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Fair Values of Financial Instruments | 9 Months Ended
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Sep. 30, 2021
Fair Values of Financial Instruments [Abstract] |
Fair Values of Financial Instruments | Note 11 – Fair Values of Financial Instruments Guidance on fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: 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 with little or no market activity). An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The only assets or liabilities that the Company measured at fair value on a recurring basis were as follows. (In thousands):
|  |  |  |  | (Level 1) |  | (Level 2) |  |
|  |  |  |  | Quoted Prices in |  | Significant |  | (Level 3)
|  |  |  |  | Active Markets |  | Other |  | Significant
|  |  |  |  | for Identical |  | Observable |  | Unobservable
Description |  | Total |  | Assets |  | Inputs |  | Inputs
As of September 30, 2021: |  |  |  |  |  |  |  |  |  |  |  |
Securities |  |  |  |  |  |  |  |  |  |  |  |
Debt Securities Available for Sale |  | $ | 82,603 |  | $ | - |  | $ | 82,603 |  | $ | -
Marketable Equities |  | $ | 23,534 |  | $ | 23,534 |  | $ | - |  | $ | -
Total Securities |  | $ | 106,137 |  | $ | 23,534 |  | $ | 82,603 |  | $ | -
As of December 31, 2020: |  |  |  |  |  |  |  |  |  |  |  |
Securities |  |  |  |  |  |  |  |  |  |  |  |
Debt Securities Available for Sale |  | $ | 99,756 |  | $ | - |  | $ | 99,756 |  | $ | -
Marketable Equities |  | $ | 17,717 |  | $ | 17,717 |  | $ | - |  | $ | -
Total Securities |  | $ | 117,473 |  | $ | 17,717 |  | $ | 99,756 |  | $ | -
The Company’s policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers of assets or liabilities into or out of Level 1, Level 2, or Level 3 of the fair value hierarchy during the three months ended September 30, 2021 and 2020. The only assets or liabilities that the Company measured at fair value on a nonrecurring basis were as follows. (In thousands):
|  |  |  |  | (Level 1) |  | (Level 2) |  |  |
|  |  |  |  | Quoted Prices in |  | Significant |  | (Level 3)
|  |  |  |  | Active Markets |  | Other |  | Significant
|  |  |  |  | for Identical |  | Observable |  | Unobservable
Description |  | Total |  | Assets |  | Inputs |  | Inputs
As of September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Impaired Loans |  | $ | 16,943 |  | $ | - |  | $ | - |  | $ | 16,943
Other real estate owned |  | $ | - |  | $ | - |  | $ | - |  | $ | -
As of December 31, 2020: |  |  |  |  |  |  |  |  |  |  |  |
Impaired Loans |  | $ | 10,130 |  | $ | - |  | $ | - |  | $ | 10,130
Other real estate owned |  | $ | 414 |  | $ | - |  | $ | - |  | $ | 414
‎ Note 11 – Fair Values of Financial Instruments (Continued) The following tables present additional quantitative information as of September 30, 2021 and December 31, 2020 about assets measured at fair value on a nonrecurring basis and for which the Company has utilized adjusted Level 3 inputs to determine fair value. (Dollars in thousands):
Quantitative Information about Level 3 Fair Value Measurements
|  | Fair Value | Valuation | Unobservable |
|  | Estimate | Techniques | Input | Range
September 30, 2021: |  |  |  |  |
Impaired Loans | $ | 16,943 | Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-10%
Other real estate owned | $ | - | Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-10%
|  | Fair Value | Valuation | Unobservable |
|  | Estimate | Techniques | Input | Range
December 31, 2020: |  |  |  |  |
Impaired Loans | $ | 10,130 | Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-10%
Other real estate owned | $ | 414 | Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-10%
(1)Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not objectively determinable. (2)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal. The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments as of September 30, 2021 and December 31, 2020. Cash and Cash Equivalents and Interest-Earning Time Deposits (Carried at Cost) The carrying amounts reported in the consolidated statements of financial condition for cash and short-term instruments approximate fair values. Securities Available for Sale The fair value of securities available for sale (carried at fair value) are determined by matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. Equity Securities The fair values of available-for-sale securities are based on quoted market prices (Level 1). Loans Held for Sale (Carried at Lower of Cost or Fair Value) The fair value of loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for specific attributes of that loan. Loans held for sale are carried at the lower of cost or fair value. Loans Receivable (Carried at Cost) The fair values of loans, except for certain impaired loans, are estimated using discounted cash flow analyses, using market rates at the date of the Statement of Financial Condition that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. ‎ Note 11 – Fair Values of Financial Instruments (Continued) Impaired Loans (Generally Carried at Fair Value) Impaired loans are those for which the Company has measured and recorded an impairment generally based on the fair value of the loan’s collateral, less estimated costs to sell. