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FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 30, 2021
FAIR VALUE OF FINANCIAL INSTRUMENTS |
FAIR VALUE OF FINANCIAL INSTRUMENTS | NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. The Company did not have any liabilities that were measured at fair value at September 30, 2021 and December 31, 2020. AFS securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as certain impaired loans. These non-recurring fair value adjustments generally involve the write-down of individual assets due to impairment losses. Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. Assets and Liabilities Measured on a Recurring Basis Assets measured on a recurring basis are limited to the Company’s AFS securities portfolio, equity investments and an interest rate cap derivative contract. The AFS portfolio is carried at estimated fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss in shareholders’ equity. Equity investments are carried at estimated fair value with changes in fair value reported as “unrealized gain/(loss)” on the statements of operations. The interest rate cap derivative contract is carried at estimated fair value with changes in fair value reported as accumulated other comprehensive income or loss in shareholders’ equity. The fair values for substantially all of these assets are obtained monthly from an independent nationally recognized pricing service. On a quarterly basis, the Company assesses the reasonableness of the fair values obtained for the AFS portfolio by reference to a second independent nationally recognized pricing service. Based on the nature of these securities, the Company’s independent pricing service provides prices which are categorized as Level 2 since quoted prices in active markets for identical assets are generally not available for the majority of securities in the Company’s portfolio. Various modeling techniques are used to determine pricing for the Company’s mortgage-backed securities, including option pricing and discounted cash flow models. The inputs to these models include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. On an annual basis, the Company obtains the models, inputs and assumptions utilized by its pricing service and reviews them for reasonableness. There are no liabilities that are measured on a recurring basis. Assets measured at fair value on a recurring basis are summarized below (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair Value Measurement using:
​ | ​ | ​ | ​ | ​ | Quoted Prices | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | in Active | ​ | Significant | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Markets | ​ | Other | ​ | Significant
​ | ​ | Carrying | ​ | For Identical | ​ | Observable | ​ | Unobservable
​ |  | Amount |  | Assets (Level 1) |  | Inputs (Level 2) |  | Inputs (Level 3)
At September 30, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage-backed securities | ​ | $ | 501,431 | ​ | $ | — | ​ | $ | 501,431 | ​ | $ | —
Commercial mortgage-backed securities | ​ | ​ | 18,256 | ​ | ​ | — | ​ | ​ | 18,256 | ​ | ​ | —
Asset-backed securities | ​ | ​ | 4,733 | ​ | ​ | — | ​ | ​ | 4,733 | ​ | ​ | ​
U.S. Government agency | ​ | ​ | 67,231 | ​ | ​ | — | ​ | ​ | 67,231 | ​ | ​ | ​
Securities issued by states and political subdivisions in the U.S | ​ | ​ | 11,517 | ​ | ​ | — | ​ | ​ | 11,517 | ​ | ​ | ​
CRA Mutual Fund | ​ | ​ | 2,289 | ​ | ​ | 2,289 | ​ | ​ | — | ​ | ​ | —
Derivative assets - interest rate cap | ​ | ​ | 2,086 | ​ | ​ | — | ​ | ​ | 2,086 | ​ | ​ | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair Value Measurement using:
​ | ​ | ​ | ​ | ​ | Quoted Prices | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | in Active | ​ | Significant | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Markets | ​ | Other | ​ | Significant
​ | ​ | Carrying | ​ | For Identical | ​ | Observable | ​ | Unobservable
​ |  | Amount |  | Assets (Level 1) |  | Inputs (Level 2) |  | Inputs (Level 3)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
At December 31, 2020 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Residential mortgage securities | ​ | $ | 194,688 | ​ | $ | — | ​ | $ | 194,688 | ​ | $ | —
Commercial mortgage securities | ​ | ​ | 33,492 | ​ | ​ | — | ​ | ​ | 33,492 | ​ | ​ | —
U.S. Government agency securities | ​ | ​ | 37,916 | ​ | ​ | — | ​ | ​ | 37,916 | ​ | ​ | —
CRA Mutual Fund | ​ | ​ | 2,313 | ​ | ​ | 2,313 | ​ | ​ | — | ​ | ​ | —
Derivative assets - interest rate cap | ​ | ​ | 770 | ​ | ​ | — | ​ | ​ | 770 | ​ | ​ | —
​ There were no transfers between Level 1 and Level 2 during the three months ended September 30, 2021 and 2020. There were no material assets measured at fair value on a non-recurring basis at September 30, 2021 or December 31, 2020. The Company has engaged an independent pricing service provider to provide the fair values of its financial assets and liabilities measured at amortized cost. This provider follows FASB’s exit pricing guidelines, as required by ASU 2016-01, when calculating fair market values. ​ Carrying amounts and estimated fair values of financial instruments carried at amortized cost at September 30, 2021 and December 31, 2020 were as follows (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurement Using: | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Quoted Prices | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | in Active | ​ | Significant | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Markets | ​ | Other | ​ | Significant | ​ | ​ | ​
