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Fair Value | 9 Months Ended
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Sep. 30, 2024
Fair Value [Abstract] |
Fair Value | NOTE 6 - FAIR VALUE Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values: 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 company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The Company used the following methods and significant assumptions to estimate the fair value of each type of asset and liability: Securities available for sale: The fair value of securities available for sale is determined using pricing models that vary based on asset class and include available trade, bid and other market information 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). Derivatives: The fair value of derivatives, which includes interest rate lock commitments and interest rate swaps, is based on valuation models using observable market data as of the measurement date (Level 2). TBA mortgage – backed securities: To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company enters into either a forward sales contract to sell loans to investors when using best efforts or a trade of “to-be-announced (TBA)” mortgage-backed securities for mandatory delivery. The forward sales contracts lock in a price for the sale of loans with similar characteristics to the specific rate lock commitments based on a valuation model using observable market data for pricing commitments (Level 2). Collateral dependent impaired loans: The fair value of collateral dependent impaired loans with specific reserves in the ACL - Loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by a third-party appraisal management company approved by the Board of Directors annually. Once received, the loan officer or a member of the credit department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals are updated as needed based on facts and circumstances associated with the individual properties. Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties. Appraisers may make adjustments to the sales prices of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property. Management applies an additional discount to real estate appraised values, typically to reflect changes in market conditions since the date of the appraisal if warranted and to cover disposition costs (including selling expenses) based on the intended disposition method of the property. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Loans held for sale: Loans held for sale are carried at fair value, as determined by outstanding commitments from third party investors (Level 2). Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:
| Fair Value Measurements at ‎ September 30, 2024 using Significant ‎Other Observable Inputs
| (Level 2)
| (unaudited)
Financial Assets: |  |
Securities available for sale: |  |
Corporate debt | $ | 7,500
Issued by U.S. government-sponsored entities and agencies: |  |
U.S. Treasury |  | 1,190
Total securities available for sale | $ | 8,690
Loans held for sale | $ | 5,240
Derivative assets | $ | 4,474
Financial Liabilities: |  |
Derivative liabilities | $ | 4,474
| Fair Value Measurements at ‎ December 31, 2023 using Significant ‎Other Observable Inputs
| (Level 2)
Financial Assets: |  |
Securities available for sale: |  |
Corporate debt | $ | 7,100
Issued by U.S. government-sponsored entities and agencies: |  |
U.S. Treasury |  | 988
Mortgage-backed securities - residential |  | 4
Total securities available for sale | $ | 8,092
Loans held for sale | $ | 1,849
Derivative assets | $ | 4,710
Financial Liabilities: |  |
Derivative liabilities | $ | 4,710
The Company had no assets or liabilities measured at fair value on a recurring basis that were measured using Level 1 or Level 3 inputs at September 30, 2024 or December 31, 2023. There were no transfers of assets or liabilities measured at fair value between levels during the periods ended September 30, 2024 and December 31, 2023. There were no assets or liabilities measured at fair value on a non-recurring basis at September 30, 2024. Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2023 are summarized below:
Fair Value Measurements at December 31, 2023 Using
Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans: |  |
Commercial | $ | 403
Total collateral dependent impaired loans | $ | 403
There were no write-downs of impaired collateral dependent loans during the nine months ended September 30, 2024 or 2023. The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2023:
|  | Fair Value |  | Valuation Technique(s) |  | Unobservable Inputs |  | Weighted Average
Collateral dependent impaired loans: |  |  |  |  |  |  |  |
Commercial | $ | 403 |  | Comparable sales approach |  | Adjustment for differences between the stated value and net realizable value |  | 10.43%
