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 nine months ended September 30, 2024, with comparisons to prior periods. The accompanying financial statements were prepared under the oversight of our Audit Committee. You should read these comments along with the accompanyingfinancialstatements andfootnotesand the 2023 Annual Reportto 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 phoneat (620)285-6978.
CURRENT MARKET CONDITIONS
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 third quarter of 2024, helping to ease the prolonged drought conditions. However, larger portions of the territory have yet to receive adequate rainfall. Volatile demand for grain and feed exportscontinued tocontribute tothe cooling ofcommodity prices duringthe quarter.
The fed cattle market showed continued strength, with cash markets growing to an all-time high. Other cattle weight classes show continued price strength as demand remains strong. Recent rain falling 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 remained relatively quiet this quarter, however, some producers continued looking for opportunities to expand their acreage. Increased demand with limited supply has resulted in some strong sales across land types with many cash buyers as interest rates remain elevated. Buyers are primarily local producers with continued influence from recreational buyers on pasture and Conservation Reserve Program (CRP) sales.
Despite the softening growth in the US economy and concerns surrounding high interest rates in the first half of 2024, the US economy remains strong. Inflation continues to gradually decelerate, and interest rates have started to drop as a result. The Federal Reserve announced at its September 2024 meeting that rates would be lowered to a range of 4.75% - 5.00%. Further rate cuts are anticipated by the end of 2024 and in 2025. Real Gross Domestic Product (GDP) and consumer spending have started to trend upwards and are forecasted to continue to climb at a steady pace throughout the rest of the year. After recording sturdy growth for the past two years, net cash farm income is forecasted to decrease by 7.2% in 2024 according to the USDA. This decrease is primarily driven by high farming expenses, lower direct government payments, and weakening commodity prices. Global conflicts continue to put additional pressure on commodity prices, and in combination with the nearing US elections, have contributed to volatilityanduncertainty inthemarkets.
LOAN PORTFOLIO
Loans outstanding at September 30, 2024, totaled $1.89 billion, an increase of $144.5 million, or 8.3%, from loans of $1.75 billion at December 31, 2023. The increase was a combination of increased loan demand from existing and new borrowers and loan participations purchased to diversify our portfolio. Credit quality remains strong at 97.83%. The 1.28%decline from December31, 2023 reflects someweakeningin the ag economy.
Advanced conditional payments totaled $18.4 million at September 30, 2024, a decrease of $11.9 million, or 39.3% from $30.3 million at December 31, 2023. Advanced 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 nine-month period ending September 30, 2024. Net income for the nine months ended September 30, 2024, was $31.2 million, an increase of $797 thousand, or 2.6%, 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 provision for credit losses and noninterest expense. Additional detailsare provided below.
For the nine months ended September 30, 2024, net interest income was $42.2 million, anincrease of $5.6 million, or 15.3%, compared with the nine months ended September 30, 2023. Net interest income increased as a result of loan volumegrowthandincreasedearningson equity due to higher interest rates.
The provision for credit losses for the nine months ended September 30, 2024, was $5.1 million, an increase of $4.6 million from the provision for credit losses for the same period ended one year ago. The provision for credit losses increased primarily as a resultof specific reserve held on a purchased food processingloan in the third quarter. Other impacts on the provision are related to the changes in the overall risk profile of the portfolio and increase in loan volume.
Noninterest income increased $1.3 million or 13.8% during the first nine months of 2024 compared with the first nine months of 2023 primarily dueto an increaseof $1.0millioninpatronage received from Farm Creditinstitutions and an increase of $426 thousand in loan fee income, offset by a $508 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 primarily due to increased patronage eligible sold loan volume and overall loan growth. Also included in noninterest income is a refund of $520 thousand from Farm Credit System Insurance Corporation (FCSIC). There was no refund received in 2023. The refund is our portion of excess funds above the secure base amount in the FCSIC Allocated Insurance Reserve Accounts. Refer to the 2023 Annual Report to Shareholders for additional information.
Mineral income is distributed quarterly by CoBank, with $400 thousand received during the first nine months of 2024. The decrease of $114 thousand compared with the first nine months of 2023 is due to lower oil and gas commodity prices paidon production.
During the first nine months of 2024, noninterest expense increased $1.5 million to $16.9 million, primarily due to increases in salaries and benefits ($900 thousand), purchased services from AgVantis ($700 thousand), and other noninterest expense ($379 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 for services from AgVantis. Othernoninterest expenseis higherprimarily due to an increase inother purchased services, travel, training, and sponsorships. Partially offsetting the increase in total noninterest expense was a decrease of $667 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
Our shareholders’ equity at September 30, 2024, was $368.2 million, an increase from $336.6 million at December 31, 2023. This increase is due to net income and net stock issuances, partially offset by preferred stock dividends declared.
