FAIR VALUE

3 Months Ended

Mar. 31, 2022

NOTE 9 – FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

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 bank’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Bank used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

The Bank’s available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. The securities available-for-sale portfolio consists of corporate bonds and mortgage-backed securities. The fair values of these securities are obtained from an independent nationally recognized pricing service. An independent pricing service provides prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.

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


	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of March 31, 2022
Securities available for sale:
U.S. treasury bills	$	5,073,448	$	5,073,449	$	—	$	—
U.S. government and agency obligations		5,750,586		—		5,750,586		—
Corporate bonds		17,952,224		—		17,952,224		—
MBSs - residential		46,061,169		—		46,061,169		—
MBSs - commercial		16,754,313		—		16,754,313		—
	$	91,591,740	$	5,073,449	$	86,518,292	$	—
As of December 31, 2021
Securities available for sale:
U.S. government and agency obligations	$	2,981,730	$	—	$	2,981,730
Corporate bonds		7,397,618		—		7,397,618		—
MBSs - residential		21,760,245		—		21,760,245		—
MBSs - commercial		9,699,205		—		9,699,205		—
	$	41,838,798	$	—	$	41,838,798	$	—

There were no transfers between level 1 and level 2 during the three months ended March 31, 2022.

NOTE 9 – FAIR VALUE (Continued)

The carrying amounts and estimated fair values of financial instruments not measured at fair value, at March 31, 2022 and December 31, 2021, were as follows:


	Carrying		Fair		Fair Value Measurement Placement
	Amount		Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
March 31, 2022
Financial instruments - assets
Cash and due from banks	$	69,504	$	69,504	$	69,504	$	—	$	—
Investment securities held-to-maturity		81,315		78,415		—		78,415		—
Loans		564,877		547,123		—		—		547,123
Financial instruments - liabilities
Certificates of deposit		339,933		340,655		—		340,655		—
Borrowings		78,004		78,000		—		78,000		—


	Carrying		Fair		Fair Value Measurement Placement
	Amount		Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
December 31, 2021
Financial instruments - assets
Cash and due from banks	$	105,069	$	105,069	$	105,069	$	—	$	—
Investment securities held-to-maturity		74,053		74,081		—		74,081		—
Loans		571,363		569,845		—		—		569,845
Financial instruments - liabilities
Certificates of deposit		366,396		365,452		—		365,452		—
Borrowings		85,052		86,657		—		86,657		—

Carrying amount is the estimated fair value for cash and cash equivalents. The fair value of loans is determined using an exit price methodology. Certificates of deposits fair value is estimated by using a discounted cash flow approach. Fair value of FHLB advances is based on current rates for similar financing. The fair value of off-balance sheet items is not considered material.

- 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.

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