FAIR VALUE ACCOUNTING

12 Months Ended

Dec. 31, 2023

ASC Topic 820-10, “Fair Value Measurements and Disclosures” 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 topic 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 Company 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 the Company’s assumptions about the factors that market participants would use in pricing an asset or liability.

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

The fair value of securities available for sale is determined by obtaining market price quotes from independent third parties wherever such quotes are available (Level 1 inputs); or matrix pricing, which is a mathematical technique widely used in the industry 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). Where such quotes are not available, we utilize independent third party valuation analysis to support our own estimates and judgments in determining fair value (Level 3 inputs).

Assets Measured on a Recurring Basis

The following tables present the financial instruments measured at fair value on a recurring basis as of December 31, 2023 and December 31, 2022.


	Fair Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2023
Investment securities:
U.S. government agency obligations	$	16,576	$	—	$	16,576	$	—

Mortgage-backed securities	73,480		—		73,480		—




Corporate debt securities	41,174		—		41,174		—
Asset-backed securities	24,513		—		24,513		—

Total investment securities	155,743		—		155,743		—
Equity investments:
Equity investments	557		557		—		—
Equity investments measured at NAV(1)	2,727		—		—		—
Total equity investments	3,284		557		—		—
Total	$	159,027	$	557	$	155,743	$	—

December 31, 2022
Investment securities:
U.S. government agency obligations	$	18,313	$	—	$	18,313	$	—

Mortgage-backed securities	78,610		—		78,610		—
Corporate debt securities	40,251		—		40,251		—
Asset-backed securities	28,817		—		28,817		—

Total Investment Securities	165,991		—		165,991		—
Equity investments:
Equity investments	338		338		—		—
Equity investments measured at NAV(1)	1,456		—		—		—
Total equity investments	1,794		338		—		—


Total	$	167,785	$	338	$	165,991	$	—

(1) Investments valued at NAV are excluded from being reported under the fair value hierarchy but are presented to permit reconciliation with the balance sheet in accordance with ASC 820-10-35-54B.

For the years ended December 31, 2023 and December 31, 2022, the Company did not own any securities for which the Company utilized significant unobservable inputs (Level 3 inputs) to determine fair value.

There were no transfers in or out of Level 1, Level 2 or Level 3 fair value measurements during the years ended December 31, 2023 or December 31, 2022. There were no losses included in earnings attributable to the change in unrealized gains or losses relating to the available-for-sale securities above with fair value measurements utilizing significant unobservable inputs for the years ended December 31, 2023 or December 31, 2022, respectively.

Assets Measured on a Nonrecurring Basis

The following tables present the financial instruments measured at fair value on a nonrecurring basis as of December 31, 2023 and December 31, 2022:


	Carrying Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2023
Foreclosed and repossessed assets, net	$	1,795	$	—	$	—	$	1,795
Collateral dependent loans with allocated allowances	3,499		—		—		3,499
Mortgage servicing rights	3,865		—		—		5,589
Total	$	9,159	$	—	$	—	$	10,883
December 31, 2022
Foreclosed and repossessed assets, net	$	1,271	$	—	$	—	$	1,271
Impaired loans with allocated allowances	6,920		—		—		6,920
Mortgage servicing rights	4,262		—		—		5,665
Total	$	12,453	$	—	$	—	$	13,856

The fair value of collateral dependent loans and impaired loans referenced above was determined by obtaining independent third party appraisals and/or internally developed collateral valuations to support the Company’s estimates and judgments in determining the fair value of the underlying collateral supporting collateral dependent loans and impaired loans.

The fair value of foreclosed and repossessed assets referenced above was determined by obtaining market price valuations from independent third parties wherever such quotes were available for other collateral owned. The Company utilized independent third party appraisals to support the Company’s estimates and judgments in determining fair value for other real estate owned.

The fair value of mortgage servicing rights referenced above was determined based on a third party discounted cash flow analysis utilizing both observable and unobservable inputs.

The following table represents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis and for which we have utilized Level 3 inputs to determine their fair value at December 31, 2023 and December 31, 2022.


	Fair Value		Valuation Techniques (1)	Significant Unobservable Inputs (2)	Range
December 31, 2023
Foreclosed and repossessed assets, net	$	1,795	Appraisal value	Estimated costs to sell	10% - 15%
Collateral dependent loans with allocated allowances	$	3,499	Appraisal value / Internal collateral valuations	Estimated costs to sell	10% - 15%
Mortgage servicing rights	$	5,589	Discounted cash flows	Discounted rates	9.375% - 12.375%
December 31, 2022
Foreclosed and repossessed assets, net	$	1,271	Appraisal value	Estimated costs to sell	10% - 15%
Impaired loans with allocated allowances	$	6,920	Appraisal value	Estimated costs to sell	10% - 15%
Mortgage servicing rights	$	5,665	Discounted cash flows	Discounted rates	9.5% - 12.5%

(1) Fair value is generally determined through independent third-party appraisals of the underlying

collateral, which generally includes various level 3 inputs which are not observable.

(2) The fair value basis of impaired loans and real estate owned may be adjusted to reflect management

estimates of disposal costs including, but not limited to, real estate brokerage commissions, legal fees,

and delinquent property taxes.

The table below represents what we would receive to sell an asset or what we would have to pay to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount and estimated fair value of the Company’s financial instruments as of the dates indicated below were as follows:


		December 31, 2023				December 31, 2022

	Valuation Method Used	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	(Level I)	$	37,138	$	37,138	$	35,363	$	35,363
Other interest bearing deposits	(Level II)	—		—		249		250
Securities available for sale "AFS"	(Level II)	155,743		155,743		165,991		165,991
Securities held to maturity "HTM"	(Level II)	91,229		73,262		96,379		76,779
Equity investments	(Level I)	557		557		338		338
Equity investments valued at NAV (1)	N/A	2,727		2,727		1,456		1,456
Other investments	(Level II)	15,725		15,725		15,834		15,834
Loans receivable, net	(Level III)	1,437,884		1,374,387		1,393,845		1,342,838
Loans held for sale - Residential mortgage	(Level I)	1,134		1,134		—		—
Loans held for sale - SBA	(Level II)	4,639		4,639		—		—
Mortgage servicing rights	(Level III)	3,865		5,589		4,262		5,665
Accrued interest receivable	(Level I)	5,409		5,409		5,285		5,285
Financial liabilities:
Deposits	(Level III)	$	1,519,092	$	1,517,361	$	1,424,720	$	1,420,871
FHLB advances	(Level II)	79,530		79,087		142,530		141,060
Other borrowings	(Level II)	67,465		59,743		72,409		72,409

Accrued interest payable	(Level I)	3,175		3,175		968		968

(1) Investments valued at NAV are excluded from being reported under the fair value hierarchy but are presented to permit reconciliation with the balance sheet in accordance with ASC 820-10-35-54B.

- 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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