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Fair Value of Financial Instruments

ASC

825,

Disclosures about Fair Values of Financial Instruments

requires interim reporting period disclosure about the fair value of financial instruments, including assets, liabilities and off-balance sheet items for which it is practicable to estimate fair value. The fair value estimates are made as of

September 30, 2020

and

December 31, 2019

based upon relevant market information, if available, and upon the characteristics of the financial instruments themselves. Because

market exists for a significant portion of the Company's financial instruments, fair value estimates are based upon judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.

The estimated fair value of the Company's financial instruments as of

September 30, 2020

and

December 31, 2019

are shown in the following table.

	September 30, 2020													December 31, 2019
							Fair value hierarchy													Fair value hierarchy
(Dollars in thousands)	Carrying amount			Estimated fair value			Level 1		Level 2		Level 3	Contract amount		Carrying amount			Estimated fair value			Level 1		Level 2		Level 3	Contract amount
Financial assets:
Cash and cash equivalents	$	76,027			76,027			76,027							44,399			44,399			44,399
Securities available for sale		118,564			118,564					118,564					107,592			107,592					107,592
Equity securities		127			127					127					167			167					167
Loans held for sale		7,225			7,225					7,225					3,606			3,606					3,606
Loans receivable, net		670,297			674,804					674,804					596,392			600,863					600,863
Federal Home Loan Bank stock		932			932					932					854			854					854
Accrued interest receivable		4,236			4,236					4,236					2,251			2,251					2,251
Financial liabilities:
Deposits		787,023			787,975					787,975					673,870			673,945					673,945
Accrued interest payable		225			225					225					420			420					420
Off-balance sheet financial instruments:
Commitments to extend credit		266			266								191,522		14			14								178,804
Commitments to sell loans		(102	)		(102	)							48,199		(16	)		(16	)							10,098

Cash and Cash Equivalents

The carrying amount of cash and cash equivalents approximates their fair value.

Securities Available for Sale

The fair values of securities were based upon quoted market prices for identical or similar instruments in active markets.

Equity Securities

The fair values of equity securities were based upon quoted market prices.

Loans Held for Sale

The fair values of loans held for sale were based upon quoted market prices for loans with similar interest rates and terms to maturity.

Loans Receivable, net

The fair value of the loan portfolio, with the exception of the adjustable rate portfolio, was calculated by discounting the scheduled cash flows through the estimated maturity using anticipated prepayment speeds and using discount rates that reflect the credit and interest rate risk inherent in each loan portfolio. The fair value of the adjustable loan portfolio was estimated by grouping the loans with similar characteristics and comparing the characteristics of each group to the prices quoted for similar types of loans in the secondary market. The fair value disclosures for both the fixed and adjustable rate portfolios were adjusted to reflect the exit price amount anticipated to be received from the sale of the portfolio in an open market transaction.

Federal Home Loan Bank Stock

The carrying amount of Federal Home Loan Bank (FHLB) stock approximates its fair value.

Accrued Interest Receivable

The carrying amount of accrued interest receivable approximates its fair value since it is short-term in nature and does

not

present unanticipated credit concerns.

Deposits

The fair value of demand deposits, savings accounts and money market account deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value disclosures for all of the deposits reflect the exit price amount anticipated to be received from the sale of the deposits in an open market transaction.

Accrued Interest Payable

The carrying amount of accrued interest payable approximates its fair value since it is short-term in nature.

Commitments to Extend Credit

The fair values of commitments to extend credit are estimated using the fees normally charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter parties.

Commitments to Sell Loans

The fair values of commitments to sell loans are estimated using the quoted market prices for loans with similar interest rates and terms to maturity.