Fair Value

12 Months Ended

Dec. 31, 2022

Fair Value [Abstract]

Fair Value

Note 9 – Fair Value

The Company used the following methods and significant assumptions to estimate fair value:

The fair values of securities available‑for‑sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The fair value of impaired loans that are collateral dependent is generally based upon the fair value of the collateral, which is obtained from recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Assets acquired through or by transfer in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated every nine months. These appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals for collateral‑dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, an independent third‑party licensed appraiser reviews the appraisals for accuracy and reasonableness, reviewing the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry‑wide statistics.

Assets Measured on a Recurring Basis

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

	Fair Value Measurement
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
At December 31, 2022:
Securities available-for-sale:
Federal agency mortgage-backed	$	–	$	74,169	$	–	$	74,169
Federal agency CMO		–		26,100		–		26,100
Federal agency debt		–		51,425		–		51,425
Municipal bonds		–		4,197		–		4,197
U.S. Treasuries		160,589		–		–		160,589
SBA pools		–		12,269		–		12,269
At December 31, 2021:
Securities available-for-sale:
Federal agency mortgage-backed	$	–	$	70,030	$	–	$	70,030
Federal agency CMO		–		9,287		–		9,287
Federal agency debt		–		37,988		–		37,988
Municipal bonds		–		4,915		–		4,915
U.S. Treasuries		17,951		–		–		17,951
SBA pools		–		16,225		–		16,225

There were no transfers between Level 1, Level 2, or Level 3 during the years ended December 31, 2022 and 2021.

Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments as of the periods indicated were as follows:

	Carrying		Fair Value Measurements at December 31, 2022
	Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	16,105	$	16,105	$	–	$	–	$	16,105
Securities available-for-sale		328,749		160,589		168,160		–		328,749
Loans receivable held for investment		768,046		–		–		641,088		641,088
Accrued interest receivable		3,973		442		793		2,738		3,973
Bank owned life insurance		3,233		3,233		–		–		3,233
Financial Liabilities:
Deposits	$	686,916	$	–	$	673,615	$	–	$	673,615
Federal Home Loan Bank advances		128,344		–		126,328		–		126,328
Securities sold under agreements to repurchase		63,471		–		60,017		–		60,017
Note payable		14,000		–		–		14,000		14,000
Accrued interest payable		453		–		453		–		453

	Carrying		Fair Value Measurements at December 31, 2021
	Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	231,520	$	231,520	$	–	$	–	$	231,520
Securities available-for-sale		156,396		17,951		138,445		–		156,396
Loans receivable held for investment		648,513		–		–		623,778		623,778
Accrued interest receivable		3,372		19		1,089		2,264		3,372
Bank owned life insurance		3,190		3,190		–		–		3,190
Financial Liabilities:
Deposits	$	788,052	$	–	$	754,181	$	–	$	754,181
Federal Home Loan Bank advances		85,952		–		87,082		–		87,082
Securities sold under agreements to repurchase		51,960		–		51,960		–		51,960
Note payable		14,000		–		–		14,000		14,000
Accrued interest payable		119		–		119		–		119