FAIR VALUES

12 Months Ended

Dec. 31, 2024

Fair Value Disclosures [Abstract]

FAIR VALUES

NOTE 23 FAIR VALUES

The Company established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by this hierarchy are:

Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level 2: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are valued using other financial instruments, the parameters of which can be directly observed.

Level 3: 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.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy are as follows:

Investment Securities Available for Sale - Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s available for sale securities, totaling $96.0 million and $89.8 million as of December 31, 2024 and 2023, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service.

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.

Other Real Estate Owned – Other real estate owned is adjusted to fair value upon transfer of the loans, or former bank premises, to other real estate owned.  These assets are carried at the lower of their carrying value or fair value.  Fair value is based upon observable market prices, when available, reduced by estimated disposition costs, which the Company considers to be nonrecurring Level 2 inputs. When observable market prices are not available, management determines the fair value of the foreclosed asset using independent third-party appraisals, evaluated to determine whether or not the property is further impaired below the appraised value, and adjusts for estimated costs of disposition. The Company records foreclosed assets as nonrecurring Level 3. The aggregate carrying amounts of foreclosed assets were approximately $87,000 and $157,000 as of December 31, 2024 and 2023, respectively.

Assets and liabilities measured at fair value are as follows as of December 31, 2024:

(Dollars in thousands)		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available for sale investments
U.S. Treasuries	$	-	$	7,961	$	-
U.S. Government Agencies		-		8,805		-
Taxable municipals		-		18,524		-
Corporate bonds		-		2,253		-
Mortgage backed securities		-		58,441		-
(On a non-recurring basis) Other real estate owned		-		-		87
Collateral dependent loans with ACL:
Consumer installment and all other loans		-		-		11
Total	$	1	$	95,984	$	98

Not included in the above table is a residential 1-4 family mortgage loan totaling $178,000 that has a specific allowance for credit loss allocation of 100% due to the destruction of the collateral.

Assets and liabilities measured at fair value are as follows as of December 31, 2023:

(Dollars are in thousands)		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available for sale investments
U.S. Treasuries	$	-	$	10,985	$	-
U.S. Government Agencies		-		8,811		-
Taxable municipals		-		17,859		-
Corporate bonds		-		2,688		-
Mortgage backed securities		-		49,462		-
(On a non-recurring basis) Other real estate owned		-		-		157
Collateral dependent loans with ACL:
Commercial real estate		-		-		204
Total	$	1	$	89,805	$	361

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of December 31, 2024 and 2023, the significant unobservable inputs used in the fair value measurements were as follows:

(Dollars in thousands)		Fair Value at December 31, 2024		Fair Value at December 31, 2023	Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Collateral dependent loans with ACL:
Commercial real estate	$	-	$	204	Appraised Value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 18%
Consumer and all other	$	11	$	-	Appraised Value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 18%
Other Real Estate Owned	$	87	$	157	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 18%

Fair Value of Financial Instruments

The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis are as follows:

						Fair Value Measurements
(Dollars in thousands)		Carrying Amount		Fair Value		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
December 31, 2024
Financial instruments – assets
Net loans	$	649,852	$	633,023	$	-	$	-	$	633,023
Financial instruments – liabilities
Time deposits		268,739		268,509		-		268,509		-
Borrowed funds		24,986		23,071		-		23,071		-
December 31, 2023
Financial instruments – assets
Net loans	$	630,855	$	604,736	$	-	$	-	$	604,736
Financial instruments – liabilities
Time deposits		252,316		249,941		-		249,941		-
Borrowed funds		36,186		34,046		-		34,046		-

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions can significantly affect the estimates.

Estimated fair values have been determined by the Company using historical data, as generally provided in the Company’s regulatory reports, and an estimation methodology suitable for each category of financial instruments. The Company’s fair value estimates, methods and assumptions are set forth below for the Company’s other financial instruments.

The carrying value of cash and due from banks, federal funds sold, interest-bearing deposits with other banks, deposits with no stated maturities and accrued interest approximates fair value and is excluded from the table above.

The methods utilized to measure the fair value of financial instruments represent an approximation of exit price; however, an actual exit price may differ.