using either quoted secondary-market prices or investor commitments.
 
If no such quoted price exists, the fair value is
determined using quoted prices for a similar asset or assets, adjusted for
 
the specific attributes of that loan, which would be used
by other market participants. The Company has elected the fair value option
 
accounting for its held for sale loans.
 
Mortgage Banking Derivative Instruments.
The fair values of IRLCs are derived by valuation models incorporating
 
market
pricing for instruments with similar characteristics, commonly referred
 
to as best execution pricing, or investor commitment
prices for best effort IRLCs which have unobservable inputs, such as an
 
estimate of the fair value of the servicing rights expected
to be recorded upon sale of the loans, net estimated costs to originate the loans, and the pull-through
 
rate, and are therefore
classified as Level 3 within the fair value hierarchy.
 
The fair value of forward sale commitments is based on observable market
pricing for similar instruments and are therefore classified as Level 2 within
 
the fair value hierarchy.
Interest Rate Swap.
The Company’s derivative positions are
 
classified as Level 2 within the fair value hierarchy and are valued
using models generally accepted in the financial services industry and
 
that use actively quoted or observable market input values
from external market data providers. The fair value derivatives are determined
 
using discounted cash flow models.
Fair Value
 
Swap
.
 
The Company entered into a stand-alone derivative contract with the purchaser of
 
its Visa Class B shares.
 
The
valuation represents the amount due and payable to the counterparty based upon
 
the revised share conversion rate, if any,
 
during
the period.
 
There were
no
 
amounts payable at December 31, 2024 and December 31, 2023.
 
A summary of fair values for assets and liabilities at December 31 consisted
 
of the following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in Thousands)
Level 1
Level 2
Level 3
Total
 
Fair
Inputs
Inputs
Inputs
Value
2024
ASSETS:
Securities Available for
 
Sale:
U.S. Government Treasury
$
105,801
$
-
$
-
$
105,801
U.S. Government Agency
-
143,127
-
143,127
States and Political Subdivisions
-
39,382
-
39,382
Mortgage-Backed Securities
-
55,477
-
55,477
Corporate Debt Securities
-
51,462
-
51,462
Equity Securities
-
-
2,399
2,399
Loans Held for Sale
-
28,672
-
28,672
Interest Rate Swap Derivative
-
5,319
-
5,319
Forward Sales Contracts
-
96
-
96
Residential Mortgage Loan Commitments ("IRLC")
-
-
248
248
2023
ASSETS:
Securities Available for
 
Sale:
U.S. Government Treasury
$
24,679
$
-
$
-
$
24,679
U.S. Government Agency
-
145,034
-
145,034
State and Political Subdivisions
-
39,083
-
39,083
Mortgage-Backed Securities
-
63,303
-
63,303
Corporate Debt Securities
-
57,552
-
57,552
Equity Securities
-
-
3,450
3,450
Loans Held for Sale
-
28,211
-
28,211
Interest Rate Swap Derivative
-
5,317
-
5,317
Residential Mortgage Loan Commitments ("IRLC")
-
-
523
523
LIABILITIES:
Forward Sales Contracts
$
-
$
209
$
-
$
209
Mortgage Banking Activities.
 
The Company had Level 3 issuances and transfers related to mortgage
 
banking activities of $
7.1
million and $
14.1
 
million, respectively,
 
for the year ended December 31, 2024.
 
The Company had Level 3 issuances and
transfers related to mortgage banking activities of $
13.2
 
million and $
11.6
 
million, respectively, for the year
 
ended December 31,
2023.
 
Issuances are valued based on the change in fair value of the underlying mortgage
 
loan from inception of the IRLC to the
statement of financial condition date, adjusted for pull-through rates and
 
costs to originate.
 
IRLCs transferred out of Level 3
represent IRLCs that were funded and moved to mortgage loans held for sale, at fair
 
value.
Assets Measured at Fair Value
 
on a Non-Recurring Basis
Certain assets are measured at fair value on a non-recurring basis (i.e., the
 
assets are not measured at fair value on an ongoing
basis but are subject to fair value adjustments in certain circumstances).
 
An example would be assets exhibiting evidence of
impairment.
 
The following is a description of valuation methodologies used for assets measured on a non-recurring
 
basis.
 
Collateral Dependent Loans
.
 
Impairment for collateral dependent loans is measured using the fair
 
value of the collateral less
selling costs.
 
The fair value of collateral is determined by an independent valuation
 
or professional appraisal in conformance with
banking regulations.
 
Collateral values are estimated using Level 3 inputs due to the volatility in the real
 
estate market, and the
judgment and estimation involved in the real estate appraisal process.
 
Collateral dependent loans are reviewed and evaluated on
at least a quarterly basis for additional impairment and adjusted accordingly.
 
Valuation
 
techniques are consistent with those
techniques applied in prior periods.
 
Collateral dependent loans had a carrying value of $
3.6
 
million with a valuation allowance of
$
0.1
 
million at December 31, 2024.
 
Collateral dependent loans had a carrying value of $
3.3
 
million with a valuation allowance of
$
0.1
 
million at December 31, 2023.
Other Real Estate Owned
.
 