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 abuilding in Hays to be completed in 2024. The project is being funded primarily through the sale of the existing building andfinancing with CoBank.
The undersigned certify they have reviewed this report, this report has been prepared in accordance with all applicable statutory or regulatory requirements, and the information contained herein is true, accurate, and complete to thebest ofhis orher knowledge and belief.
//signature onfile//
//signature onfile// Matt Thielen Melvin E. Kitts Chairpersonof the Board Chairpersonof the Audit Committee November 8, 2024 November 8, 2024
//signature onfile//
//signature onfile// KevinD. Swayne
John T. Booze President & Chief Executive Officer Chief Financial Officer November 8, 2024 November 8, 2024
Consolidated Statement of Condition
Consolidated Statement of Comprehensive Income
(Dollars in Thousands)
For the three monthsFor the nine months
ended September 30ended September 30
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statement of Changes in Shareholders' Equity
(Dollars in Thousands)
Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.
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 contained in the 2023 Annual Report to Shareholders. These unaudited third quarter 2024 financial statements shouldberead in conjunction withthe 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 GAAP requires management to make estimates and assumptions that affect the amounts reported in the 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 for the full year ending December 31, 2024. Descriptions of the significant accounting policies are included in the 2023 Annual Report to Shareholders. In theopinionofmanagement,these policies and the presentation of the interim financial condition and resultsof operations conformwith GAAP andprevailingpractices within the bankingindustry.
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 cashflows.
NOTE 2 - LOANS AND ALLOWANCE FOR CREDIT LOSSES
A summary ofloansfollows.
September30,2024
December31,2023
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 ofparticipationspurchased and soldat September 30,2024:
OtherFarmCredit Institutions Non-FarmCredit InstitutionsTotal
(dollarsinthousands)
PurchasedSoldPurchasedSoldPurchasedSold
Realestatemortgage115,608$102,379$82$-$115,690$102,379 $
Productionandintermediate-term273,087794,276129,657302402,744794,578
Agribusiness623,278769,708375,204597998,482770,305
Ruralinfrastructure703,139569,107--703,139569,107
Agriculturalexportfinance36,28930,508--36,28930,508
Total1,751,401$2,265,978$504,943$899$2,256,344$2,266,877 $
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$1.99 billion of total purchased volume and $1.57 billion oftotal soldvolume.
Credit Quality
Credit risk arises from the potential inability of an obligor to meet its payment obligation and exists in our outstanding loans, letters of credit, and unfunded loan commitments. The Association manages credit risk associated with the retail lending activities through an analysis of the credit risk profile of an individual borrower using its own set of underwriting 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’scredit 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 madeona secured orunsecured 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 borrower will experience a default during the life of the loan. The loss given default is management’s estimate as to the anticipated principal loss on a specific loan assuming default occurs during the remaining life of the loan. A default is considered to have occurred if the lender believes the borrower will not be able to pay its obligation in full or the borrower 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,or when acredit action is taken, the probability ofdefaultcategory.
Each of the probability of default categories carries a distinct percentage of default probability. The probability of default rate between one and nine of the acceptable categories is very narrow and would reflect almost no default to a minimal default percentage. The probability of default rate grows more rapidly as a loan moves from acceptable to other assets especially mentioned and grows significantly as a loan moves to a substandard (viable) level. A substandard (non-viable) rating indicates that the probability of default is almostcertain. These categories are defined as follows:
Acceptable –assets areexpected tobe fully collectible and represent the highestquality.
Other assets especially mentioned (OAEM) – assets are currently collectible but exhibit some potential weakness.
Substandard – assets exhibit some serious weakness in repayment capacity, equity, and/or collateral pledged on the loan.
Doubtful – assets exhibit similar weaknesses to substandard assets; however, doubtful assets have additional weaknesses in existing factors, conditions, and values that make collection in full highly questionable.
Loss – assetsareconsidereduncollectible.
The following table shows loans under the Farm Credit Administration Uniform Loan Classification System as a percentage oftotal loans by loan type as of:
September30,2024
December31,2023
Accrued interest receivable on loans of $35.8 million at September 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 nine months of 2024and no accrued interestwas reversed during the first nine months of 2023.
Nonperforming assets consist of nonaccrual loans, accruing loans 90 days or more past due, and other property owned. The followingtableshows thesenonperforming assets and related creditquality statistics as follows:
The Associationhadnoother 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 wellasinterest income recognized on nonaccrual loansduring the period:
The following tablesprovidean ageanalysisofpastdueloans atamortizedcost.
