MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited)
The following discussion summarizes the financial position and results of operations of High Plains Farm Credit, ACA for the six months ended June 30, 2024, with comparisons to prior periods. You should read these comments along with the accompanying financial statements and footnotes and the 2023 Annual Report to Shareholders. The accompanying financial statements were prepared under the oversight of our Audit Committee. You should read these comments along with the accompanying financial statements and footnotes and the 2023 Annual Report to Shareholders.
High Plains Farm Credit’s annual and quarterly reports to stockholders are available on the Association’s website, HighPlainsFarmCredit.com or can be obtained free of charge by contacting the Association’s headquarters at (620) 285-6978. Annual reports are available 75 days after year-end and quarterly reports are available 40 days after each calendar quarter-end. The financial condition and results of operations of CoBank, ACB (CoBank), materially affect the risk associated with stockholder investments in High Plains Farm Credit, ACA. Stockholders of High Plains Farm Credit, ACA may obtain copies of CoBank’s financial statements free of charge by visiting CoBank’s website, CoBank.com, or by contacting the Larned headquarters office located at 605 Main, Larned, KS 67550-0067 or by phone at (620) 2856978.
CURRENT MARKET CONDITIONS
Some areas have yet to receive adequate rainfall as the U.S. drought monitor indicates conditions ranging from “normal” to “severe drought” in our territory. Portions of the territory received much needed rain during the quarter, helping to ease the prolonged drought conditions. Volatile demand for grain and feed exports contributed to the cooling of commodity prices during the quarter.
The fed cattle market continued to be a high point with continued high cash markets with weights nearly even with last year. Recent rainfall across the state improved pasture conditions but is making haying difficult. Demand is still light for all hay offerings, but more tons were moved this quarter.
The real estate market was relatively quiet this quarter. Producers continue to look for opportunities to expand their acreage. Increased demand with limited supply has resulted in some strong sales across land types with several cash buyers as interest rates remain elevated. Buyers are primarily local producers with growing influence from recreational buyers on pasture and Conservation Reserve Program (CRP) sales.
The growth of the U.S. economy has gradually softened through the first half of 2024 primarily due to continued elevated inflation and high interest rates. Upward trends for the Gross Domestic Product (GDP) and consumer spending have also slowed as a result, but generally remained strong. The Federal Reserve announced at its June 2024 meeting that rates would remain steady at the current range of 5.25% - 5.50% After recording strong growth for the past two years, net cash farm income is projected to decline by 24.1% in 2024 according to the USDA forecast report in February. This decrease is primarily driven by high farming expenses, lower direct government payments, and weakening commodity prices. Global conflicts have continued to put additional pressures on commodity prices, contributing to volatility and uncertainty in the markets.
LOAN PORTFOLIO
Loans outstanding at June 30, 2024, totaled $1.84 billion, an increase of $88.4 million, or 5.1%, from loans of $1.75 billion at December 31, 2023 The increase was a combination of loan participations purchased to diversify our portfolio and increased loan demand from existing and new borrowers. Credit quality remains strong at 98.24% on June 30, 2024. This is 0.87% decline from December 31, 2023, and reflects some weakness in the ag economy.
Advance conditional payments totaled $15.5 million at June 30, 2024, a decrease of $14.8 million, or 48.8% from $30.3 million at December 31, 2023. Advance conditional payment accounts are generally impacted by seasonal conditions. Typically, stockholders apply excess cash to these accounts to be utilized within their operation later in the year.
RESULTS OF OPERATIONS
High Plains Farm Credit, ACA posted strong financial results for the six-month period ending June 30, 2024. Net income for the six months ended June 30, 2024, was $23.3 million, an increase of $3.3 million, or 16.7%, from the same period ended one year ago This was mainly due to increases in net interest income and noninterest income, partially offset by an increase in noninterest expense. Additional details provided below
For the six months ended June 30, 2024, net interest income was $27.7million, an increase of $3.9 million, or 16.2%, compared with the six months ended June 30, 2023. Net interest income increased as a result of loan volume growth and increased earnings on equity due to higher interest rates.
The provision for credit losses for the six months ended June 30, 2024, was $723 thousand, an increase of $385 thousand, or 113.9%, from the provision for credit losses for the same period ended one year ago. The provision for credit losses increased as a result of shifts within the portfolio and loan risk classification changes.
