v3.26.1
Fair Value
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value

4. Fair Value

 

The Company has established a framework for measuring fair value using a hierarchy, where the Company maximizes the use of observable inputs and minimize the use of unobservable inputs. Fair value measurements are an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Three levels of input are used to measure fair value, as follows:

 

  Level 1 – quoted prices in active markets for identical assets or liabilities;
     
  Level 2 – quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or
     
  Level 3 – unobservable inputs, such as discounted cash flow models or valuations.

 

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

 

Fair Value Measurements of Non-Financial Instruments on a Recurring Basis

 

The Company has no non-financial instruments measured at fair value on a recurring basis.

 

Fair Value Measurements of Non-Financial Instruments on a Non-recurring Basis

 

Certain assets are measured at fair value on a non-recurring basis when there is evidence of impairment. The fair values of individually evaluated loans with specific allocations of the allowance for credit losses are generally based on recent real estate appraisals of the collateral less estimated cost to sell, which are classified as Level 3. Declines in the fair values of other real estate owned subsequent to their initial acquisitions are also based on recent real estate appraisals minus selling costs, which are classified as Level 3.

 

Individually Evaluated Loans

 

There were 29 and 21 individually evaluated loan assets as of December 31, 2025 and December 31, 2024, respectively.

 

Foreclosed Assets

 

Foreclosed assets (upon initial recognition or subsequent impairment) are measured at fair value on a non-recurring basis.

 

Foreclosed assets, upon initial recognition, are measured and reported at fair value minus cost to sell. Each reporting period, the Company remeasures the fair value of its significant foreclosed assets. Fair value is based upon independent market prices, appraised values of the foreclosed assets or management’s estimates of value, which the Company classifies as a Level 3 evaluation.

 

 

The following tables present the balances of non-financial instruments measured at fair value on a non-recurring basis as of December 31, 2025 and 2024:

 

   Carrying Amount [Member]   Estimated Fair Value [Member]   Assets   Inputs   Inputs 
          

Quoted Prices

in Active

Markets for

   Significant Other   Significant 
   December 31, 2025   Identical   Observable   Unobservable 
   Carrying   Estimated   Assets   Inputs   Inputs 
   Amount   Fair Value   Level 1   Level 2   Level 3 
                     
Foreclosed assets, net  $499   $499   $          –   $          –   $499 
Individually evaluated loans, net   6,192    6,192    –    –    6,192 
Total  $6,691   $6,691   $–   $–   $6,691 

 

   Carrying Amount [Member]   Estimated Fair Value [Member]   Assets   Inputs   Inputs 
          

Quoted Prices

in Active

Markets for

   Significant Other   Significant 
   December 31, 2024   Identical   Observable   Unobservable 
   Carrying   Estimated   Assets   Inputs   Inputs 
   Amount   Fair Value   Level 1   Level 2   Level 3 
                     
Foreclosed assets, net  $1,356   $1,356   $          –   $          –   $1,356 
Individually evaluated loans, net   4,313    4,313    –    –    4,313 
Total  $5,669   $5,669   $–   $–   $5,669 

 

The following methods and assumptions were used by the Company in estimating the fair value of assets and liabilities valued on a nonrecurring basis:

 

   Estimated Fair Value   Valuation Technique  Unobservable Inputs  Range of Discounts  Weighted Average Discount(1) 
December 31, 2025              
Individually evaluated loans, net  $6,192   Underlying collateral value, third party appraisals  Collateral discounts and estimated costs to sell  0%-26%   12%
Foreclosed assets, net  $499   Underlying collateral value, third party appraisals  Collateral discounts  7%   7%

 

(1) The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

 

   Estimated Fair Value   Valuation Technique  Unobservable Inputs  Range of Discounts  Weighted Average Discount(1) 
December 31, 2024              
Individually evaluated loans, net  $4,313   Underlying collateral value, third party appraisals  Collateral discounts and estimated costs to sell  0%-18%   14%
Foreclosed assets, net  $1,356   Underlying collateral value, third party appraisals  Collateral discounts  7%-18%   17%

 

 

 

 

(1) The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

 

Fair Value of Financial Instruments

 

Borrowings under Credit Facilities

 

The fair value of the Company’s borrowings under credit facilities is estimated based on the expected cash flows discounted using the current rates offered to the Company for debt of the same remaining maturities. As all of the borrowings under credit facilities or the Notes are payable on demand or at similar rates to what the Company can borrow funds for today, the fair value of the borrowings is determined to approximate carrying value at both December 31, 2025 and 2024. The interest on our Notes Program is paid to our Note holders either monthly or at the end of their investment, compounded monthly. For the same reasons as the determination for the principal balances on the Notes, the fair value approximates the carrying value for the interest as well.

 

The table below is a summary of fair value estimates for financial instruments:

           Carrying Amount [Member]   Estimated Fair Value [Member]   Carrying Amount [Member]   Estimated Fair Value [Member] 
           December 31, 2025   December 31, 2024 
     Fair Value     Carrying   Estimated   Carrying   Estimated 
     Level     Amount   Fair Value   Amount   Fair Value 
Financial Assets                            
Cash and cash equivalents including restricted cash    1     $3,740   $3,740   $3,347   $3,347 
Certificates of deposit    2      2,275    2,275    –    – 
Loans receivable, net    3      59,223    59,223    49,254    49,254 
Accrued interest on loans    2      1,111    1,111    844    844 
Financial Liabilities                          
Refundable prepaid interest    2      965    965    353    353 
Loan deposits    2      838    838    867    867 
Notes payable secured, net    2      18,445    18,445    21,102    21,102 
Notes payable unsecured, net    2      35,774    35,774    35,213    35,213 
Accrued interest payable    2      3,595    3,595    3,280    3,280