Note 9 - Fair Value Measurements and Disclosures (Tables)

6 Months Ended

Jun. 30, 2024

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 June 30, 2024:

June 30, 2024	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	$	—	$	6,449	$	—	$	6,449
U.S. Government agency securities		—		65,633		—		65,633
State and municipal securities (1)		—		86,693		—		86,693
U.S. Government agencies and sponsored    enterprises (GSEs):
Mortgage-backed securities (1)		—		211,783		—		211,783
Collateralized mortgage obligations (CMOs)		—		83,480		—		83,480
Corporate debt securities and money market funds		—		6,328		52		6,380
Total debt securities available-for-sale		—		460,366		52		460,418
Equity securities		7,233		—		—		7,233
Total recurring fair value measurements	$	7,233	$	460,366	$	52	$	467,651
Nonrecurring fair value measurements
Collateral dependent loans	$	—	$	—	$	43	$	43
Mortgage servicing rights		—		—		1		1
Total nonrecurring fair value measurements	$	—	$	—	$	44	$	44

December 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
Debt securities available-for-sale
U.S. Treasuries	$	—	$	6,451	$	—	$	6,451
U.S. Government agency securities		—		74,122		—		74,122
State and municipal securities (1)		—		89,189		—		89,189
U.S. Government agencies and sponsored    enterprises (GSEs):
Mortgage-backed securities (1)		—		224,238		—		224,238
Collateralized mortgage obligations (CMOs)		—		89,973		—		89,973
Corporate debt securities		—		6,157		52		6,209
Total debt securities available-for-sale		—		490,130		52		490,182
Equity securities		5,910		—		—		5,910
Total recurring fair value measurements	$	5,910	$	490,130	$	52	$	496,092
Nonrecurring fair value measurements
Collateral dependent loans	$	—	$	—	$	164	$	164
Mortgage servicing rights		—		—		7		7
Total nonrecurring fair value measurements	$	—	$	—	$	171	$	171
(1) Includes derivatives designated as fair value hedging instruments as discussed in Note 12

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
June 30, 2024	Fair value		Valuation techniques		Unobservable inputs		Value or range of values
Collateral dependent loans	$	43	Appraisal of collateral	(1)	Appraisal adjustments	(2)	-20% to -100%
					Liquidation expenses	(3)		-10	%
Mortgage servicing rights		1	Discounted cash flow		Remaining term		1 to 30 years
					Prepayment speeds		94% to 177%
					Discount rate		12.0% to 12.5%

	Quantitative information about Level 3 fair value measurements
December 31, 2023	Fair value		Valuation techniques		Unobservable inputs		Value or range of values
Collateral dependent loans	$	164	Appraisal of collateral	(1)	Appraisal adjustments	(2)	-20% to -100%
					Liquidation expenses	(3)	-10%
Mortgage servicing rights		7	Discounted cash flow		Remaining term		2 to 30 yrs
					Prepayment speeds		104% to 214%
					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.

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 six months ended June 30, 2024 and 2023:

	Fair value measurements using significant unobservable inputs (Level 3)
	2024			2023
Balance, January 1,	$	52		$	53
Payments received		(1	)		(1	)
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, June 30,	$	52		$	52

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
June 30, 2024	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	$	76,909	$	76,909	$	76,909	$	—	$	—
Investment securities:
Available-for-sale (1)		460,418		460,418		—		460,366		52
Equities		7,233		7,233		7,233		—		—
Restricted investment in stocks		3,114		3,114		—		3,114		—
Loans held for sale		786		790
Net loans		1,153,452		1,144,269		—		—		1,144,269
Mortgage servicing rights		399		580		—		—		580
Accrued interest receivable		6,402		6,402		—		6,402		—
Financial liabilities
Deposits with no stated maturities	$	1,194,146	$	1,194,146	$	1,194,146	$	—	$	—
Deposits with stated maturities		378,693		375,939		—		375,939		—
Short-term borrowings		49,066		49,066		49,066		—		—
Long-term debt		30,000		29,903		29,903		—		—
Accrued interest payable		4,488		4,488		—		4,488		—
Off-balance sheet instruments
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—
Standby letters of credit		—		46		—		46		—

					Fair value measurements
December 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	$	62,657	$	62,657	$	62,657	$	—	$	—
Investment securities:
Available-for-sale (1)		490,182		490,182		—		490,130		52
Equity		5,910		5,910		5,910		—		—
Restricted investment in bank stocks		2,730		2,730		—		2,730		—
Loans held for sale		549		560
Net loans		1,084,681		1,077,544		—		—		1,077,544
Mortgage servicing rights		415		585		—		—		585
Accrued interest receivable		6,101		6,101		—		6,101		—
Financial liabilities
Deposits with no stated maturities	$	1,173,732	$	1,173,732	$	1,173,732	$	—	$	—
Deposits with stated maturities		314,981		311,735		—		311,735		—
Short-term borrowings		94,094		94,094		94,094		—		—
Long-term debt		20,000		19,906		19,906		—		—
Accrued interest payable		5,294		5,294		—		5,294		—
Off-balance sheet instruments
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—
Standby letters of credit		—		79		—		79		—
(1) Includes derivatives designated as fair value hedging instruments as discussed in Note 12