Noninterest income increased $897 thousand or 13.7% during the first six months of 2024 compared with the first six months of 2023 primarilydue to an increase of $828 thousand in patronage received from Farm Creditinstitutions and an increase of $202 thousand in fee income, offset by a $577 thousand decrease in other noninterest income related to a gain from the sale of the Dodge City building in 2023. Patronage distributions from Farm Credit institutions increased primarilyduetoincreased patronage-eligiblesold loanvolumeandloangrowth. Alsoincludedinnoninterest income was a refund of $520 thousand from Farm Credit System Insurance Corporation (FCSIC). The refund is our portion of excess funds above the secure base amount in the FCSIC Allocated Insurance Reserve Accounts. There was no refund received in 2023.
We received mineral income of $273 thousand during the first six months of 2024, which is distributed to us quarterly byCoBank.Thedecreaseof$111thousandforthesixmonthsendedJune30,2024,comparedwiththefirstsixmonths of 2023 is due to lower oil andgas commodity prices paid on production.
During the first six months of 2024, noninterest expense increased $1.0 million to $11.1 million, primarily due to increases in salaries and benefits ($562 thousand), purchased services from AgVantis ($467 thousand), and other noninterest expense ($305 thousand). Salaries and benefits increased primarily as a result of additional employees and merit increases. Association growth and increased technology service fees led to the increase in expense from AgVantis.Othernoninterestexpenseishigherprimarilyduetoanincreaseinotherpurchasedservices,travel,training, and sponsorships. Partially offsetting the increase in total noninterest expense was a decrease of $427 thousand in insurance premiums paid to the Farm Credit System Insurance Corporation (FCSIC). The insurance premium accrual assessment rate on Systemwide adjusted insured debt decreased from 18 basis points to 10 basis points.
CAPITAL RESOURCES
Ourshareholders’equityatJune 30, 2024,was $364.0million, anincrease from $336.6millionat December31,2023. This increase is due to net income and net stock issuances, partially offset by preferred stock dividends declared. As of June 30, 2024, anticipated Class H stock (Preferred Stock) retirements on July 10, 2024 totaled $6.4 million.
BUILDING PROJECTS
High Plains Farm Credit continues to expand products and services for stockholders, which gives rise to a need for infrastructure commensurate with our current and future growth. In May 2022, the Board of Directors approved the purchase and remodeling of a building in Hays to be completed in 2024. The project is being funded primarily through the sale of the existing building and financing with CoBank.
Theundersignedcertifytheyhavereviewedthisreport,thisreporthasbeenpreparedinaccordancewithallapplicable statutory or regulatory requirements, and the information contained herein is true, accurate, and complete to the best of his orherknowledge and belief.
//signature on file//
//signature on file// Matt Thielen
Melvin E. Kitts Chairperson of the Board Chairperson of the Audit Committee August9, 2024 August 9, 2024
//signature on file//
//signature on file// Kevin D. Swayne
John T. Booze President & Chief Executive Officer Chief Financial Officer August9, 2024 August 9, 2024
Consolidated Statement of Condition
(Dollars in Thousands)
Commitments and Contingencies
Consolidated Statement of Comprehensive Income
in Thousands)
Consolidated Statement of Changes in Shareholders' Equity
(Dollars in Thousands)
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A description of the organization and operations of High Plains Farm Credit, ACA, (the Association), the significant accounting policies followed, and the financial condition and results of operations as of and for the year ended December 31,2023, are containedin the 2023 AnnualReport toShareholders. Theseunaudited second quarter 2024 financial statements should be read in conjunction with the 2023 AnnualReportto Shareholders.
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) for interim financial information. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements and should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2023, as contained in the 2023 Annual Report to Shareholders.
In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair statement of results for the interim periods, have been made. The preparation of financial statements in accordance with GAAPrequires management tomake estimates and assumptions that affect the amounts reported inthe financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected forthe full yearending December 31, 2024. Descriptions of the significant accounting policies are included in the 2023 Annual Report to Shareholders. In the opinion of management, these policies and the presentation of the interim financial condition and results of operations conform with GAAP and prevailing practices within the banking industry.