Financial Instruments Recorded Using Fair Value Option The Company has elected the fair value option for loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. No ne of these loans were 90 days or more past due or on nonaccrual as of September 30, 2024 or December 31, 2023. As of September 30, 2024 and December 31, 2023, the aggregate fair value, contractual balance and gain or loss on loans held for sale were as follows:
| September 30, 2024 |  | December 31, 2023
| (unaudited) |  |  |
Aggregate fair value | $ | 5,240 |  | $ | 1,849
Contractual balance |  | 5,240 |  |  | 1,849
Gain (loss) | $ | - |  | $ | -
The total amount of gains and losses from changes in fair value included in earnings for the three and nine months ended September 30, 2024 and 2023 for loans held for sale were:
| Three months ended September 30, |  | Nine months ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
| (unaudited) |  | (unaudited)
Interest income | $ | 59 |  | $ | 10 |  | $ | 118 |  | $ | 23
Interest expense |  | - |  |  | - |  |  | - |  |  | -
Change in fair value |  | - |  |  | - |  |  | - |  |  | -
Total change in fair value | $ | 59 |  | $ | 10 |  | $ | 118 |  | $ | 23
The carrying amounts and estimated fair values of financial instruments at September 30, 2024 were as follows:
| Fair Value Measurements at September 30, 2024 Using:
| Carrying |  |  |  |  |  |  |  |  |  |  |  |
(unaudited) | Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 233,520 |  | $ | 233,520 |  | $ | - |  | $ | - |  | $ | 233,520
Interest-bearing deposits in other financial institutions |  | 100 |  |  | 100 |  |  | - |  |  | - |  |  | 100
Securities available for sale |  | 8,690 |  |  | - |  |  | 8,690 |  |  | - |  |  | 8,690
Equity securities |  | 5,000 |  |  | - |  |  | 5,000 |  |  | - |  |  | 5,000
Loans held for sale |  | 5,240 |  |  | - |  |  | 5,240 |  |  | - |  |  | 5,240
Loans and leases, net |  | 1,717,075 |  |  | - |  |  | - |  |  | 1,705,869 |  |  | 1,705,869
FHLB and FRB stock |  | 8,908 |  |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a
Accrued interest receivable |  | 9,721 |  |  | 331 |  |  | 198 |  |  | 9,192 |  |  | 9,721
Derivative assets |  | 4,474 |  |  | - |  |  | 4,474 |  |  | - |  |  | 4,474
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits | $ | (1,745,576) |  | $ | (1,044,519) |  | $ | (702,237) |  | $ | - |  | $ | (1,746,756)
FHLB advances and other borrowings |  | (108,672) |  |  | - |  |  | (109,872) |  |  | - |  |  | (109,872)
Advances by borrowers for taxes and insurance |  | (1,214) |  |  | - |  |  | - |  |  | (1,214) |  |  | (1,214)
Subordinated debentures |  | (14,990) |  |  | - |  |  | (17,127) |  |  | - |  |  | (17,127)
Accrued interest payable |  | (2,736) |  |  | - |  |  | (2,736) |  |  | - |  |  | (2,736)
Derivative liabilities |  | (4,474) |  |  | - |  |  | (4,474) |  |  | - |  |  | (4,474)
The carrying amounts and estimated fair values of financial instruments at December 31, 2023 were as follows:
| Fair Value Measurements at December 31, 2023 Using:
| Carrying |  |  |  |  |  |  |  |  |  |  |  |
| Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 261,595 |  | $ | 261,595 |  | $ | - |  | $ | - |  | $ | 261,595
Interest-bearing deposits in other financial institutions |  | 100 |  |  | 100 |  |  | - |  |  | - |  |  | 100
Securities available for sale |  | 8,092 |  |  | - |  |  | 8,092 |  |  | - |  |  | 8,092
Equity securities |  | 5,000 |  |  | - |  |  | 5,000 |  |  | - |  |  | 5,000
Loans held for sale |  | 1,849 |  |  | - |  |  | 1,849 |  |  | - |  |  | 1,849
Loans and leases, net |  | 1,694,133 |  |  | - |  |  | - |  |  | 1,670,885 |  |  | 1,670,885
FHLB and FRB stock |  | 8,482 |  |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a
Accrued interest receivable |  | 9,210 |  |  | 171 |  |  | 125 |  |  | 8,914 |  |  | 9,210
Derivative assets |  | 4,710 |  |  | - |  |  | 4,710 |  |  | - |  |  | 4,710
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits | $ | (1,744,057) |  | $ | (1,080,605) |  | $ | (659,492) |  | $ | - |  | $ | (1,740,097)
FHLB advances and other borrowings |  | (109,995) |  |  | - |  |  | (108,294) |  |  | - |  |  | (108,294)
Advances by borrowers for taxes and insurance |  | (2,179) |  |  | - |  |  | - |  |  | (2,179) |  |  | (2,179)
Subordinated debentures |  | (14,961) |  |  | - |  |  | (17,345) |  |  | - |  |  | (17,345)
Accrued interest payable |  | (2,680) |  |  | - |  |  | (2,680) |  |  | - |  |  | (2,680)
Derivative liabilities |  | (4,710) |  |  | - |  |  | (4,710) |  |  | - |  |  | (4,710)

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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/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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