Note 9 - Fair Value Measurements and Disclosures (Tables)

6 Months Ended

Jun. 30, 2022

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, 2022:

June 30, 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
Available-for-sale securities:
U.S. Treasury securities	$	—	$	893	$	—	$	893
U.S. Government agency securities		—		91,090		—		91,090
State and municipal securities		—		108,495		—		108,495
U.S. Government agencies and sponsored    enterprises (GSEs):
Mortgage-backed securities		—		285,320		—		285,320
Collateralized mortgage obligations (CMOs)		—		117,277		—		117,277
Corporate debt securities		—		6,437		55		6,492
Total debt securities available-for-sale		—		609,512		55		609,567
Equity securities		11,617		—		—		11,617
Total recurring fair value measurements	$	11,617	$	609,512	$	55	$	621,184
Nonrecurring fair value measurements*
Impaired loans	$	—	$	—	$	2,843	$	2,843
Mortgage servicing rights		—		—		70		70
Total nonrecurring fair value measurements	$	—	$	—	$	2,913	$	2,913
*Impairment

December 31, 2021	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. 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
Corporate debt securities		—		6,801		75		6,876
Total debt 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

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, 2022	Fair value		Valuation techniques		Unobservable inputs		Value or range of values
Impaired loans	$	2,527	Appraisal of collateral	(1)	Appraisal adjustments	(2)	-10% to -25%
					Liquidation expenses	(3)		-10	%
Impaired loans		316	Financial statement values for UCC collateral		Financial statement value discounts	(4)	-30% to -100%
Mortgage servicing rights		70	Discounted cash flow		Remaining term		1 to 29 years
					Prepayment speeds		123% to 269%
					Discount rate		12.0% to 12.5%

	Quantitative information about Level 3 fair value measurements
December 31, 2021	Fair value		Valuation techniques		Unobservable inputs		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 years
					Prepayment speeds		187% to 312%
					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 six months ended June 30, 2022 and 2021:

	Fair value measurements using significant unobservable inputs (Level 3)
	2022			2021
Balance, January 1,	$	75		$	70
Payments received		(21	)		—
Total gains or losses (realized/unrealized)
Included in earnings		—			—
Included in other comprehensive (loss) income		1			2
Transfers in and/or out of Level 3		—			—
Balance, June 30,	$	55		$	72

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, 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	$	17,094	$	17,094	$	17,094	$	—	$	—
Investment securities:
Available-for-sale		609,567		609,567		—		609,512		55
Equities		11,617		11,617		11,617		—		—
Restricted investment in stocks		1,884		1,884		—		1,884		—
Net loans		952,117		939,839		—		—		939,839
Mortgage servicing rights		503		659		—		—		659
Accrued interest receivable		3,628		3,628		—		3,628		—
Financial liabilities
Deposits with no stated maturities	$	1,305,919	$	1,305,919	$	1,305,919	$	—	$	—
Deposits with stated maturities		161,809		157,266		—		157,266		—
Short-term borrowings		77,836		77,836		77,836		—		—
Long-term debt		10,000		9,911		9,911		—		—
Accrued interest payable		197		197		—		197		—
Off-balance sheet instruments
Commitments to extend credit	$	—	$	—	$	—	$	—	$	—
Standby letters of credit		—		51		—		51		—

					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
Equities		12,410		12,410		12,410		—		—
Restricted investment in stocks		1,329		1,329		—		1,329		—
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		—