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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2022

Estimated Fair Values and Related Carrying or Notional Amounts

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of September 30, 2022 and December 31, 2021 are reflected below.


	(In Thousands)
	September 30, 2022
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	70,670	$	70,670	$	70,670	$	-	$	-
Interest-bearing time deposits		5,187		5,187		-		5,187		-
Securities - available-for-sale		395,485		395,485		95,162		296,957		3,366
Other securities		8,227		8,227		-		-		8,227
Loans held for sale		2,182		2,219		-		-		2,219
Loans, net		2,122,626		2,080,950		-		-		2,080,950
Interest receivable		9,856		9,856		-		-		9,856

Financial Liabilities:
Interest bearing deposits	$	1,313,263	$	1,313,263	$	-	$	-	$	1,313,263
Non-interest bearing deposits		506,928		506,928		-		506,928		-
Time deposits		462,845		449,985		-		-		449,985
Total Deposits		2,283,036		2,270,176		-		506,928		1,763,248

Federal funds purchased and securities sold under agreement to repurchase		55,802		55,802		-		-		55,802
Federal Home Loan Bank advances		102,147		103,588		-		-		103,588
Other borrowings		10,000		10,000		-		10,000		-
Subordinated notes, net of unamortized issuance costs		34,557		35,003		-		35,003		-
Interest payable		787		787		-		-		787


	(In Thousands)
	December 31, 2021
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	180,823	$	180,823	$	180,823	$	-	$	-
Interest-bearing time deposits		10,913		10,933		-		10,933		-
Securities - available-for-sale		429,931		429,931		89,177		335,981		4,773
Other securities		8,162		8,162		-		-		8,162
Loans held for sale		7,714		7,844		-		-		7,844
Loans, net		1,841,177		1,864,386		-		-		1,864,386
Interest receivable		7,209		7,209		-		-		7,209

Financial Liabilities:
Interest bearing deposits	$	1,248,294	$	1,248,044	$	-	$	-	$	1,248,044
Non-interest bearing deposits		473,689		473,689		-		473,689		-
Time deposits		471,479		475,810		-		-		475,810
Total Deposits		2,193,462		2,197,543		-		473,689		1,723,854

Federal funds purchased and securities sold under agreement to repurchase		29,268		29,268		-		-		29,268
Federal Home Loan Bank advances		24,065		24,305		-		-		24,305
Other borrowings		40,000		40,000		-		40,000		-
Subordinated notes, net of unamortized issuance costs		34,471		35,000		-		35,000		-
Interest payable		1,125		1,125		-		-		1,125

Financial Assets Measured at Fair Value on Recurring Basis

The following summarizes financial assets measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021, segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value:


Assets and Liabilities Measured at Fair Value on a Recurring Basis (In Thousands)
September 30, 2022	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets - (Securities Available-for-Sale)
U.S. Treasury	$	95,162	$	-	$	-
U.S. Government agencies		-		138,020		-
Mortgage-backed securities		-		90,264		-
State and local governments		-		68,673		3,366
Total Securities Available-for-Sale	$	95,162	$	296,957	$	3,366


December 31, 2021	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets - (Securities Available-for-Sale)
U.S. Treasury	$	89,177	$	-	$	-
U.S. Government agencies		-		156,886		-
Mortgage-backed securities		-		117,927		-
State and local governments		-		61,168		4,773
Total Securities Available-for-Sale	$	89,177	$	335,981	$	4,773

Changes in the Level 3 Fair-Value Category of Unobservable Inputs

The following tables represent the changes in the Level 3 fair-value category of which unobservable inputs are relied upon as of the three and nine month periods ended September 30, 2022 and September 30, 2021. During the three month period ended March 31, 2022, there was one security transferred from Level 3 to Level 2.


	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at July 1, 2022	$	2,089		$	1,325		$	3,414

Change in Market Value		(19	)		(29	)		(48	)

Purchases		-			-			-

Payments & Maturities		-			-			-

Reclassification & Adjustments		-			-			-

Balance at September 30, 2022	$	2,070		$	1,296		$	3,366


	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at July 1, 2021	$	2,410		$	1,538		$	3,948

Change in Market Value		(9	)		(17	)		(26	)

Purchases		-			-			-

Payments & Maturities		(155	)		-			(155	)

Reclassification & Adjustments		-			-			-

Balance at September 30, 2021	$	2,246		$	1,521		$	3,767


	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at January 1, 2022	$	2,307		$	2,466		$	4,773

Change in Market Value		(77	)		(181	)		(258	)

Purchases		-			-			-

Payments & Maturities		(160	)		-			(160	)

Reclassification & Adjustments		-			(989	)		(989	)

Balance at September 30, 2022	$	2,070		$	1,296		$	3,366


	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at January 1, 2021	$	-		$	1,562		$	1,562

Change in Market Value		(17	)		(41	)		(58	)

Purchases		2,418			-			2,418

Payments & Maturities		(155	)		-			(155	)

Reclassification & Adjustments		-			-			-

Balance at September 30, 2021	$	2,246		$	1,521		$	3,767

Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:


	(In Thousands)				Range
	Fair Value at				(Weighted
	September 30, 2022		Valuation Technique	Unobservable Inputs	Average)
State and local government	$	3,366	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	2.13-4.59% (3.96%)

Collateral dependent impaired loans		2,482	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	20.00-23.87% (23.80%)

Mortgage servicing rights		52	Discounted Cash Flow	Constant prepayment rate and probability of default / Discount rate	0.09-1.85% (1.81%)

Other real estate owned - residential		-	Appraisals	Discount to reflect current market	— % ( — %)


	(In Thousands)				Range
	Fair Value at				(Weighted
	December 31, 2021		Valuation Technique	Unobservable Inputs	Average)
State and local government	$	4,773	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0.21-1.77% (1.33%)

Collateral dependent impaired loans		8,527	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	20.00-53.95% (34.78%)

Mortgage servicing rights		3,157	Discounted Cash Flow	Constant prepayment rate and probability of default / Discount rate	1.94-27.70% (18.44%)

Other real estate owned - residential		99	Appraisals	Discount to reflect current market	32.72% (32.72%)

Assets Measured at Fair Value on Nonrecurring Basis

The following table presents assets measured at fair value on a nonrecurring basis at September 30, 2022 and December 31, 2021:


	Assets Measured at Fair Value on a Nonrecurring Basis at September 30, 2022
	(In Thousands)
	Balance at September 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	2,482	$	-	$	-	$	2,482
Mortgage servicing rights		52		-		-		52
Other real estate owned - residential		-		-		-		-


	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2021
	(In Thousands)
	Balance at December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	8,527	$	-	$	-	$	8,527
Mortgage servicing rights		3,157		-		-		3,157
Other real estate owned - residential		99		-		-		99

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details