NEW INDEPENDENT BANCSHARES, INC. AND SUBSIDIARY Notes to the Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES( Continued)
d. Investment Securities( Continued) Equity securities not using the equity method are carried at estimated fair value based on information provided by a third party pricing service with changes in fair value and realized gains or losses reported in noninterest income. If fair value is not readily determinable, the equity security is carried at cost subject to adjustments for any observable market transactions on the same or similar instruments of the investee. All equity securities are evaluated at least annually for impairment. The Company does not own any equity securities with readily determinable fair value. The Company owns less than 1 % of Bankers ' Bancorporation, Inc. stock as of December 31, 2024. The investment does not have a readily determinable fair value, is carried at cost, and no impairment was recognized.
Dividend and interest income, including amortization of premium and accretion of discount arising at acquisition from all categories of investment securities are included in interest income in the Consolidated Statements of Income.
The Bank is a member of the Federal Home Loan Bank of Indianapolis. Members are required to own a certain amount of stock based on the level of borrowing and other factors. The stock is restricted as to its marketability; because no ready market exists for this investment, and they have no quoted market value, the Bank ' s investment in this stock is carried at cost. A determination as to whether there has been an impairment of a restricted stock investment is performed on a annual basis and includes a review of the current financial condition of the issuer.
e. Allowance for Credit Losses- Held to Maturity Securities Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities totaled $ 256,501 at December 31, 2024, and was excluded from the estimate of credit losses.
The estimate of credit losses is primarily based on the ratings assigned to the securities by debt rating agencies and the average of the annual historical loss rates associated with those ratings. Management classifies held-to-maturity portfolio into two major security types: subordinated notes and municipal bonds.
Each of the subordinated notes is backed by FDIC-insured banks that are considered wellcapitalized under the regulatory framework for prompt corrective action. As a result, no allowance for credit loss was recorded related to the held-to-maturity subordinated notes.
The municipal bonds held by the Company are highly rated by major rating agencies. As a result, no allowance for credit losses was recorded related to the held-to-maturity municipal bonds.
f. Allowance for Credit Losses- Available-for-Sale Securities For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security, or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value, and the entire loss is recorded in earnings.
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