September30,2024
(dollarsinthousands)
30-89Days PastDue 90Days orMore PastDue Total PastDue NotPast Dueor LessThan 30Days PastDueTotalLoans Recorded Investment >90Days and Accruing
Realestatemortgage7,090$9,507$16,597$919,846$936,443$$ Productionandintermediate-term714-714543,244543,958Agribusiness---274,539274,539Ruralinfrastructure---134,032134,032Agriculturalexportfinance---5,7805,780Ruralresidentialrealestate---2727Total7,804$9,507$17,311$1,877,468$1,894,779$$
December31,2023
(dollarsinthousands)
Recorded Investment >90Days and Accruing Realestatemortgage265$429$694$891,501$892,195$429 $ Productionandintermediate-term---553,026553,026Agribusiness---164,361164,361Ruralinfrastructure---134,930134,930Agriculturalexportfinance---5,7805,780Ruralresidentialrealestate---3636-
Loan Modifications to Borrowers Experiencing Financial Difficulty
The following tables show the amortized cost basis at the end of the respective reporting period for loan modifications granted toborrowers experiencingfinancialdifficulty, disaggregated by loan typeandtypeof modificationgranted.
Accrued interest receivable related to loan modifications granted to borrowers experiencing financial difficulty was $29 thousand as of the three months ended September 30, 2024 and $77 thousand as of the nine months ended September 30, 2024.
(dollarsinthousands)
(dollarsinthousands)
$ $1,377 TermExtension FortheThreeMonthsEndedFortheNineMonthsEnded 2023Segment2023Segment September30,%ofPortfolioSeptember30,%ofPortfolio
Combination-InterestRateReductionandTermExtension FortheThreeMonthsEndedFortheNineMonthsEnded 2023Segment2023Segment September30,%ofPortfolioSeptember30,%ofPortfolio
Productionandintermediate-term151
$
Accrued interest receivable related to loan modifications granted to borrowers experiencing financial difficulty was $64 thousand as of the three and nine monthsended September 30,2023.
The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty during the periods presented.
EndedSeptember30EndedSeptember30 20242024 2023 FortheThreeMonthsFortheNineMonths Weighted-AverageTermExtension(inmonths) 2023
There were no loans to borrowers experiencing financial difficulty that defaulted during the nine months ended September 30, 2024or September30, 2023 which weremodified duringthe twelve months prior tothose periods.
The following table sets forth an aging analysis of loans to borrowers experiencing financial difficulty that were modifiedduring the twelve months priorto September30,2024:
PaymentStatusofModifiedLoans DuringthePastTwelveMonthsEndedSeptember30,2024
CurrentPastDue 30-89Days PastDue 90DaysorMore
(dollarsinthousands) Productionandintermediate-term1,359
The following table sets forth an aging analysis of loans to borrowers experiencing financial difficulty that were modifiedon or after January1,2023, thedate ofadoption ofCECL, through September30,2023:
DuringtheNineMonthsEndedSeptember30,2023
(dollarsinthousands)
Current 30-89Days90DaysorMore PastDuePastDue
Additional commitments to lend to borrowers experiencing financial difficulty whose loans have been modified during the nine months ended September 30, 2024 were $5.7 million and during the year ended December 31, 2023 were $11.5million.
The Associationhadnoloansheldfor saleat September30,2024and December31, 2023.
Allowance for Credit Losses
The allowance for credit losses (ACL) represents the estimated current expected credit losses over the remaining contractual life of the loans measured at amortized cost and certain off-balance sheet credit exposures. The ACL takes 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 commodity prices, unemployment rates, Gross Domestic Product (GDP) annual growth rates, government spending to GDP, real consumer spending, United States exports, inflation,andFedFunds 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, borrower and commodity concentration lending and leasing limits have been established by the Association to manage credit exposure. The regulatory limit to a single borrower or lessee is 15% of the Association’s lending and leasing limit base but the Association’s board of directors has generally established more restrictive lending limits. This limitapplies to Associations with long-term andshort-and intermediate-term lending authorities.