During 2024 and 2023, certain foreclosed assets, upon initial recognition, were measured
 
and reported
at fair value through a charge-off to the allowance
 
for credit losses based on the fair value of the foreclosed asset less estimated
cost to sell.
 
At December 31, 2024 and 2023, these assets were recorded at fair value, which
 
is determined by an independent
valuation or professional appraisal in conformance with banking regulations.
 
On an ongoing basis, we obtain updated appraisals
on foreclosed assets and record valuation adjustments as necessary.
 
The fair value of foreclosed assets is estimated using Level 3
inputs due to the judgment and estimation involved in the real estate valuation process.
 
Mortgage Servicing Rights
. Residential mortgage loan servicing rights are evaluated for impairment
 
at each reporting period
based upon the fair value of the rights as compared to the carrying amount.
 
Fair value is determined by a third-party valuation
model using estimated prepayment speeds of the underlying mortgage loans
 
serviced and stratifications based on the risk
characteristics of the underlying loans (predominantly loan type and note
 
interest rate).
 
The fair value is estimated using Level 3
inputs, including a discount rate, weighted average prepayment speed,
 
and the cost of loan servicing.
 
Further detail on the key
inputs utilized are provided in Note 4 – Mortgage Banking Activities.
 
At December 31, 2024 and 2023, there was
no
 
valuation
allowance for mortgage servicing rights.
Other Fair Value
 
Disclosures
The Company is required to disclose the estimated fair value of financial instruments,
 
both assets and liabilities, for which it is
practical to estimate fair value and the following is a description of valuation
 
methodologies used for those assets and liabilities.
Cash and Short-Term
 
Investments.
 
The carrying amount of cash and short-term investments is used to approximate
 
fair value,
given the short time frame to maturity and as such assets do not present unanticipated
 
credit concerns.
 
Securities Held to Maturity
.
 
Securities held to maturity are valued in accordance with the methodology previously
 
noted in the
caption “Assets and Liabilities Measured at Fair Value
 
on a Recurring Basis – Securities Available
 
for Sale”.
Other Equity Securities.
Other equity securities are accounted for under the equity method (Topic
 
323) and recorded at cost.
These securities are not readily marketable securities and are reflected in
 
Other Assets on the Statement of Financial Condition.
 
Loans.
 
The loan portfolio is segregated into categories and the fair value of each loan category is calculated
 
using present value
techniques based upon projected cash flows and estimated discount
 
rates.
 
Pursuant to the adoption of ASU 2016-01,
Recognition
and Measurement of Financial Assets and Financial
 
Liabilities
, the values reported reflect the incorporation of a liquidity
discount to meet the objective of “exit price” valuation.
 
Deposits.
 
The fair value of Noninterest Bearing Deposits, NOW Accounts, Money Market
 
Accounts and Savings Accounts are
the amounts payable on demand at the reporting date. The fair value of fixed
 
maturity certificates of deposit is estimated using
present value techniques and rates currently offered for deposits of similar remaining
 
maturities.
Subordinated Notes Payable.
 
The fair value of each note is calculated using present value techniques,
 
based upon projected cash
flows and estimated discount rates as well as rates being offered
 
for similar obligations.
Short-Term
 
and Long-Term
 
Borrowings.
 
The fair value of each note is calculated using present value techniques,
 
based upon
projected cash flows and estimated discount rates as well as rates being offered
 
for similar debt.
A summary of estimated fair values of significant financial instruments at December
 
31 consisted of the following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2024
(Dollars in Thousands)
Carrying
Level 1
Level 2
Level 3
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
70,543
$
70,543
$
-
$
-
Fed Funds Sold and Interest Bearing Deposits
321,311
321,311
-
-
Investment Securities, Held to Maturity
567,155
361,529
182,931
-
Other Equity Securities
(1)
2,848
-
2,848
-
Mortgage Servicing Rights
933
-
-
1,616
Loans, Net of Allowance for Credit Losses
2,622,299
-
-
2,457,883
LIABILITIES:
Deposits
$
3,671,977
$
-
$
3,046,926
$
-
Short-Term
 
Borrowings
28,304
-
28,304
-
Subordinated Notes Payable
52,887
-
42,530
-
Long-Term Borrowings
794
-
794
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2023
(Dollars in Thousands)
Carrying
Level 1
Level 2
Level 3
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
83,118
$
83,118
$
-
$
-
Short-Term Investments
228,949
228,949
-
-
Investment Securities, Held to Maturity
625,022
441,189
150,562
-
Other Equity Securities
(1)
2,848
-
2,848
-
Mortgage Servicing Rights
831
-
-
1,280
Loans, Net of Allowance for Credit Losses
2,703,977
-
-
2,510,529
LIABILITIES:
Deposits
$
3,701,822
$
-
$
3,243,896
$
-
Short-Term
 
Borrowings
35,341
-
35,341
-
Subordinated Notes Payable
52,887
-
44,323
-
Long-Term Borrowings
315
-
315
-
(1)
Accounted for under the equity method – not readily
 
marketable securities – reflected in other assets.
All non-financial instruments are excluded from the above table.
 
The disclosures also do not include goodwill.
 
Accordingly, the
aggregate fair value amounts presented do not represent the underlying
 
value of the Company.