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Note 15 - Fair Values of Financial Instruments

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 15 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying amount, estimated fair value and level within the fair value hierarchy of financial instruments were as follows at year end:

		Level in				2023								2022
		Fair Value				Carrying				Fair				Carrying				Fair
(Dollars in thousands)		Hierarchy				Amount				Value				Amount				Value
Financial assets
Cash and cash equivalents		Level 1				$	130,533			$	130,533			$	96,772			$	96,772
Securities available for sale		(1)					617,092				617,092				602,936				602,936
Federal Home Loan Bank stock		(2)					21,513				21,513				17,721				17,721
Loans, net		Level 3					4,253,844				4,191,644				3,874,373				3,800,042
Mortgage loans held for sale		Level 2					18,607				19,027				3,565				3,643
Accrued interest receivable		Level 2					19,806				19,806				15,476				15,476
Interest rate swaps		Level 2					27,505				27,505				26,173				26,173

Financial liabilities
Deposits		Level 2					3,900,918				3,814,778				3,712,811				3,379,403
Securities sold under agreements to repurchase		Level 2					229,734				229,734				194,340				194,340
Federal Home Loan Bank advances		Level 2					467,910				454,857				308,263				292,044
Subordinated debentures		Level 2					49,644				49,653				48,958				49,531
Subordinated notes		Level 2					88,971				77,218				88,628				75,024
Accrued interest payable		Level 2					9,012				9,012				3,223				3,223
Interest rate swaps		Level 2					27,964				27,964				26,377				26,377

(1)

See Note 16 for a description of the fair value hierarchy as well as a disclosure of levels for classes of financial assets and liabilities.

(2)

It is not practical to determine the fair value of FHLBI stock due to transferability restrictions; therefore, fair value is estimated at carrying amount.

Carrying amount is the estimated fair value for cash and cash equivalents, FHLBI stock, accrued interest receivable and payable, noninterest-bearing checking accounts and securities sold under agreements to repurchase. Security fair values are based on market prices or dealer quotes, and if no such information is available, on the rate and term of the security and information about the issuer. Fair value for loans is based on an exit price model as required by ASU 2016-01, taking into account inputs such as discounted cash flows, probability of default and loss given default assumptions. Fair value for deposit accounts other than noninterest-bearing checking accounts is based on discounted cash flows using current market rates applied to the estimated life. The fair values of subordinated debentures, subordinated notes, and FHLBI advances are based on current rates for similar financing. The fair values of interest rate swaps are based on discounted cash flows using forecasted yield curves, along with insignificant unobservable inputs, such as borrower credit spreads. The fair value of other off-balance sheet items is estimated to be nominal.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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