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

12 Months Ended

Dec. 31, 2021

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, 2021	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	$	—	$	97,499	$	—	$	97,499
State and municipal securities		—		131,035		—		131,035
U.S. Government agencies and sponsored    enterprises (GSEs):
Mortgage-backed securities		—		329,938		—		329,938
Collateralized mortgage obligations (CMOs)		—		127,012		—		127,012
Pooled trust preferred securities		—		—		75		75
Corporate debt securities		—		6,801		—		6,801
Total securities available-for-sale		—		692,285		75		692,360
Equity securities		12,410		—		—		12,410
Total recurring fair value measurements	$	12,410	$	692,285	$	75	$	704,770
Nonrecurring fair value measurements *
Impaired loans	$	—	$	—	$	4,686	$	4,686
Mortgage servicing rights		—		—		117		117
Total nonrecurring fair value measurements	$	—	$	—	$	4,803	$	4,803

* impairment

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

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, 2021	Fair value		Valuation techniques		Unobservable input		Value or range of values
Impaired loans	$	4,369	Appraisal of collateral	(1)	Appraisal adjustments	(2)	-15% to -20%
					Liquidation expenses	(3)	-10%
Impaired loans		317	Financial statement values for UCC collateral		Financial statement value discounts	(4)	-30 to -100%
Mortgage servicing rights		117	Discounted cash flow		Remaining term		3 to 29 yrs
					Prepayment Speeds		187% to 312%
					Discount rate		12.0% to 12.5%

	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	(4)	-87.5 to -100%
Mortgage servicing rights		291	Discounted cash flow		Remaining term		2 to 30 yrs
					Prepayment Speeds		243% to 320%
					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 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	2021			2020
Balance, beginning of year	$	70		$	79
Payments received		(1	)		(1	)
Sale of securities		—			—
Total gains or losses (realized/unrealized)
Included in earnings		—			—
Included in other comprehensive    income		6			(8	)
Transfers in and/or out of Level 3		—			—
Balance, end of year	$	75		$	70

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, 2021	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	$	13,390	$	13,390	$	13,390	$	—	$	—
Investment securities:
Available-for-sale		692,360		692,360		—		692,285		75
Equity		12,410		12,410		12,410		—		—
Restricted investment in bank stocks		1,329		1,329		—		1,329		—
Loans held for sale		—		—		—		—		—
Net loans		915,286		916,271		—		—		916,271
Mortgage servicing rights		538		615		—		—		615
Accrued interest receivable		4,104		4,104		—		4,104		—
Financial liabilities
Deposits with no stated maturities	$	1,281,372	$	1,281,372	$	1,281,372	$	—	$	—
Deposits with stated maturities		168,373		168,039		—		168,039		—
Short-term borrowings		68,476		68,476		68,476		—		—
Long-term debt		10,000		10,114		10,114		—		—
Accrued interest payable		211		211		—		211		—
Off-balance sheet instruments
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—
Standby letters of credit		—		70		—		70		—

					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		—