XML 27 R15.htm IDEA: XBRL DOCUMENT

Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2022

The Company measures the fair value of financial instruments for reporting in accordance with ASC Topic 820, Fair Value Measurements. Fair values of assets or liabilities are based on estimates of the exit price, which is the price that would be received to sell an asset or paid to transfer a liability. When available, observable market transactions or market information is used. The fair value estimate of loans receivable was based on similar techniques, with the addition of current origination spreads, liquidity premiums, or credit adjustments. The fair value of nonperforming loans is based on the underlying value of the collateral.

The Company determines the fair values of its financial instruments based on the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair values. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect its estimate for market assumptions.

Valuation inputs refer to the assumptions market participants would use in pricing a given asset or liability using one of the three valuation techniques. Inputs can be observable or unobservable. Observable inputs are those assumptions that market participants would use in pricing the particular asset or liability. These inputs are based on market data and are obtained from an independent source. Unobservable inputs are assumptions based on the Company’s own information or estimate of assumptions used by market participants in pricing the asset or liability. Unobservable inputs are based on the best and most current information available on the measurement date.

All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy:

•Level 1 - Quoted prices for identical instruments in active markets.

•Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable.

•Level 3 - Instruments whose significant value drivers are unobservable.

The Company used the following methods to measure fair value on a recurring or nonrecurring basis.

•Investments available-for-sale: The fair value of all investments, excluding FHLB stock, was based upon quoted market prices for similar investments in active markets, identical or similar investments in markets that are not active, and model-derived valuations whose inputs are observable.

•Impaired loans: The fair value of impaired loans is measured using the present value of expected future cash flows discounted at the loan’s effective interest rate. When the sole source of repayment of the loan is the operation or liquidation of the collateral, the fair value is determined using the observable market price less certain completion costs.

•Derivatives: The fair value of derivatives is based on pricing models utilizing observable market data and discounted cash flow methodologies for which the determination of fair value may require significant management judgment or estimation.

The tables below present the balances of assets and liabilities measured at fair value on a recurring basis (there were no transfers between Level 1, Level 2 and Level 3 recurring measurements during the periods presented):


	December 31, 2022
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Available-for-sale investments:
Mortgage-backed investments:
Fannie Mae	$	9,940	$	—	$	9,940	$	—
Freddie Mac	11,889		736		11,153		—
Ginnie Mae	27,843		—		27,843		—
Other	32,389		—		32,389		—
Municipal bonds	30,883		—		30,883		—
U.S. Government agencies	74,354		38,450		35,904		—
Corporate bonds	30,480		—		30,480		—

Total available-for-sale investments	$	217,778	$	39,186	$	178,592	$	—
Derivative fair value asset	$	10,485	$	—	$	10,485	$	—
Total	$	228,263	$	39,186	$	189,077	$	—


	December 31, 2021
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Available-for-sale investments:
Mortgage-backed investments:
Fannie Mae	$	12,978	$	—	$	12,978	$	—
Freddie Mac	12,824		744		12,080		—
Ginnie Mae	23,687		—		23,687		—
Other	11,264		3,023		8,241		—
Municipal bonds	36,466		—		36,466		—
U.S. Government agencies	41,434		—		41,434		—
Corporate bonds	30,295		—		30,295		—
Total available-for-sale investments	$	168,948	$	3,767	$	165,181	$	—
Derivative fair value asset	$	1,491	$	—	$	1,491	$	—
Total	$	170,439	$	3,767	$	166,672	$	—

The estimated fair value of Level 2 investments is based on quoted prices for similar investments in active markets, identical or similar investments in markets that are not active, and model-derived valuations whose inputs are observable.

The tables below present the balances of assets and liabilities measured at fair value on a nonrecurring basis at December 31, 2022, and 2021.


	December 31, 2022
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Impaired loans (included in loans receivable, net)(1)	$	48,521	$	—	$	—	$	48,521

Total	$	48,521	$	—	$	—	$	48,521

_______________

(1) Total value of impaired loans is net of $13,000 of specific reserves on performing TDRs.


	December 31, 2021
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Impaired loans (included in loans receivable, net)(1)	$	36,118	$	—	$	—	$	36,118

Total	$	36,118	$	—	$	—	$	36,118

________________

(1) Total value of impaired loans is net of $20,000 of specific reserves on performing TDRs.

The following tables present quantitative information about Level 3 fair value measurements for financial assets measured at fair value on a nonrecurring basis at December 31, 2022 and 2021.

December 31, 2022

Fair Value

Valuation Technique(s)

Unobservable Input(s)

Range (Weighted Average Change in Fair Value)

(Dollars in thousands)

Impaired Loans (1)

48,521

Market approach

Appraised value of collateral discounted by expected selling costs

0.0% - 6.91%

(0.06%)

_______________

(1) Total value of impaired loans is net of $13,000 of specific reserves on performing TDRs.

December 31, 2021

Fair Value

Valuation Technique(s)

Unobservable Input(s)

Range (Weighted Average Change in Fair Value)

(Dollars in thousands)

Impaired Loans (1)

36,118

Market approach

Appraised value of collateral discounted by expected selling costs

0.0% (0.00%)

________________

(1) Total value of impaired loans is net of 20,000 of specific reserves on performing TDRs.

The fair value calculation of the Company’s financial instruments attempts to incorporate market conditions at a specific point in time. The underlying assumptions are generally subjective and involve uncertainties. Therefore, these fair value estimates are not intended to represent the underlying value of the Company as a whole.

The carrying amounts and estimated fair values of financial instruments at December 31, 2022, and 2021, were as follows:


	December 31, 2022			Fair Value Measurements Using:
	Carrying Value	Estimated Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash on hand and in banks	7,722	$	7,722	$	7,722	$	—	$	—
Interest-earning deposits	16,598	16,598		16,598		—		—
Investments available-for-sale	217,778	217,778		39,186		178,592		—
Investments held-to-maturity	2,444	2,444		—		2,444		—
Loans receivable, net	1,167,083	1,120,403		—		—		1,120,403
FHLB stock	7,512	7,512		—		7,512		—
Accrued interest receivable	6,513	6,513		—		6,513		—
Derivative fair value asset	10,485	10,485		—		10,485		—

Financial Liabilities:
Deposits	782,600	782,600		782,600		—		—
Certificates of deposit, retail	262,554	254,004		—		254,004		—

Brokered deposits	124,886	124,843				124,843
Advances from the FHLB	145,000	144,999		—		144,999		—
Accrued interest payable	328	328		—		328		—


	December 31, 2021				Fair Value Measurements Using:
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash on hand and in banks	$	7,246	$	7,246	$	7,246	$	—	$	—
Interest-earning deposits	66,145		66,145		66,145		—		—
Investments available-for-sale	168,948		168,948		3,767		165,181		—
Investments held-to-maturity	2,432		2,432		—		2,432		—
Loans receivable, net	1,103,461		1,109,887		—		—		1,109,887
FHLB stock	5,465		5,465		—		5,465		—
Accrued interest receivable	5,285		5,285		—		5,285		—
Derivative fair value asset	1,491		1,491		—		1,491		—

Financial Liabilities:
Deposits	863,347		863,347		863,347		—		—
Certificates of deposit, retail	294,127		295,929		—		295,929		—

Advances from the FHLB	95,000		95,003		—		95,003		—
Accrued interest payable	112		112		—		112		—

Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business. The fair value has not been estimated for assets and liabilities that are not considered financial instruments.

- 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 + Details