Recently Adopted or Issued Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09 – Income Taxes: Improvements to Income Tax Disclosures. The amendments in this standard require more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments require qualitative disclosure about specific categories of reconciling items and individual jurisdictions that result in a significant difference between the statutory tax rate and the effective tax rate. The amendments are effective for annual periods beginning after December 15, 2024. The adoption of this guidance is not expected to have a material impact on the Association’s financial condition, results of operations, or cash flows.
NOTE 2 - LOANS AND ALLOWANCE FOR CREDIT LOSSES
A summary of loans follows. (dollarsinthousands)
June30,2024December31,2023
The Association purchases and sells participation interests with other parties in order to diversify risk, manage loan volume, and comply with Farm Credit Administration regulations. The following table presents information regarding the balances of participationspurchased and sold at June 30, 2024:
OtherFarmCredit Institutions
Non-FarmCredit InstitutionsTotal
(dollarsinthousands)
PurchasedSoldPurchasedSoldPurchasedSold Realestatemortgage115,395$103,829$82$-$115,477$103,829 $ Productionandintermediate-term238,833731,19097,058310335,891731,500 Agribusiness538,818680,411324,305484863,123680,895 Ruralinfrastructure674,046543,033--674,046543,033 Agriculturalexportfinance36,28730,509--36,28730,509
Total1,603,379$2,088,972$421,445$794$2,024,824$2,089,766 $
We have participation relationships with associations across the Farm Credit System. High Plains Farm Credit serves as the lead lender or facilitating agent for these participations in loans to eligible borrowers. In late 2022, High Plains Farm Credit agreed to be the administrator for the Farm Credit Capital Group (FCCG) to assist other Associations in expanding participation activity. Of the total purchased and sold volume noted in the table above, FCCG activity accounts for$1.73 billion of total purchased volume and $1.37 billion of total sold volume.
Credit Quality
Credit risk arises from the potential inability of an obligor to meet its payment obligation and exists in our outstanding loans,lettersofcredit,andunfundedloancommitments.TheAssociationmanagescreditriskassociatedwiththeretail lendingactivities through an analysis of thecredit riskprofileof anindividualborrowerusingitsownsetofunderwriting standards and lending policies, approved by its board of directors, which provides direction to its loan officers. The retail credit risk management process begins with an analysis of the borrower’s credit history, repayment capacity, financial position, and collateral, which includes an analysis of credit scores for smaller loans. Repayment capacity focuses on the borrower’s ability to repay the loan based on cash flows from operations or other sources of income, including off-farm income. Real estate mortgage loans must be secured by first liens on the real estate (collateral). As required by Farm Credit Administration regulations, each institution that makes loans on a secured basis must have collateral evaluation policies and procedures. Real estate mortgage loans may be made only in amounts up to 85% of the original appraised value of the property taken as security or up to 97% of the appraised value if guaranteed by a state, federal, or other governmental agency. The actual loan to appraised value when loans are made is generally lower than the statutory maximum percentage. Loans other than real estate mortgage may be made on a secured or unsecured basis.
The Association uses a two-dimensional risk rating model based on an internally generated combined System risk rating guidance that incorporates a 14-point probability of default rating scale to identify and track the probability of borrower default and a separate scale addressing loss given default. Probability of default is the probability that a borrowerwillexperienceadefaultduringthelifeoftheloan.Thelossgivendefaultismanagement’sestimateastothe anticipated principal loss on a specific loan assuming default occurs during the remaining life of the loan. A default is consideredtohaveoccurredifthelenderbelievestheborrowerwillnotbeabletopayitsobligationinfullortheborrower or the loan is classified nonaccrual. This credit risk rating process incorporates objective and subjective criteria to identify inherent strengths, weaknesses, and risks in a particular relationship. The institution reviews, at least on an annual basis, orwhen a creditaction is taken, the probability of defaultcategory.
