Fair Value Disclosures

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures

Fair Value Disclosures

Note 10 — Fair Value Disclosures

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company’s marketable equity securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company has to record at fair value other assets and liabilities on a non-recurring basis, such as securities held to maturity, individually evaluated loans and other real estate owned. U.S. GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

The level of the asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company’s assets that are carried at fair value on a recurring basis and the level that was used to determine their fair value at June 30, 2024 and December 31, 2023:

	Quoted Prices in				Significant Other				Significant				Total Carried
	Active Markets for				Observable				Unobservable				at Fair
	Identical Assets				Inputs				Inputs				Value on a
	(Level 1)				(Level 2)				(Level 3)				Recurring Basis
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
Description	2024		2023		2024		2023		2024		2023		2024		2023
Assets:
Marketable equity securities:
Mutual funds	$	18,000	$	18,102	$	—	$	—	$	—	$	—	$	18,000	$	18,102
Total assets	$	18,000	$	18,102	$	—	$	—	$	—	$	—	$	18,000	$	18,102

There were no transfers between Level 1 and 2 during the three and six months ended June 30, 2024 or the year ended December 31, 2023. The Company did not have any liabilities that were carried at fair value on a recurring basis at June 30, 2024 and December 31, 2023.

The following table sets forth the Company’s assets that are carried at fair value on a non-recurring basis and the level that was used to determine their fair value, at June 30, 2024 and December 31, 2023:

	Quoted Prices in				Significant Other				Significant				Total Carried
	Active Markets for				Observable				Unobservable				at Fair
	Identical Assets				Inputs				Inputs				Value on a
	(Level 1)				(Level 2)				(Level 3)				Non-Recurring Basis
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
Description	2024		2023		2024		2023		2024		2023		2024		2023
	(In Thousands)
Assets:
Loans individually evaluated	$	—	$	—	$	—	$	—	$	4,404	$	4,385	$	4,404	$	4,385
Real estate owned		—		—		—		—		1,456		1,456		1,456		1,456
Total assets	$	—	$	—	$	—	$	—	$	5,860	$	5,841	$	5,860	$	5,841

The following tables present the qualitative information about non-recurring Level 3 fair value measurements of financial instruments at June 30, 2024 and December 31, 2023:

	At June 30, 2024
	Fair		Valuation	Unobservable			Weighted
	Value		Technique	Input	Range		Average
	(In Thousands)
Assets:
Loans individually evaluated	$	4,404	Income approach	Capitalization rate	6.00	%	6.00	%
Real estate owned		1,456	Income approach	Capitalization rate	12.00	%	12.00	%

	At December 31, 2023
	Fair		Valuation	Unobservable			Weighted
	Value		Technique	Input	Range		Average
	(In Thousands)
Assets:
Loans individually evaluated	$	4,385	Income approach	Capitalization rate	6.00	%	6.00	%
Real estate owned		1,456	Income approach	Capitalization rate	12.00	%	12.00	%

The Company did not have any liabilities that were carried at fair value on a non-recurring basis at June 30, 2024 and December 31, 2023.

The methods and assumptions used to estimate fair value at June 30, 2024 and December 31, 2023 are as follows:

For real estate owned, fair value is generally determined through independent appraisals or fair value estimations of the underlying properties which generally include various Level 3 inputs which are not identifiable. The appraisals or fair value estimation may be adjusted by management for qualitative reasons and estimated liquidation expenses. Management’s assumptions may include consideration of location and occupancy of the property and current economic conditions. Subsequently, as these properties are actively marketed, the estimated fair values may be periodically adjusted through incremental subsequent write-downs to reflect decreases in estimated values resulting from sales price observations and the impact of changing economic and market conditions.

A loan is considered individually evaluated for credit loss when, based upon current information and events, it is probable that the Company will be unable to collect all scheduled payments in accordance with the contractual terms of the loan. Individually evaluated loans that are collateral dependent are written down to fair value through the establishment of specific reserves, a component of the allowance for credit losses or through partial charge-offs, and as

such are carried at the lower of cost or the fair value. Estimates of fair value of the collateral are determined based on a variety of information, including available valuations from certified appraisers for similar assets, present value of discounted cash flows and inputs that are estimated based on commonly used and generally accepted industry liquidation advance rates and estimates and assumptions developed by management. The appraisals may be adjusted by management for estimated liquidation expenses and qualitative factors such as economic conditions. If real estate is not the primary source of repayment, present value of discounted cash flows and estimates using generally accepted industry liquidation advance rates are utilized. Due to the multitude of assumptions, many of which are subjective in nature, and the varying inputs and techniques used by appraisers, the Company recognizes that valuations could differ across a wide spectrum of valuation techniques employed and accordingly, fair value estimates for impaired loans are classified as Level 3.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

Fair values for marketable equity securities are determined by quoted market prices on nationally recognized and foreign securities exchanges (Level 1). Fair values for equity securities and securities held to maturity are determined utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the security’s terms and conditions, among other things

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The carrying amounts and estimated fair value of our financial instruments are as follows:

					Fair Value at June 30, 2024
					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying				Assets		Inputs		Inputs
(In thousands)	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	113,885	$	113,885	$	113,885	$	—	$	—
Certificates of deposit		100		100		—		100		—
Marketable equity securities		18,000		18,000		18,000		—		—
Securities held to maturity		15,392		12,517		—		12,517		—
Loans receivable, net		1,703,306		1,677,248		—		—		1,677,248
Investments in restricted stock		712		712		—		712		—
Accrued interest receivable		13,473		13,473		—		13,473		—
Financial Liabilities
Deposits		1,563,850		1,562,113		—		1,562,113		—
Borrowings		47,000		46,047		—		46,047		—

					Fair Value at December 31, 2023
					Quoted
					Prices in
					Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying				Assets		Inputs		Inputs
(In thousands)	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	68,671	$	68,671	$	68,671	$	—	$	—
Certificates of deposit		100		100		—		100		—
Marketable equity securities		18,102		18,102		18,102		—		—
Securities held to maturity		15,860		13,126		—		13,126		—
Loans receivable		1,581,804		1,552,219		—		—		1,552,219
Investments in restricted stock		929		929		—		929		—
Accrued interest receivable		12,311		12,311		—		12,311		—
Financial Liabilities
Deposits		1,400,036		1,401,083		—		1,401,083		—
Borrowings		64,000		63,053		—		63,053		—