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Financial Instruments
 12 Months Ended
Dec. 31, 2023
Investments, All Other Investments [Abstract]  
Financial Instruments

(8) Financial Instruments

 

The estimated fair values of the Company’s financial instruments were as follows (in thousands):

 

   At December 31, 2023   At December 31, 2022 
   Carrying Amount   Fair Value   Level   Carrying Amount   Fair Value   Level 
Financial assets:                              
Cash and cash equivalents  $76,663   $76,663    1   $71,836   $71,836    1 
Debt Securities available for sale   24,355    24,355    2    25,102    25,102    2 
Debt Securities held-to-maturity   360    326    2    540    504    2 
Loans   671,094    652,965    3    477,218    476,566    3 
Federal Home Loan Bank stock   3,354    3,354    3    600    600    3 
Accrued interest receivable   2,474    2,474    3    1,444    1,444    3 
                               
Financial liabilities:                              
Deposit liabilities   639,581    645,426    3    507,899    512,357    3 
Federal Home Loan Bank advances   62,000    61,565    3    10,000    9,450    3 
Federal Reserve Bank advances   13,600    13,592    3    —    —    3 
Off-balance sheet financial instruments   —    —         —    —    3 
    —    —    3    —    —    3 

 

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 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.

 

(continued)

 

 

OPTIMUMBANK HOLDINGS, INC. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

 

(8) Financial Instruments Continued

 

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 Company 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 Company 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 December 31, 2023 follows (in thousands):

 

Commitments to extend credit  $31,044 
      
Unused lines of credit  $69,978 
      
Standby letters of credit  $4,559