Eachoftheprobabilityofdefaultcategoriescarriesadistinctpercentageofdefaultprobability.Theprobabilityofdefault ratebetweenoneandnineoftheacceptablecategories isverynarrowandwouldreflectalmostnodefaulttoaminimal defaultpercentage.Theprobabilityofdefaultrategrowsmorerapidly asa loanmoves from acceptable to otherassets especially mentioned and grows significantly as a loan moves to a substandard (viable) level. A substandard (nonviable) rating indicates that the probability of default is almost certain. These categories aredefined as follows:
Acceptable – assets are expected to be fully collectible and represent the highest quality.
Other assets especially mentioned (OAEM) – assets are currently collectible but exhibit some potential weakness.
Substandard–assetsexhibitsomeseriousweaknessinrepaymentcapacity,equity,and/orcollateralpledged on the loan.
Doubtful–assetsexhibitsimilarweaknessestosubstandardassets;however,doubtfulassetshaveadditional weaknesses in existing factors, conditions, and values that make collection in full highly questionable.
Loss – assets are considereduncollectible.
The following table shows loans under the Farm Credit Administration Uniform Loan Classification System as a percentage of total loans by loan type as of:
June30,2024December31,2023
Accrued interest receivable on loans of $31.4 million at June 30, 2024 and $28.2 million at December 31, 2023 has been excluded from the amortized cost of loans and reported separately in the Consolidated Statement of Condition. The Association reversed $201 thousand out of accrued interest receivable during the first six months of 2024 and no accrued interest was reversedduring the first six months of 2023.
Nonperformingassetsconsistofnonaccrualloans,accruingloans90daysormorepastdue,andotherpropertyowned. The following table shows these nonperforming assets and related credit quality statistics as follows:
(dollarsinthousands)
Nonaccrualloans
The Association had no other property owned for the periods presented. The following tables provide the amortized cost for nonaccrual loans with and without a related allowance for loan losses, as wellas interest income recognized on nonaccrual loans during the period:
(dollarsinthousands) Nonaccrualloans
(dollarsinthousands)
Nonaccrualloans
The following tables provide an age analysis of past dueloans at amortized cost.
June30,2024
(dollarsinthousands)
30-89Days PastDue 90Days orMore PastDue Total PastDue NotPast Dueor LessThan 30Days PastDueTotalLoans Recorded Investment >90Days and Accruing
Realestatemortgage9,703$445$10,148$910,464$920,612$$ Productionandintermediate-term89500589551,595552,184500 Agribusiness---229,147229,147Ruralinfrastructure---131,013131,013Agriculturalexportfinance---5,7785,778Ruralresidentialrealestate---3030Total9,792$945$10,737$1,828,027$1,838,764$500 $
December31,2023
(dollarsinthousands) 30-89 Days PastDue 90Days orMore PastDue
Realestatemortgage265$429$694$891,501$892,195$429 $
Productionandintermediate-term---553,026553,026Agribusiness---164,361164,361Ruralinfrastructure---134,930134,930Agriculturalexportfinance---5,7805,780Ruralresidentialrealestate---3636-
$429$694$1,749,634$1,750,328$429 $
Loan Modifications to Borrowers Experiencing Financial Difficulty
The following tableshows the amortized cost basis at the end of the respective reporting period for loan modifications granted to borrowers experiencing financialdifficulty, disaggregated by loan type and type of modification granted.
(dollarsinthousands)
June30,2024
SegmentJune30,2024
Segment
Accrued interest receivable related to loan modifications granted to borrowers experiencingfinancial difficulty was $38 thousand as of the three months ended June 30, 2024 and $38 thousand as of the six months ended June 30, 2024.
SegmentJune30,2023
Accrued interest receivable related to loan modifications granted to borrowers experiencingfinancial difficulty was $31 thousand as of the three and six months ended June 30, 2023.
Thefollowingtabledescribesthefinancialeffectofthemodificationsmadetoborrowersexperiencingfinancialdifficulty during theperiods presented.
FortheThreeMonthsEndedJune30FortheSixMonthsEndedJune30
Weighted-AverageTermExtension(inmonths) 2023
There were noloans to borrowers experiencing financial difficulty thatdefaulted during the six months ended June 30, 2024 or June 30, 2023 which were modified during the twelve months prior to those periods.