​ | ​ | Carrying | ​ | For Identical | ​ | Observable | ​ | Unobservable | ​ | Total Fair
At September 30, 2021 |  | Amount |  | Assets (Level 1) |  | Inputs (Level 2) |  | Inputs (Level 3) |  | Value
Financial Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and due from banks | ​ | $ | 32,660 | ​ | $ | 32,660 | ​ | $ | — | ​ | $ | — | ​ | $ | 32,660
Overnight deposits | ​ | ​ | 1,824,820 | ​ | ​ | 1,824,820 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 1,824,820
Securities available for sale | ​ | ​ | 603,168 | ​ | ​ | — | ​ | ​ | 603,168 | ​ | ​ | — | ​ | ​ | 603,168
Securities held to maturity | ​ | ​ | 2,017 | ​ | ​ | — | ​ | ​ | 2,074 | ​ | ​ | — | ​ | ​ | 2,074
Equity investments | ​ | ​ | 2,289 | ​ | ​ | 2,289 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 2,289
Loans, net | ​ | ​ | 3,565,167 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 3,592,347 | ​ | ​ | 3,592,347
Other investments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
FRB Stock | ​ | ​ | 7,430 | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A
FHLB Stock | ​ | ​ | 3,070 | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A
Disability Fund | ​ | ​ | 1,000 | ​ | ​ | — | ​ | ​ | 1,000 | ​ | ​ | — | ​ | ​ | 1,000
Time deposits at banks | ​ | ​ | 498 | ​ | ​ | 498 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 498
Interest rate cap derivative | ​ | ​ | 2,086 | ​ | ​ | — | ​ | ​ | 2,086 | ​ | ​ | — | ​ | ​ | 2,086
Accrued interest receivable | ​ | ​ | 13,504 | ​ | ​ | — | ​ | ​ | 717 | ​ | ​ | 12,787 | ​ | ​ | 13,504
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-interest-bearing demand deposits | ​ | $ | 2,803,823 | ​ | $ | 2,803,823 | ​ | $ | — | ​ | $ | — | ​ | $ | 2,803,823
Money market and savings deposits | ​ | ​ | 2,571,707 | ​ | ​ | 2,571,707 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 2,571,707
Time deposits | ​ | ​ | 82,039 | ​ | ​ | — | ​ | ​ | 82,610 | ​ | ​ | — | ​ | ​ | 82,610
Trust preferred securities payable | ​ | ​ | 20,620 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 20,002 | ​ | ​ | 20,002
Subordinated debt, net of issuance cost | ​ | ​ | 24,698 | ​ | ​ | — | ​ | ​ | 25,438 | ​ | ​ | — | ​ | ​ | 25,438
Accrued interest payable | ​ | ​ | 448 | ​ | ​ | 3 | ​ | ​ | 337 | ​ | ​ | 108 | ​ | ​ | 448
Secured Borrowings | ​ | ​ | 35,559 | ​ | ​ | 0 | ​ | ​ | 35,559 | ​ | ​ | 0 | ​ | ​ | 35,559
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurement Using: | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Quoted Prices | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | in Active | ​ | Significant | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Markets | ​ | Other | ​ | Significant | ​ | ​ | ​
​ | ​ | Carrying | ​ | For Identical | ​ | Observable | ​ | Unobservable | ​ | Total Fair
At December 31, 2020 |  | Amount |  | Assets (Level 1) |  | Inputs (Level 2) |  | Inputs (Level 3) |  | Value
Financial Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and due from banks | ​ | $ | 8,692 | ​ | $ | 8,692 | ​ | $ | — | ​ | $ | — | ​ | $ | 8,692
Overnight deposits | ​ | ​ | 855,613 | ​ | ​ | 855,613 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 855,613
Securities available for sale | ​ | ​ | 266,096 | ​ | ​ | — | ​ | ​ | 266,096 | ​ | ​ | — | ​ | ​ | 266,096
Securities held to maturity | ​ | ​ | 2,760 | ​ | ​ | — | ​ | ​ | 2,827 | ​ | ​ | — | ​ | ​ | 2,827
Equity investments | ​ | ​ | 2,313 | ​ | ​ | 2,313 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 2,313
Loans, net | ​ | ​ | 3,101,646 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 3,094,998 | ​ | ​ | 3,094,998
Other investments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
FRB Stock | ​ | ​ | 7,381 | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A
FHLB Stock | ​ | ​ | 2,718 | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | N/A
Disability Fund | ​ | ​ | 1,000 | ​ | ​ | — | ​ | ​ | 1,000 | ​ | ​ | — | ​ | ​ | 1,000
CRA - CD | ​ | ​ | 498 | ​ | ​ | 498 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 498
Interest rate cap derivative | ​ | ​ | 770 | ​ | ​ | — | ​ | ​ | 770 | ​ | ​ | — | ​ | ​ | 770
Accrued interest receivable | ​ | ​ | 13,249 | ​ | ​ | — | ​ | ​ | 414 | ​ | ​ | 12,835 | ​ | ​ | 13,429
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-interest-bearing demand deposits | ​ | $ | 1,726,135 | ​ | $ | 1,726,135 | ​ | $ | — | ​ | $ | — | ​ | $ | 1,726,135
Money market and savings deposits | ​ | ​ | 2,011,409 | ​ | ​ | 2,011,409 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 2,011,409
Time deposits | ​ | ​ | 92,062 | ​ | ​ | — | ​ | ​ | 93,157 | ​ | ​ | — | ​ | ​ | 93,157
Trust preferred securities payable | ​ | ​ | 20,620 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 20,011 | ​ | ​ | 20,011
Subordinated debt, net of issuance cost | ​ | ​ | 24,657 | ​ | ​ | — | ​ | ​ | 25,375 | ​ | ​ | — | ​ | ​ | 25,375
Accrued interest payable | ​ | ​ | 712 | ​ | ​ | 7 | ​ | ​ | 591 | ​ | ​ | 114 | ​ | ​ | 712
Secured borrowing | ​ | ​ | 36,964 | ​ | ​ | — | ​ | ​ | 36,964 | ​ | ​ | — | ​ | ​ | 36,964
​

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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