Note 9 - Fair Value Measurements and Disclosures (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Financial Assets Measured at Fair Value on a Recurring and Nonrecurring Basis

The following table sets forth QNB’s financial assets measured at fair value on a recurring and nonrecurring basis and the fair value measurements by level within the fair value hierarchy as of March 31, 2023:

March 31, 2023	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Balance at end of period
Recurring fair value measurements
Available-for-sale securities:
U.S. Treasury securities	$	—	$	—	$	—	$	—
U.S. Government agency securities		—		88,701		—		88,701
State and municipal securities		—		89,917		—		89,917
U.S. Government agencies and sponsored    enterprises (GSEs):
Mortgage-backed securities		—		252,984		—		252,984
Collateralized mortgage obligations (CMOs)		—		100,083		—		100,083
Corporate debt securities		—		6,167		52		6,219
Total debt securities available-for-sale		—		537,852		52		537,904
Equity securities		11,908		—		—		11,908
Total recurring fair value measurements	$	11,908	$	537,852	$	52	$	549,812
Nonrecurring fair value measurements*
Impaired loans	$	—	$	—	$	337	$	337
Mortgage servicing rights		—		—		1		1
Total nonrecurring fair value measurements	$	—	$	—	$	338	$	338
*Impairment

December 31, 2022	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Balance at end of period
Recurring fair value measurements
Debt securities available-for-sale
U.S. Treasuries	$	—	$	301	$	—	$	301
U.S. Government agency securities		—		86,709		—		86,709
State and municipal securities		—		95,367		—		95,367
U.S. Government agencies and sponsored    enterprises (GSEs):
Mortgage-backed securities		—		256,161		—		256,161
Collateralized mortgage obligations (CMOs)		—		101,672		—		101,672
Corporate debt securities		—		6,262		53		6,315
Total debt securities available-for-sale		—		546,472		53		546,525
Equity securities		12,056		—		—		12,056
Total recurring fair value measurements	$	12,056	$	546,472	$	53	$	558,581
Nonrecurring fair value measurements*
Impaired loans	$	—	$	—	$	3,928	$	3,928
Mortgage servicing rights		—		—		1		1
Total nonrecurring fair value measurements	$	—	$	—	$	3,929	$	3,929
*Impairment

Quantitative Information about Assets Measured at Fair Value

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which QNB has utilized Level 3 inputs to determine fair value:

	Quantitative information about Level 3 fair value measurements
March 31, 2023	Fair value		Valuation techniques		Unobservable inputs		Value or range of values
Impaired loans	$	43	Appraisal of collateral	(1)	Appraisal adjustments	(2)	-20% to -100%
					Liquidation expenses	(3)		-10	%
Impaired loans		294	Financial statement values for UCC collateral		Financial statement value discounts	(4)	-30% to -100%
Mortgage servicing rights		1	Discounted cash flow		Remaining term		2 to 28 years
					Prepayment speeds		118% to 254%
					Discount rate		12.0% to 12.5%

	Quantitative information about Level 3 fair value measurements
December 31, 2022	Fair value		Valuation techniques		Unobservable inputs		Value or range of values
Impaired loans	$	3,634	Appraisal of collateral	(1)	Appraisal adjustments	(2)	-15% to -100%
					Liquidation expenses	(3)		-10	%
Impaired loans		294	Financial statement values for UCC collateral		Financial statement value discounts	(4)	-30% to -100%
Mortgage servicing rights		1	Discounted cash flow		Remaining term		2 to 28 years
					Prepayment speeds		113% to 235%
					Discount rate		12.0% to 12.5%

(1)Fair value is primarily determined through appraisals of the underlying collateral by independent parties, which generally includes various Level 3 inputs which are not always identifiable.

(2)Appraisals may be adjusted by management for qualitative factors such as economic conditions and the age of the appraisal. The range is presented as a percent of the initial appraised value.

(3)Appraisals and pending agreements of sale are adjusted by management for estimated liquidation expenses. The range is presented as a percent of the initial appraised value.

(4)Values obtained from financial statements for UCC collateral (fixed assets and inventory) are discounted to estimated realizable liquidation value.

Available-for-sale Securities Measured at Fair Value Using Significant Unobservable Inputs

The following table presents additional information about the available-for-sale securities measured at fair value on a recurring basis and for which QNB utilized significant unobservable inputs (Level 3 inputs) to determine fair value for the three months ended March 31, 2023 and 2022:

	Fair value measurements using significant unobservable inputs (Level 3)
	2023			2022
Balance, January 1,	$	53		$	75
Payments received		—			(22	)
Total gains or losses (realized/unrealized)
Included in earnings		—			—
Included in other comprehensive (loss) income		(1	)		—
Transfers in and/or out of Level 3		—			—
Balance, March 31,	$	52		$	53

Financial and Off-balance Sheet Instruments

The estimated fair values and carrying amounts of the Company’s financial and off-balance sheet instruments are summarized as follows:

					Fair value measurements
March 31, 2023	Carrying amount		Fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial assets
Cash and cash equivalents	$	14,201	$	14,201	$	14,201	$	—	$	—
Investment securities:
Available-for-sale		537,904		537,904		—		537,852		52
Equities		11,908		11,908		11,908		—		—
Restricted investment in stocks		2,098		2,098		—		2,098		—
Loans held for sale		388		389		—		389		—
Net loans		1,003,765		980,285		—		—		980,285
Mortgage servicing rights		460		621		—		—		621
Accrued interest receivable		3,425		3,425		—		3,425		—
Financial liabilities
Deposits with no stated maturities	$	1,174,574	$	1,174,574	$	1,174,574	$	—	$	—
Deposits with stated maturities		250,016		244,751		—		244,751		—
Short-term borrowings		110,192		110,192		110,192		—		—
Long-term debt		—		—		—		—		—
Accrued interest payable		923		923		—		923		—
Off-balance sheet instruments
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—
Standby letters of credit		—		83		—		83		—

					Fair value measurements
December 31, 2022	Carrying amount		Fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial assets
Cash and cash equivalents	$	15,899	$	15,899	$	15,899	$	—	$	—
Investment securities:
Available-for-sale		546,525		546,525		—		546,472		53
Equities		12,056		12,056		12,056		—		—
Restricted investment in stocks		5,193		5,193		—		5,193		—
Net loans		1,028,854		1,001,103		—		—		1,001,103
Mortgage servicing rights		469		638		—		—		638
Accrued interest receivable		5,038		5,038		—		5,038		—
Financial liabilities
Deposits with no stated maturities	$	1,242,920	$	1,242,920	$	1,242,920	$	—	$	—
Deposits with stated maturities		175,449		168,554		—		168,554		—
Short-term borrowings		161,327		161,327		161,327		—		—
Long-term debt		10,000		10,000		10,000		—		—
Accrued interest payable		467		467		—		467		—
Off-balance sheet instruments
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—
Standby letters of credit		—		69		—		69		—