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Disclosures about Fair Value of Financial Instruments and Other Assets and Liabilities | 12 Months Ended
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Dec. 31, 2022
Disclosures about Fair Value of Financial Instruments and Other Assets and Liabilities |
Disclosures about Fair Value of Financial Instruments and Other Assets and Liabilities | Note 16: Disclosures about Fair Value of Financial Instruments and Other Assets and Liabilities The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company also utilizes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
| Level 1 | Quoted prices in active markets for identical assets or liabilities
| Level 2 | 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 for substantially the full term of the assets or liabilities
| Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. Available-for-sale Securities Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2022 and 2021: ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | December 31, 2022
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ |  | ​ | ​ |  | Quoted Prices in |  | Significant |  | ​ | ​
​ | ​ | ​ | ​ | ​ | Active Markets | ​ | Other | ​ | Significant
​ | ​ | ​ | ​ | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | Fair | ​ | Assets | ​ | Inputs | ​ | Inputs
​ | ​ | Value | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
​ | ​ | (In thousands)
U.S government agencies | ​ | $ | 44,032 | ​ | $ | — | ​ | $ | 44,032 | ​ | $ | —
Subordinated notes | ​ | ​ | 28,094 | ​ | ​ | — | ​ | ​ | 28,094 | ​ | ​ | —
State and municipal obligation | ​ | ​ | 145,498 | ​ |  | — | ​ | ​ | 145,498 | ​ |  | —
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | December 31, 2021
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ |  | ​ | ​ |  | Quoted Prices in |  | Significant |  | ​ | ​
​ | ​ | ​ | ​ | ​ | Active Markets | ​ | Other | ​ | Significant
​ | ​ | ​ | ​ | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | Fair | ​ | Assets | ​ | Inputs | ​ | Inputs
​ | ​ | Value | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
​ | ​ | (In thousands)
Subordinated notes | ​ | $ | 28,765 | ​ | $ | — | ​ | $ | 28,765 | ​ | $ | —
State and municipal obligations | ​ | ​ | 117,548 | ​ |  | — | ​ | ​ | 117,548 | ​ |  | —
​ Following is a description of the valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy. Impaired Loans (Collateral Dependent) Collateral dependent impaired loans consisted primarily of loans secured by nonresidential real estate. Management has determined fair value measurements on impaired loans primarily through evaluations of appraisals performed. Due to the nature of the valuation inputs, impaired loans are classified within Level 3 of the hierarchy. The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the Company’s Chief Lender. Appraisals are reviewed for accuracy and consistency by the Company’s Chief Lender. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the Company’s Chief Lender by comparison to historical results. Foreclosed Assets Held for Sale Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value (based on current appraised value) at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Management has determined fair value measurements on other real estate owned primarily through evaluations of appraisals performed, and current and past offers for the other real estate under evaluation. Due to the nature of the valuation inputs, foreclosed assets held for sale are classified within Level 3 of the hierarchy. Appraisals of other real estate owned (OREO) are obtained when the real estate is acquired and subsequently as deemed necessary by the Company’s Chief Lender. Appraisals are reviewed for accuracy and consistency by the Company’s Chief Lender and are selected from the list of approved appraisers maintained by management. The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2022 and 2021: ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | December 31, 2022
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ |  | ​ | ​ |  | Quoted Prices in |  | Significant |  | ​ | ​
​ | ​ | ​ | ​ | ​ | Active Markets | ​ | Other | ​ | Significant
​ | ​ | ​ | ​ | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | Fair | ​ | Assets | ​ | Inputs | ​ | Inputs
​ | ​ | Value | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
​ | ​ | (In thousands)
Collateral dependent impaired loans | ​ | $ | 9 | ​ | $ | — | ​ | $ | — | ​ | $ | 9
Foreclosed assets held for sale | ​ |  | 3,519 | ​ |  | — | ​ |  | — | ​ |  | 3,519
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | December 31, 2021
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ |  | ​ |  | Quoted Prices in |  | Significant |  | ​
​ | ​ | ​ | ​ | Active Markets | ​ | Other | ​ | Significant
​ | ​ | ​ | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | Fair | ​ | Assets | ​ | Inputs | ​ | Inputs
​ | ​ | Value | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
​ | ​ | (In thousands)
Collateral dependent impaired loans | ​ | $ | 2,822 | ​ | $ | — | ​ | $ | — | ​ | $ | 2,822
