Note 5 - Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Financial Instruments Disclosure [Text Block]

(5) Fair Value of Financial Instruments

ASC 825, Disclosures about Fair Values of Financial Instruments requires interim reporting period disclosure of the estimated fair values of the Company’s 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, 2021 and December 31, 2020 based upon relevant market information, if available, and upon the characteristics of the financial instruments themselves. Because no 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, 2021 and December 31, 2020 are shown below. Following the table, there is an explanation of the methods and assumptions used to estimate the fair value of each class of financial instruments.

	September 30, 2021													December 31, 2020
							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	$	149,436			149,436			149,436							86,269			86,269			86,269
Securities available for sale		234,939			234,939					234,939					148,090			148,090					148,090
Equity securities		217			217					217					149			149					149
Loans held for sale		5,754			5,754					5,754					6,186			6,186					6,186
Loans receivable, net		622,264			632,659					632,659					642,630			648,275					648,275
Federal Home Loan Bank stock		1,092			1,092					1,092					932			932					932
Accrued interest receivable		2,062			2,062					2,062					3,102			3,102					3,102
Financial liabilities:
Deposits		915,302			915,478					915,478					795,204			795,927					795,927
Accrued interest payable		76			76					76					140			140					140
Off-balance sheet financial instruments:
Commitments to extend credit		(69	)		(69	)							219,855		261			261								180,330
Commitments to sell loans		23			23								26,184		(44	)		(44	)							24,746

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.

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 (FHLB) Stock

The carrying amount of 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 were adjusted to 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.