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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2020
Fair Value Measurements [Abstract] |
Fair Value Measurements | NOTE 15 — FAIR VALUE MEASUREMENTS The Company reports certain assets at fair value in accordance with GAAP, which defines fair value and establishes a framework for measuring fair value in accordance with generally accepted accounting principles. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The 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 values: Basis of Fair Value Measurements Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 - Quoted prices in markets that are not active, or inputs that are observable 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 by little or no market activity). An asset’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company used the following methods and significant assumptions to estimate fair value: Cash and cash equivalents: The carrying amounts of cash and cash equivalents approximate fair values. Debt Securities Available-For-Sale: Fair values for investments are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or pricing models. See Note 15 for further details. Loans receivable: Fair values are based on an exit price notion in which an orderly transaction would take place between market participants at the measurement date under current market conditions. Accrued interest receivable: The carrying amount of accrued interest receivable approximates its fair value. Deposit liabilities: The fair values disclosed for deposits (e.g., interest and non-interest checking, savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. Borrowings: Fair values of Federal Reserve Bank (“FRB”) Discount Window and Federal Home Loan Bank advances are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. Off-balance sheet instruments: The fair value of commitments to originate loans is estimated using the fees currently charged to enter similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments and the unadvanced portions of loans, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligation with the counterparties at the reporting date. Fair Values of Assets Measured on a Recurring Basis The Company’s investments in state and municipal, asset-backed and government mortgage-backed debt securities available-for-sale are generally classified within Level 2 of the fair value hierarchy. For these investments, the Company obtains fair value measurements from independent pricing services. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions. The following summarizes assets measured at fair value on a recurring basis at December 31, 2020 and 2019:
|  | Fair Value Measurements at Reporting Date Using
|  |  |  |  | Quoted Prices in |  | Significant |  | Significant
|  |  |  |  | Active Markets for |  | Other Observable |  | Unobservable
|  |  |  |  | Identical Assets |  | Inputs |  | Inputs
(In thousands) |  | Total |  | Level 1 |  | Level 2 |  | Level 3
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
State and municipal |  | $ | 10,894 |  | $ | — |  | $ | 10,894 |  | $ | —
Asset-backed securities |  |  | 4,710 |  |  | — |  |  | 4,710 |  |  | —
Mortgage-backed securities |  |  | 16,611 |  |  | — |  |  | 16,611 |  |  | —
Totals |  | $ | 32,215 |  | $ | — |  | $ | 32,215 |  | $ | —
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |
State and municipal |  | $ | 11,206 |  | $ | — |  | $ | 11,206 |  | $ | —
Asset-backed securities |  |  | 5,500 |  |  | — |  |  | 5,500 |  |  | —
Mortgage-backed securities |  |  | 25,084 |  |  | — |  |  | 25,084 |  |  | —
Totals |  | $ | 41,790 |  | $ | — |  | $ | 41,790 |  | $ | —
Fair Values of Assets Measured on a Nonrecurring Basis The Company may also be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from the application of lower-of-cost-or market accounting or write-downs of individual assets. Certain impaired loans were adjusted to fair value, less cost to sell, of the underlying collateral securing these loans resulting in losses. The loss is not recorded directly as an adjustment to current earnings, but rather as a component in determining the allowance for loan losses. Fair value was measured using appraised values of collateral and adjusted as necessary by management based on unobservable inputs for specific properties. The following summarizes assets measured at fair value on a nonrecurring basis at December 31, 2020 and 2019:
| Fair Value Measurements at Reporting Date Using:
|  |  |  | Quoted Prices in |  | Significant |  | Significant
|  |  |  | Active Markets for |  | Other Observable |  | Unobservable
|  |  |  | Identical Assets |  | Inputs |  | Inputs
(In thousands) | Total |  | Level 1 |  | Level 2 |  | Level 3
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Impaired loans |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 2,000 |  | $ | — |  | $ | — |  | $ | 2,000
Totals | $ | 2,000 |  | $ | — |  | $ | — |  | $ | 2,000
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |
Impaired loans |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | $ | 215 |  | $ | — |  | $ | — |  | $ | 215
Commercial |  | 1,805 |  |  | — |  |  | — |  |  | 1,805
Totals | $ | 2,020 |  | $ | — |  | $ | — |  | $ | 2,020
The following is a summary of the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis at December 31, 2020 and 2019:
(In thousands) | Fair Value |  | Valuation Technique |  | Unobservable Input |  | Range
December 31, 2020 |  |  |  |  |  |  |  |
Impaired loans |  |  |  |  |  |  |  |
Commercial | $ | 2,000 |  | Business valuation |  | Comparable company evaluations |  | —
December 31, 2019 |  |  |  |  |  |  |  |
Impaired loans |  |  |  |  |  |  |  |
Commercial real estate | $ | 215 |  | Real estate appraisals |  | Discount for dated appraisals |  | 6 - 10%
Commercial |  | 1,805 |  | Business valuation |  | Comparable company evaluations |  | —
The carrying amount of impaired commercial loans measured at fair value on a nonrecurring basis was $4.0 million and $2.0 million with specific reserves of $2.0 million and $174,000 at December 31, 2020 and 2019, respectively. There were no outstanding impaired commercial real estate loans at December 31, 2020. The carrying amount of impaired commercial real estate loans was $273,000 with specific reserves of $58,000 at December 31, 2019. GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying amounts and estimated fair values of the Company's financial instruments, all of which are held or issued for purposes other than trading, are as follows at December 31, 2020 and 2019:
|  | Carrying |  | Fair Value
(In thousands) |  | Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 83,819 |  | $ | 83,819 |  | $ | — |  | $ | — |  | $ | 83,819
Debt securities available-for-sale |  |  | 32,215 |  |  | — |  |  | 32,215 |  |  | — |  |  | 32,215
Federal Home Loan Bank of Boston stock |  |  | 895 |  |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Loans, net |  |  | 1,314,810 |  |  | — |  |  | — |  |  | 1,321,143 |  |  | 1,321,143
Accrued interest receivable |  |  | 6,371 |  |  | — |  |  | 6,371 |  |  | — |  |  | 6,371
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 1,237,428 |  |  | — |  |  | 1,237,867 |  |  | — |  |  | 1,237,867
Borrowings |  |  | 13,500 |  |  | — |  |  | 14,016 |  |  | — |  |  | 14,016
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 59,658 |  | $ | 59,658 |  | $ | — |  | $ | — |  | $ | 59,658
Debt securities available-for-sale |  |  | 41,790 |  |  | — |  |  | 41,790 |  |  | — |  |  | 41,790
Federal Home Loan Bank of Boston stock |  |  | 1,416 |  |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Loans, net |  |  | 959,286 |  |  | — |  |  | — |  |  | 958,270 |  |  | 958,270
Accrued interest receivable |  |  | 2,854 |  |  | — |  |  | 2,854 |  |  | — |  |  | 2,854
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 849,905 |  |  | — |  |  | 850,774 |  |  | — |  |  | 850,774
Borrowings |  |  | 24,998 |  |  | — |  |  | 25,351 |  |  | — |  |  | 25,351
The carrying amounts of financial instruments shown above are included in the consolidated balance sheets under the indicated captions. Accounting policies related to financial instruments are described in Note 2.

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- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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