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Fair Value Measurements

12 Months Ended

Dec. 31, 2022

NOTE 11 - FAIR VALUE MEASUREMENTS

ASC 820-10, Fair Value Measurement – Overall, provides a framework for measuring fair value under U.S. GAAP. This guidance also allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis.

In accordance with ASC 820-10, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.

Level 3 – Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, and are not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value for December 31, 2022 and December 31, 2021.

The Company’s investment in debt instruments available for sale is generally classified within Level 2 of the fair value hierarchy. For those securities, the Bank obtains fair value measurements from independent pricing services. The fair value measurements consider observable data that considers standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

The Company’s impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using appraisals obtained from a third party, and are adjusted for selling costs. These appraised values may be discounted based on management’s historical knowledge, expertise, or changes in the market conditions from time of valuation. For Level 3 inputs, fair values are based upon management’s estimates of the value of the underlying collateral or the present value of the expected cash flows.

As of December 31, 2022 and December 31, 2021, the following summarizes assets measured at fair value on a recurring basis:


	Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices		Significant		Significant
			in Active		Other		Unobservable
			Markets for		Observable		Inputs
			Identical Assets		Inputs		Level 3
			Level 1		Level 2

			(In Thousands)
December 31, 2022
Corporate bonds	$	5,001	$	—	$	5,001	$	—
							$	—
Total available for-sale-securities	$	5,001	$	—	$	5,001	$	—

December 31, 2021
Corporate bonds	$	5,010	$	—	$	5,010	$	—

Total available for-sale-securities	$	5,010	$	—	$	5,010	$	—

Under certain circumstances, the Company makes adjustments to its assets and liabilities although they are not measured at fair value on an ongoing basis.

As of December 31, 2022 and December 31, 2021, the Bank had no assets or liabilities for which a nonrecurring change in fair value had been recorded.

ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. ASU 2016-01 requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The exit price notion is a market-based measurement of fair value that is represented by the price to sell an asset or transfer a liability in the principal market (or most advantageous market in the absence of a principal market) on the measurement date. For December 31, 2022 and December 31, 2021, fair values of loans are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors.


	December 31, 2022
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
			(In Thousands)
Financial assets:
Cash and cash equivalents	$	62,050	$	62,050	$	62,050	$	-	$	-
Interest bearing time deposits		300		300		-		300		-
Held-to-maturity securities		77,591		69,707		-		69,707		-
Federal Home Loan Bank stock		7,293		7,293		-		7,293		-
Loans, net		885,674		841,271		-		-		841,271
Accrued interest receivable		2,632		2,632		2,632		-		-
Bank-owned life insurance		14,067		14,067		-		14,067		-

Financial liabilities:
Deposits, other than certificates of deposit	$	398,302	$	398,302	$	-	$	398,302	$	-
Certificates of deposit		319,847		310,943		-		310,943		-
Federal Home Loan Bank advances		174,000		172,427		-		172,427		-
Accrued interest payable		736		736		736		-		-


	December 31, 2021
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
			(In Thousands)
Financial assets:
Cash and cash equivalents	$	52,975	$	52,975	$	52,975	$	-	$	-
Held-to-maturity securities		65,571		65,556		-		65,556		-
Federal Home Loan Bank stock		1,087		1,087		-		1,087		-
Loans, net		517,131		517,167		-		-		517,167
Loans held for sale		1,301		1,322		-		1,322		-
Accrued interest receivable		1,481		1,481		1,481		-		-
Bank-owned life insurance		14,135		14,135		-		14,135		-

Financial liabilities:
Deposits, other than certificates of deposit	$	344,934	$	344,934	$	-	$	344,934	$	-
Certificates of deposit		226,820		227,265		-		227,265		-
Federal Home Loan Bank advances		9,000		8,969		-		8,969		-
Accrued interest payable		49		49		49		-		-

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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