Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2020

Investments All Other Investments [Abstract]

Fair Value of Financial Instruments

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

FASB ASC Topic 825, “Financial Instruments,” requires disclosure of fair value information about certain financial instruments, whether assets, liabilities, or off-balance-sheet commitments, if practicable. The following methods and assumptions were used to estimate the fair value of each class of financial instrument. Fair value estimates that were derived from broker quotes

cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.

(a) Cash—Book value equals fair value.

(b) Equity securities—The Company’s equity securities are recorded at cost less any impairment plus or minus observable price changes.

(c) Investment securities—The Company’s investments are recorded at the estimated fair value of such investments.

(d) Loans receivable—The Company’s loans are recorded at book value which approximated fair value.

(e) Floating rate borrowings—Due to the short-term nature of these instruments, the carrying amount approximated fair value.

(f) Commitments to extend credit—The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and present creditworthiness of the counter parties. For fixed rate loan commitments, fair value also includes a consideration of the difference between the current levels of interest rates and the committed rates. At June 30, 2020 and December 31, 2019, the estimated fair value of these off-balance-sheet instruments was not material.

(g) Fixed rate borrowings—The fair value of the debentures payable to the SBA is estimated based on current market interest rates for similar debt.

	June 30, 2020				December 31, 2019
(Dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash, cash equivalents and federal funds sold(1)	$	103,884	$	103,884	$	67,821	$	67,821
Equity investments		10,389		10,389		10,079		10,079
Investment securities		47,495		47,495		48,998		48,998
Loans receivable		1,193,617		1,193,617		1,114,762		1,114,762
Accrued interest receivable(2)		10,643		10,643		8,662		8,662
Financial liabilities
Funds borrowed(3)		1,295,794		1,295,727		1,169,593		1,171,274
Accrued interest payable(2)		4,497		4,497		4,398		4,398

(1) Categorized as level 1 within the fair value hierarchy. See Note 13.

(2) Categorized as level 3 within the fair value hierarchy. See Note 13.

(3) As of June 30, 2020 and December 31, 2019, publicly traded retail notes traded at a discount to par of $67 and a premium to par of $1,681, respectively.