The following table sets forth an aging analysis of loans to borrowers experiencing financial difficulty that were modified during the twelve months priorto June 30, 2024:
PaymentStatusofModifiedLoans
DuringthePastTwelveMonthsEndedJune30,2024
(dollarsinthousands)
CurrentPastDue 30-89Days PastDue 90DaysorMore
The following table sets forth an aging analysis of loans to borrowers experiencing financial difficulty that were modified on or after January 1,2023, the date of adoption of CECL, through June 30, 2023:
PaymentStatusofModifiedLoans
(dollarsinthousands)
Current 30-89Days90DaysorMore PastDuePastDue DuringtheSixMonthsEndedJune30,2023
Productionandintermediate-term1,231$-$$ Total1,231$-$$
Additional commitments to lend to borrowers experiencing financial difficulty whose loans have been modified during the six months ended June 30, 2024 were $8.3 million and during the year ended December31, 2023 were $11.5 million.
The Association had no loans held for sale at June 30, 2024 and December 31, 2023.
Allowance for Credit Losses
The allowance for credit losses (ACL) represents the estimated current expected credit losses over the remaining contractuallifeoftheloansmeasuredatamortizedcostandcertainoff-balancesheetcreditexposures.TheACLtakes into consideration relevant information about past events, current conditions, and reasonable and supportable macroeconomic forecasts of future conditions. The contractual term excludes expected extensions, renewals, and modifications. The Associationuses a single economic scenario over a reasonable and supportable forecast period of 12 months. Subsequent to the forecast period, the Association explicitly reverts to long run historical loss experience beyond the 12 months to inform the estimate of losses for the remaining contractual life of the loan portfolio. The economic forecasts are updated on a quarterly basis and incorporate macroeconomic variables such as agricultural commodityprices,unemployment rates, GrossDomesticProduct(GDP) annualgrowthrates,governmentspendingto GDP, real consumer spending, United States exports, inflation, and Fed Funds rates.
The credit risk rating methodology is a key component of the Association’s allowance for credit losses evaluation and is generally incorporated into the Association’s loan underwriting standards and internal lending limits. In addition, borrowerandcommodityconcentrationlendingandleasinglimitshavebeenestablishedbytheAssociationtomanage
creditexposure.Theregulatorylimittoasingleborrowerorlesseeis15%oftheAssociation’slendingandleasinglimit basebuttheAssociation’sboardofdirectorshasgenerallyestablishedmorerestrictivelendinglimits.Thislimitapplies to Associations with long-term and short- and intermediate-term lending authorities.
A summary of changes in the allowancefor loan losses is as follows:
Provisionfor
BalanceatLoanLosses/Balanceat March31,(LoanLossJune30, (dollarsinthousands) 2024Charge-offsRecoveriesReversals)2024
Realestatemortgage105$-$-$691$796 $
Productionandintermediate-term442--36478
Agribusiness259--32291
Ruralinfrastructure370--(11)359
Total1,176$-$-$748$1,924 $
Provisionfor BalanceatLoanLosses/Balanceat December31,(LoanLossJune30, (dollarsinthousands) 2023Charge-offsRecoveriesReversals)2024
Realestatemortgage101$-$-$695$796 $
Productionandintermediate-term419--59478
Agribusiness156--135291
Ruralinfrastructure605--(246)359
Total1,281$-$-$643$1,924 $
Provisionfor
BalanceatLoanLosses/Balanceat March31,(LoanLossJune30, (dollarsinthousands) 2023Charge-offsRecoveriesReversals)2023
Realestatemortgage188$-$-$87$275 $ Productionandintermediate-term1,139662-44521 Agribusiness165--(113)52 Ruralinfrastructure112--361473 Ruralresidentialrealestate---11
Total1,604$662$-$380$1,322 $
Provision
CumulativeforLoan BalanceatEffectofBalanceatLosses/Balanceat December31,CECLJanuary1,(LoanLossJune30, (dollarsinthousands) 2022Adoption2023Charge-offsRecoveriesReversals)2023
Realestatemortgage461$(310)$151$-$-$124$275 $ Productionandintermediate-term1,997(838)1,159662-24521 Agribusiness184(55)129--(77)52 Ruralinfrastructure5477131--342473
Ruralresidentialrealestate-11---1
Total2,696$(1,125)$1,571$662$-$413$1,322 $
The Association maintains a separate reserve for unfunded commitments, which is included in Liabilities on the Association’s Consolidated Statement of Condition.The related provisionfor the reserve forunfunded commitments is includedaspartoftheprovisionforcreditlossesontheConsolidatedStatementofComprehensiveIncome,alongwith the provision for loan losses. A summary of changes in the reserve for unfunded commitments follows:
FortheSixMonths EndedJune30,2024 (dollarsinthousands)
FortheThreeMonths EndedJune30,2024
Balanceatbeginningofperiod605$644 $ Provisionforreserveforunfundedcommitments11980 Total724$724 $
FortheSixMonths EndedJune30,2023 (dollarsinthousands)
Balanceatbeginningofperiod372$734 $ CumulativeEffectofCECLAdoption(303) BalanceatJanuary1431 $ Reversalofreserveforunfundedcommitments(16)(75) Total356$356 $
NOTE 3 – CAPITAL
A summary of select capital ratios based on a three-month average and minimums set by the Farm Credit Administration follows.
