FAIR VALUE

6 Months Ended

Jun. 30, 2025

5. FAIR VALUE

ASC 820 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability

Assets and liabilities measured at fair value on a recurring basis are summarized below:


			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Total at		Identical Assets		Inputs		Inputs
(dollars in thousands)	June 30, 2025		(Level 1)		(Level 2)		(Level 3)
Assets:
Available-for-sale securities
Residential government-sponsored mortgage-backed securities	$	94,554	$	—	$	94,554	$	—
Obligations of states and political subdivisions		29,754		—		29,754		—
Corporate securities		10,262		—		10,262		—
Residential government-sponsored collateralized mortgage obligations		64,017		—		64,017		—
Government-sponsored agency securities		14,333		—		14,333		—
Agency commercial mortgage-backed securities		22,239		—		22,239		—
SBA pool securities		6,914		—		6,914		—
		242,073		—		242,073		—
Loans held for investment		149,946		—		149,946		—
Loans held for sale, at fair value		126,869		—		126,869		—
Consumer Program derivative		1,177		—		—		1,177
Mortgage banking financial assets		166		—		—		166
Mortgage banking derivative assets		1,151		—		—		1,151
Investment in Panacea Financial Holdings, Inc. common stock ⁽¹⁾		6,586		—		—		6,586
Total assets	$	527,968	$	—	$	518,888	$	9,080

(1)

Inputs and assumptions utilized in determining the fair value are discussed in “PFH Deconsolidation and Sale of Shares” in footnote 1, Accounting Policies.


			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Total at		Identical Assets		Inputs		Inputs
(dollars in thousands)	December 31, 2024		(Level 1)		(Level 2)		(Level 3)
Assets:
Available-for-sale securities
Residential government-sponsored mortgage-backed securities	$	91,407	$	—	$	91,407	$	—
Obligations of states and political subdivisions		29,705		—		29,705		—
Corporate securities		15,080		—		15,080		—
Residential government-sponsored collateralized mortgage obligations		56,390		—		56,390		—
Government-sponsored agency securities		13,836		—		13,836		—
Agency commercial mortgage-backed securities		22,178		—		22,178		—
SBA pool securities		7,307		—		7,307		—
		235,903		—		235,903		—
Loans held for investment		249,190		—		249,190		—
Loans held for sale, at fair value		83,276		—		83,276		—
Consumer Program derivative		4,511		—		—		4,511
Mortgage banking financial assets		82		—		—		82
Mortgage banking derivative assets		1,000		—		—		1,000
Total assets	$	573,962	$	—	$	568,369	$	5,593

Assets measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements Using

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Total at

Identical Assets

Inputs

(dollars in thousands)

June 30, 2025

(Level 1)

(Level 2)

(Level 3)

Collateral dependent loans

98,127

—

98,127

Assets held for sale

2,181

—

2,181


			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Total at		Identical Assets		Inputs		Inputs
(dollars in thousands)	December 31, 2024		(Level 1)		(Level 2)		(Level 3)
Collateral dependent loans	$	66,590	$	—	$	—	$	66,590
Loans held for sale, at lower of cost or market		163,832		50,662		113,170		—
Assets held for sale		5,497		—		—		5,497

Fair Value of Financial Instruments

The carrying amount, estimated fair values and fair value hierarchy levels of financial instruments were as follows ($ in thousands) for the periods indicated:


		June 30, 2025				December 31, 2024
	Fair Value	Carrying		Fair		Carrying		Fair
	Hierarchy Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	94,074	$	94,074	$	64,505	$	64,505
Securities available-for-sale	Level 2		242,073		242,073		235,903		235,903
Securities held-to-maturity	Level 2		8,850		8,270		9,448		8,602
Stock in Federal Reserve Bank and Federal Home Loan Bank	Level 2		12,998		12,998		13,037		13,037
Preferred investment in mortgage company	Level 2		3,005		3,005		3,005		3,005
Net loans	Level 2 and 3		3,084,536		2,888,458		2,833,723		2,564,623
Loans held for sale	Level 2		126,869		126,869		83,276		83,276
Loans held for sale, at lower of cost or market	Level 3		—		—		163,832		163,832
Consumer Program derivative	Level 3		1,177		1,177		4,511		4,511
Mortgage banking financial assets	Level 3		166		166		82		82
Mortgage banking derivative assets	Level 3		1,151		1,151		1,000		1,000
Interest rate swaps, net	Level 2		—		—		752		752
Investment in Panacea Financial Holdings, Inc. common stock	Level 3		6,586		6,586		—		—
Financial liabilities:
Demand deposits and NOW accounts	Level 2	$	1,336,329	$	1,336,329	$	1,256,632	$	1,256,632
Money market and savings accounts	Level 2		1,679,848		1,679,848		1,574,225		1,574,225
Time deposits	Level 3		326,496		325,625		340,178		339,767
Securities sold under agreements to repurchase	Level 1		4,370		4,370		3,918		3,918
Junior subordinated debt	Level 2		9,904		8,997		9,880		9,016
Senior subordinated notes	Level 2		86,116		86,728		85,998		85,987
Secured borrowings	Level 3		16,449		16,449		17,195		17,195

The carrying amount is the estimated fair value for cash and cash equivalents, loans held for sale, mortgage banking financial assets and liabilities, mortgage banking derivative assets and liabilities, Consumer Program derivative, interest rate swaps, demand deposits and NOW accounts, savings accounts, money market accounts, FHLB advances, secured borrowings and securities sold under agreements to repurchase.

The fair value of junior subordinated debt and senior subordinated notes are based on current rates for similar financing. The carrying amount of Federal Reserve Bank and FHLB stock is a reasonable estimate of fair value as these securities are not readily marketable and are based on the ultimate recoverability of the par value. The fair value of off-balance-sheet items is not considered material. The fair value of net loans, time deposits, junior subordinated debt, and senior subordinated notes are measured using the exit-price notion. The net loans that use level 2 inputs are related to the portfolio of loans underlying our interest rate swaps as previously discussed in “Note 1 – Accounting Policies”.

- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/exampleRef
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Reference 2: http://www.xbrl.org/2003/role/exampleRef
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+ Details

Primis Financial Corp. 10-Q