Note 17 - Fair Value Measurements and Fair Values of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

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

For financial assets measured at fair value on a recurring and nonrecurring basis, the fair value measurements by level within the fair value hierarchy used were as follows:

December 31, 2020	Quoted prices in active markets for identical assets (Level 1)		Significant other observable input (Level 2)		Significant unobservable inputs (Level 3)		Balance at end of period
Recurring fair value measurements
Securities available-for-sale
U.S. Government agency securities	$	—	$	69,776	$	—	$	69,776
State and municipal securities		—		87,812		—		87,812
U.S. Government agencies and sponsored    enterprises (GSEs):
Mortgage-backed securities		—		175,847		—		175,847
Collateralized mortgage obligations (CMOs)		—		94,948		—		94,948
Pooled trust preferred securities		—		—		70		70
Corporate debt securities		—		7,193		—		7,193
Total securities available-for-sale		—		435,576		70		435,646
Equity securities		12,849		—		—		12,849
Total recurring fair value measurements	$	12,849	$	435,576	$	70	$	448,495
Nonrecurring fair value measurements *
Impaired loans	$	—	$	—	$	5,034	$	5,034
Mortgage servicing rights		—		—		291		291
Total nonrecurring fair value measurements	$	—	$	—	$	5,325	$	5,325

* impairment

December 31, 2019	Quoted prices in active markets for identical assets (Level 1)		Significant other observable input (Level 2)		Significant unobservable inputs (Level 3)		Balance at end of period
Recurring fair value measurements
Securities available-for-sale
U.S. Government agency securities	$	—	$	69,298	$	—	$	69,298
State and municipal securities		—		50,781		—		50,781
U.S. Government agencies and sponsored    enterprises (GSEs):
Mortgage-backed securities		—		134,829		—		134,829
Collateralized mortgage obligations (CMOs)		—		86,610		—		86,610
Pooled trust preferred securities		—		—		79		79
Corporate debt securities		—		8,113		—		8,113
Total securities available-for-sale		—		349,631		79		349,710
Equity securities		9,164		—		—		9,164
Total recurring fair value measurements	$	9,164	$	349,631	$	79	$	358,874
Nonrecurring fair value measurements *
Impaired loans	$	—	$	—	$	5,212	$	5,212
Mortgage servicing rights		—		—		7		7
Total nonrecurring fair value measurements	$	—	$	—	$	5,219	$	5,219

* 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
December 31, 2020	Fair value		Valuation techniques		Unobservable input		Value or range of values
Impaired loans	$	4,754	Appraisal of collateral	(1)	Appraisal adjustments	(2)	-10% to -30%
					Liquidation expenses	(3)	-10%
Impaired loans		280	Financial statement values for UCC collateral		Financial statement value discounts	(5)	-87.5 to -100%
Mortgage servicing rights		291	Discounted cash flow		Remaining term		2 to 30 yrs
					Discount rate		12.0% to 12.5%

	Quantitative information about Level 3 fair value measurements
December 31, 2019	Fair value		Valuation techniques		Unobservable input		Value or range of values
Impaired loans	$	4,655	Appraisal of collateral	(1)	Appraisal adjustments	(2)	-5% to -40%
					Liquidation expenses	(3)	-10%
Impaired loans		521	Financial statement values for UCC collateral		Financial statement value discounts	(5)	-30 to -100%
Impaired loans		36	Used commercial vehicle guides		Guide value discounts	(4)		-30	%
Mortgage servicing rights		—	Discounted cash flow		Remaining term		2 to 27 yrs
					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) If lendable value (lower than wholesale) is utilized then no additional discounts are taken. If lendable value is not provided, then additional discounts are applied.

(5) 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 securities available-for-sale 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 year ended December 31:

	Fair value measurements using significant unobservable inputs (Level 3)
Securities available-for-sale	2020			2019
Balance, beginning of year	$	79		$	116
Payments received		(1	)		(37	)
Sale of securities		—			—
Total gains or losses (realized/unrealized)
Included in earnings		—			—
Included in other comprehensive    income		(8	)		—
Transfers in and/or out of Level 3		—			—
Balance, end of year	$	70		$	79

Financial and Off-balance Sheet Instruments

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

					Fair value measurements
December 31, 2020	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	$	39,331	$	39,331	$	39,331	$	—	$	—
Investment securities:
Available-for-sale		435,646		435,646		—		435,576		70
Equity		12,849		12,849		12,849		—		—
Restricted investment in bank stocks		1,041		1,041		—		1,041		—
Loans held for sale		6,570		6,886		—		6,886		—
Net loans		909,216		915,726		—		—		915,726
Mortgage servicing rights		533		568		—		—		568
Accrued interest receivable		4,825		4,825		—		4,825		—
Financial liabilities
Deposits with no stated maturities	$	1,030,982	$	1,030,982	$	1,030,982	$	—	$	—
Deposits with stated maturities		197,085		199,127		—		199,127		—
Short-term borrowings		58,838		58,838		58,838		—		—
Long-term debt		10,000		10,269		10,269		—		—
Accrued interest payable		350		350		—		350		—
Off-balance sheet instruments
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—
Standby letters of credit		—		88		—		88		—

					Fair value measurements
December 31, 2019	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	$	17,608	$	17,608	$	17,608	$	—	$	—
Investment securities:
Available-for-sale		349,710		349,710		—		349,631		79
Equity		9,164		9,164		9,164		—		—
Restricted investment in bank stocks		1,073		1,073		—		1,073		—
Loans held for sale		977		997		—		997		—
Net loans		810,729		825,295		—		—		825,295
Mortgage servicing rights		441		551		—		—		551
Accrued interest receivable		2,828		2,828		—		2,828		—
Financial liabilities
Deposits with no stated maturities	$	802,284	$	802,284	$	802,284	$	—	$	—
Deposits with stated maturities		235,576		235,557		—		235,557		—
Short-term borrowings		55,931		55,931		55,931		—		—
Accrued interest payable		909		909		—		909		—
Off-balance sheet instruments
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—
Standby letters of credit		—		47		—		47		—