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value at September 30, 2021 and December 31, 2020 consisted of the loan balances of $24.6 million net of a valuation allowance of $7.7 million and $14.6 million net of a valuation of loan allowance of $4.5 million, respectively. Other Real Estate Owned (Generally Carried at Lower of Cost or Fair Value) Real Estate Owned is generally carried at fair value less estimated costs to sell which is determined based upon independent third-party appraisals of the properties or based upon the expected proceeds from a pending sale. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. FHLB of New York Stock (Carried at Cost) The carrying amount of restricted investment in bank stock approximates fair value and considers the limited marketability of such securities. Interest Receivable and Payable (Carried at Cost) The carrying amount of interest receivable and interest payable approximates its fair value. Deposits (Carried at Cost) The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook 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 in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. Borrowings and Subordinated Debt (Carried at Cost) Fair values are estimated using discounted cash flow analysis, based on quoted prices for new long-term debt with similar credit risk characteristics, terms and remaining maturity. Prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. Off-Balance Sheet Financial Instruments (Carried at Cost) Fair values for the Company’s off-balance sheet financial instruments (lending commitments and unused lines of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing. The fair value of these commitments was deemed immaterial and is not presented in the accompanying table. ‎ Note 11 – Fair Values of Financial Instruments (Continued) The carrying values and estimated fair values of financial instruments were as follows as of September 30, 2021 and December 31, 2020:
|  |  | As of September 30, 2021
|  |  |  |  |  |  |  | Quoted Prices in Active |  | Significant |  | Significant
|  | Carrying |  |  |  |  | Markets for Identical Assets |  | Other Observable Inputs |  | Unobservable Inputs
|  | Value |  | Fair Value |  | (Level 1) |  | (Level 2) |  | (Level 3)
|  | (In Thousands)
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 442,938 |  | $ | 442,938 |  | $ | 442,938 |  | $ | - |  | $ | -
Interest-earning time deposits |  |  | 735 |  |  | 735 |  |  | - |  |  | 735 |  |  | -
Debt securities available for sale |  |  | 82,603 |  |  | 82,603 |  |  | - |  |  | 82,603 |  |  | -
Equity investments |  |  | 23,534 |  |  | 23,534 |  |  | 23,534 |  |  | - |  |  | -
Loans held for sale |  |  | 913 |  |  | 913 |  |  | - |  |  | 913 |  |  | -
Loans receivable, net |  |  | 2,289,854 |  |  | 2,237,471 |  |  | - |  |  | - |  |  | 2,237,471
FHLB of New York stock, at cost |  |  | 8,193 |  |  | 8,193 |  |  | - |  |  | 8,193 |  |  | -
Accrued interest receivable |  |  | 10,388 |  |  | 10,388 |  |  | - |  |  | 10,388 |  |  | -
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 2,541,405 |  |  | 2,429,607 |  |  | 1,750,043 |  |  | 679,564 |  |  | -
Borrowings |  |  | 118,573 |  |  | 120,049 |  |  | - |  |  | 120,049 |  |  | -
Subordinated debentures |  |  | 37,217 |  |  | 45,913 |  |  | - |  |  | 45,913 |  |  | -
Accrued interest payable |  |  | 660 |  |  | 660 |  |  | - |  |  | 660 |  |  | -
|  |  | As of December 31, 2020
|  |  |  |  |  |  |  | Quoted Prices in Active |  | Significant |  | Significant
|  | Carrying |  |  |  |  | Markets for Identical Assets |  | Other Observable Inputs |  | Unobservable Inputs
|  | Value |  | Fair Value |  | (Level 1) |  | (Level 2) |  | (Level 3)
|  | (In Thousands)
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 261,229 |  | $ | 261,229 |  | $ | 261,229 |  | $ | - |  | $ | -
Interest-earning time deposits |  |  | 735 |  |  | 735 |  |  | - |  |  | 735 |  |  | -
Debt securities available for sale |  |  | 99,756 |  |  | 99,756 |  |  | - |  |  | 99,756 |  |  | -
Equity investments |  |  | 17,717 |  |  | 17,717 |  |  | 17,717 |  |  | - |  |  | -
Loans held for sale |  |  | 3,530 |  |  | 3,530 |  |  | - |  |  | 3,530 |  |  | -
Loans receivable, net |  |  | 2,295,021 |  |  | 2,309,118 |  |  | - |  |  | - |  |  | 2,309,118
FHLB of New York stock, at cost |  |  | 11,324 |  |  | 11,324 |  |  | - |  |  | 11,324 |  |  | -
Accrued interest receivable |  |  | 12,924 |  |  | 12,924 |  |  | - |  |  | 12,924 |  |  | -
Other Real Estate Owned |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 2,318,050 |  |  | 2,323,561 |  |  | 1,627,871 |  |  | 695,690 |  |  | -
Borrowings |  |  | 191,161 |  |  | 194,899 |  |  | - |  |  | 194,899 |  |  | -
Subordinated debentures |  |  | 37,042 |  |  | 37,252 |  |  | - |  |  | 37,252 |  |  | -
Accrued interest payable |  |  | 1,463 |  |  | 1,463 |  |  | - |  |  | 1,463 |  |  | -
‎

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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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