Note 5 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2022

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 March 31, 2022 and December 31, 2021 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 March 31, 2022 and December 31, 2021 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.

	March 31, 2022													December 31, 2021
							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	$	29,176			29,176			29,176							94,143		94,143		94,143
Securities available for sale		284,648			284,648					284,648					285,765		285,765				285,765
Equity securities		217			217					217					248		248				248
Loans held for sale		1,882			1,882					1,882					5,575		5,575				5,575
Loans receivable, net		679,124			672,369					672,369					652,502		661,298				661,298
Federal Home Loan Bank stock		1,283			1,283					1,283					1,092		1,092				1,092
Accrued interest receivable		2,269			2,269					2,269					2,132		2,132				2,132
Financial liabilities:
Deposits		920,398			919,450					919,450					950,666		950,558				950,558
Accrued interest payable		58			58					58					63		63				63
Off-balance sheet financial instruments:
Commitments to extend credit		(131	)		(131	)							195,861		26		26							195,141
Commitments to sell loans		43			43								13,345		12		12							12,340

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 similar securities.

Equity Securities

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

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

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 certain 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.