A summary ofchanges in theallowanceforloanlosses is asfollows:
Provisionfor LoanLosses/Balanceat Balanceat(LoanLossSeptember30, (dollarsinthousands) June30,2024Charge-offsRecoveriesReversals)2024
Provisionfor BalanceatLoanLosses/Balanceat December31,(LoanLossSeptember30, (dollarsinthousands) 2023Charge-offsRecoveriesReversals)2024
Realestatemortgage101$-$-$705$806 $
Productionandintermediate-term419--107526
Agribusiness156--4,5644,720
Ruralinfrastructure605--(269)336
Total1,281$-$-$5,107$6,388 $
Provisionfor LoanLosses/Balanceat Balanceat(LoanLossSeptember30, (dollarsinthousands) June30,2023Charge-offsRecoveriesReversals)2023
Realestatemortgage275$-$-$(2)$273 $
Productionandintermediate-term521--(11)510
Agribusiness52--2375
Ruralinfrastructure473--14487
Ruralresidentialrealestate1--(1)-
Total1,322$-$-$23$1,345 $
Provision
CumulativeforLoan BalanceatEffectofBalanceatLosses/Balanceat December31,CECLJanuary1,(LoanLossSeptember30, (dollarsinthousands) 2022Adoption2023Charge-offsRecoveriesReversals)2023
Realestatemortgage461$(310)$151$-$-$122$273 $
Productionandintermediate-term1,997(838)1,159662-13510
Agribusiness184(55)129--(54)75 Ruralinfrastructure5477131--356487
Ruralresidentialrealestate-11--(1)Total2,696$(1,125)$1,571$662$-$436$1,345 $
The Association maintains a separate reserve for unfunded commitments, which is included in Liabilities on the Association’s Consolidated Statement of Condition. The related provision for the reserve for unfunded commitments is included as part of the provision for credit losses on the Consolidated Statement of Comprehensive Income, along with the provisionfor loanlosses. Asummary ofchanges in the reserve forunfunded commitments follows:
EndedSeptember30,EndedSeptember30,
Balanceatbeginningofperiod724$644 $ (Reversalof)/Provisionforreserveforunfundedcommitments(65)15 Total659$659 $
FortheThreeMonths 2023 EndedSeptember30,EndedSeptember30,
Balanceatbeginningofperiod356$734 $ CumulativeEffectofCECLAdoption(303) BalanceatJanuary1431 $
Provisionforreserveforunfundedcommitments11641 Total472$472 $
NOTE 3 – CAPITAL
A summary of select capital ratios based on a three-month average and minimums set by the Farm Credit Administration follows.
AsofAsofCapital September30,December31,RegulatoryConservation 20242023MinimumsBuffer
RiskAdjusted:
Commonequitytier1ratio13.90%14.16%4.5%2.5%7.0%
Tier1capitalratio13.90%14.16%6.0%2.5%8.5%
Totalcapitalratio14.03%14.25%8.0%2.5%10.5%
Permanentcapitalratio14.64%14.88%7.0%-7.0%
Non-risk-adjusted:
Tier1leverageratio15.27%15.47%4.0%1.0%5.0%
Unallocatedretainedearnings andequivalentsleverageratio15.17%15.37%1.5%-1.5%
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 withoutpriorFCAapproval.
The following table presents the activity in the accumulated other comprehensive income/loss, net of tax by component:
FortheThreeMonths EndedSeptember30
FortheNineMonths EndedSeptember30
(dollarsinthousands)
Pensionandotherbenefitplans:
Amountsreclassifiedfromaccumulatedother comprehensiveincome/loss
NOTE 4 - FAIR VALUE MEASUREMENTS
$-$(3)$-
Accounting guidance defines fair value as theexchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability. See Note 2 of the 2023 Annual Report to Shareholdersfora more complete description.
Assets measured at fair valueon a recurringbasisaresummarized below:
(dollarsinthousands)
Assetsheldinnonqualifiedbenefitstrusts
December31,202353$-
The Association had no liabilities measured at fair value on arecurring basis at September30, 2024 or December 31, 2023.
Assets measured at fair value on a non-recurring basis for each of the fair value hierarchy values are summarized below:
(dollarsinthousands)
Loans
September30,2024
$--$13,987$13,987 $
December31,2023-$-$331$331 $
The Association had no liabilities measured at fair value on a non-recurring basis at September 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 usedbythe Association forassets andliabilities,subject tofair valuemeasurement.
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 observablein the marketplace.
Loans Evaluated for Impairment
For loans measured on a non-recurring basis, the fair value is based upon the underlying collateral. 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, these fair value measurements fall within Level 3 of the hierarchy. When the value of the collateral, less estimated costs to sell, is less than the principal balanceof the loan, a specificreserve is established.
NOTE 5 - SUBSEQUENT EVENTS
The Association has evaluated subsequent events through November 8, 2024, which is the date the financial statements were issued,and no material subsequent events were identified.