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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2018

Investments, All Other Investments [Abstract]

Fair Value of Financial Instruments

(8)

Fair Value of Financial Instruments. The estimated fair values and fair value measurement method with respect to the Company’s financial instruments were as follows (in thousands):

		At March 31, 2018										At December 31, 2017
		Carrying Amount				Fair Value				Level		Carrying Amount				Fair Value				Level
Financial assets:
Cash and cash equivalents		$	4,144			$	4,144			1		$	11,665			$	11,665			1
Securities available for sale			10,990				10,990			2			11,437				11,437			2
Loans			69,100				68,976			3			68,220				68,079			3
Federal Home Loan Bank stock			979				979			3			979				979			3
Accrued interest receivable			284				284			3			316				316			3

Financial liabilities:
Deposit liabilities			55,097				55,262			3			65,251				65,475			3
Federal Home Loan Bank advances			21,000				20,806			3			20,500				20,394			3
Junior subordinated debenture			5,155				N/A	⁽¹⁾		3			5,155				N/A	⁽¹⁾		3
Federal funds purchased			2,767				2,767			3			—				—			3
Off-balance sheet financial instruments			—				—			3			—				—			3

(1)	The Company is unable to determine value based on significant unobservable inputs required in the calculation. Refer to Note 10 for further information.

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit, unused lines of credit, and standby letters of credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the condensed consolidated balance sheet. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit, is based on management’s credit evaluation of the counterparty.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit to customers is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateral supporting those commitments. Standby letters of credit generally have expiration dates within one year.

Commitments to extend credit, unused lines of credit, and standby letters of credit typically result in loans with a market interest rate when funded. A summary of the contractual amounts of the Company’s financial instruments with off-balance-sheet risk at March 31, 2018 follows (in thousands):

Commitments to extend credit		$	1,494

Unused lines of credit		$	1,313

Standby letters of credit		$	-