Foreclosed assets held for sale | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | —
​ Unobservable (Level 3) Inputs The following tables present quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Fair Value at |  | Valuation |  | ​ |  | ​
​ | ​ | 12/31/22 | ​ | Technique | ​ | Unobservable Inputs | ​ | Range
​ | ​ | (In thousands) | ​ | ​ | ​ | ​ | ​ | ​
Collateral-dependent impaired loans | ​ | $ | 9 |  | Market comparable properties |  | Comparability adjustments |  | 5% – 10%
Foreclosed assets held for sale | ​ |  | 3,519 |  | Market comparable properties |  | Marketability discount |  | 10% – 35%
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Fair Value at |  | Valuation |  | ​ |  | ​
​ | ​ | 12/31/21 | ​ | Technique | ​ | Unobservable Inputs | ​ | Range
​ | ​ | (In thousands) | ​ | ​ | ​ | ​ | ​ | ​
Collateral-dependent impaired loans | ​ | $ | 2,822 |  | Market comparable properties |  | Comparability adjustments |  | 5% – 10%
Foreclosed assets held for sale | ​ |  | — |  | Market comparable properties |  | Marketability discount |  | 10% – 35%
​ There were no significant changes in the valuation techniques used during 2022. The following table presents estimated fair values of the Company’s financial instruments not required to be reported at fair value. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ |  | ​ | ​ |  | Quoted Prices |  | ​ | ​ |  | ​ | ​
​ | ​ | ​ | ​ | ​ | in Active | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Markets for | ​ | Significant | ​ | Significant
​ | ​ | ​ | ​ | ​ | Identical | ​ | Other | ​ | Unobservable
​ | ​ | Carrying | ​ | Assets | ​ | Observable Inputs | ​ | Inputs
​ | ​ | Amount | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
​ | ​ | (In thousands)
December 31, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial assets |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Cash and cash equivalents | ​ | $ | 30,080 | ​ | $ | 30,080 | ​ | $ | — | ​ | $ | —
Loans, net of allowance | ​ |  | 458,823 | ​ |  | — | ​ |  | — | ​ |  | 444,704
Federal Home Loan Bank stock | ​ |  | 2,499 | ​ |  | — | ​ |  | 2,499 | ​ |  | —
Accrued interest receivable | ​ |  | 3,403 | ​ |  | — | ​ |  | 3,403 | ​ |  | —
​ | ​ |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  |
Financial liabilities | ​ |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  |
Deposits | ​ | $ | 649,913 | ​ | $ | — | ​ | $ | 646,455 | ​ | $ | —
Securities sold under repurchase agreements | ​ |  | 18,106 | ​ |  | — | ​ |  | 18,106 | ​ |  | —
Subordinated debentures | ​ |  | 23,726 | ​ |  | — | ​ |  | 24,454 | ​ |  | —
Interest payable | ​ |  | 304 | ​ |  | — | ​ |  | 304 | ​ |  | —
​ The fair value has been derived from the December 31, 2021 audited consolidated financial statements. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using
​ |  | ​ | ​ |  | Quoted Prices |  | ​ | ​ |  | ​ | ​
​ | ​ | ​ | ​ | ​ | in Active | ​ | Significant | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Markets for | ​ | Other | ​ | Significant
​ | ​ | ​ | ​ | ​ | Identical | ​ | Observable | ​ | Unobservable
​ | ​ | Carrying | ​ | Assets | ​ | Inputs | ​ | Inputs
​ | ​ | Amount | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
​ | ​ | (In thousands)
December 31, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial assets |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Cash and cash equivalents | ​ | $ | 82,999 | ​ | $ | 82,999 | ​ | $ | — | ​ | $ | —
Loans, net of allowance | ​ |  | 450,699 | ​ |  | — | ​ |  | — | ​ |  | 459,031
Federal Home Loan Bank stock | ​ |  | 3,704 | ​ |  | — | ​ |  | 3,704 | ​ |  | —
Accrued interest receivable | ​ |  | 2,345 | ​ |  | — | ​ |  | 2,345 | ​ |  | —
​ | ​ |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  |
Financial liabilities | ​ |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  |
Deposits | ​ | $ | 605,136 | ​ | $ | — | ​ | $ | 605,855 | ​ | $ | —
Securities sold under repurchase agreements | ​ |  | 15,701 | ​ |  | — | ​ |  | 15,701 | ​ |  | —
Subordinated debentures | ​ |  | 23,665 | ​ |  | — | ​ |  | 23,575 | ​ |  | —
Interest payable | ​ |  | 180 | ​ |  | — | ​ |  | 180 | ​ |  | —
​ The following methods and assumptions were used to estimate the fair value of each class of financial instruments. Cash and Cash Equivalents, Accrued Interest Receivable and Federal Home Loan Bank Stock The carrying amounts approximate fair value. Loans Fair values of loans and leases are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors. Deposits Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. Interest Payable The carrying amount approximates fair value. Securities Sold Under Repurchase Agreements and Subordinated Debentures Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. Commitments to Originate Loans, Letters of Credit and Lines of Credit The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. Fair values of commitments were not material at December 31, 2022 and 2021.

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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 https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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