RiskAdjusted:
FortheThreeMonths EndedJune30,2023 Asof June30, 2024 Asof December31, 2023 Regulatory Minimums Capital Conservation Buffer
Total
If capital ratios fall below the regulatory minimum plus buffer amounts, capital distributions (equity redemptions, cash dividend payments, and cash patronage payments) and discretionary senior executive bonuses are restricted or prohibited without prior FCA approval.
Thefollowingtablepresentstheactivityintheaccumulatedothercomprehensiveincome/loss,netoftaxbycomponent:
FortheThreeMonths EndedJune30 FortheSixMonths EndedJune30
(dollarsinthousands) 2024202320242023
Pensionandotherbenefitplans:
Beginningbalance
Othercomprehensiveincomebeforereclassifications
Amountsreclassifiedfromaccumulatedother comprehensiveincome/loss
Netcurrentperiodothercomprehensiveincome/(loss)
Endingbalance
NOTE 4 - FAIR VALUE MEASUREMENTS
$(3)$-$(3)$-
$(3)$-$(3)$-
Accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in theprincipal or most advantageous market forthe asset or liability. See Note 2 of the 2023 Annual Report to Shareholders fora more complete description.
Assets measured at fair value on a recurring basis are summarized below:
(dollarsinthousands)
Assetsheldinnonqualifiedbenefitstrusts
June30,202479 $$--$79 $
December31,202353$-$-$53 $ FairValueMeasurementUsingTotalFair ValueLevel1Level2Level3
The Association had no liabilities measured at fair value on a recurring basis at June 30, 2024 or December31, 2023.
Assets measured at fair value on a non-recurring basis for each of the fair value hierarchy values are summarized below:
(dollarsinthousands)
Loans
June30,2024 $--$11,623$11,623 $ December31,2023-$-$331$331 $ FairValueMeasurementUsingTotalFair ValueLevel1Level2Level3
The Association had no liabilities measured at fair value on a non-recurring basis at June 30, 2024 or December 31, 2023.
Valuation Techniques
As more fully discussed in Note 2 of the 2023 Annual Report to Shareholders, accounting guidance establishes a fair value hierarchy, which requires an Association to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following presents a brief summary of the valuation techniques used by the Association forassets and liabilities, subject to fair value measurement.
Assets Held in Non-Qualified Benefits Trusts
Assets held in trust funds related to deferred compensation and supplemental retirement plans are classified within Level 1. The trust funds include investments that are actively traded and have quoted net asset values that are observable in the marketplace.
Loans Evaluated for Impairment
For impaired loans measured on a non-recurring basis, the fair value is based upon the underlying collateral since the loans are collateral dependent loans. The fair value measurement process uses independent appraisals and other market-based information, but in many cases, it also requires significant input based on management’s knowledge of and judgment about current market conditions, specific issues relating to the collateral, and other matters. As a result, thesefairvaluemeasurementsfallwithinLevel3ofthehierarchy.Whenthevalueofthecollateral,lessestimatedcosts to sell,is less than the principal balance of the loan, a specific reserve is established.
NOTE 5 - SUBSEQUENT EVENTS
The Association has evaluatedsubsequent events through August 9, 2024, which is the date the financial statements were issued, and no material subsequent events were identified.
