Fair Value Measurements

3 Months Ended

Sep. 30, 2021

Fair Value Measurements

Fair Value Measurements

Note 11:  Fair Value Measurements

ASC Topic 820, Fair Value Measurements, 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. Topic 820 also establishes 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 active 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 supported by little or no market activity that are significant to the fair value of the assets or liabilities

Recurring Measurements. The following table presents the fair value measurements recognized in the accompanying consolidated 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 September 30, and June 30, 2021:

	Fair Value Measurements at September 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Obligations of state and political subdivisions	$	46,869	$	—	$	46,869	$	—
Corporate obligations		18,832		—		18,832		—
Other securities		608		—		608		—
MBS and CMOs		143,100		—		143,100		—

	Fair Value Measurements at June 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Obligations of state and political subdivisions	$	47,696	$	—	$	47,696	$	—
Corporate obligations		20,311		—		20,311		—
Other securities		672		—		672		—
MBS and CMOs		138,341		—		138,341		—

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-sale Securities. When quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated using pricing models, or quoted prices of securities with similar characteristics. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.  In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Nonrecurring Measurements. The following tables present the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fell at September 30, and June 30, 2021:

	Fair Value Measurements at September 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	144	$	—	$	—	$	144

	Fair Value Measurements at June 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	280	$	—	$	—	$	280

The following table presents losses recognized on assets measured on a non-recurring basis for the three-month periods ended September 30, 2021 and 2020:

	For the three months ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Foreclosed and repossessed assets held for sale	$	(28)	$	(36)
Total losses on assets measured on a non-recurring basis	$	(28)	$	(36)

The following is a description of valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy. For assets classified within Level 3 of fair value hierarchy, the process used to develop the reported fair value process is described below.

Foreclosed and Repossessed Assets Held for Sale. Foreclosed and repossessed assets held for sale are valued at the time the loan is foreclosed upon or collateral is repossessed and the asset is transferred to foreclosed or repossessed assets held for sale. The value of the asset is based on third party or internal appraisals, less estimated costs to sell and appropriate discounts, if any. The appraisals are generally discounted based on current and expected market conditions that may impact the sale or value of the asset and management’s knowledge and experience with similar assets. Such discounts typically may be significant and result in a Level 3 classification of the inputs for determining fair value of these assets. Foreclosed and repossessed assets held for sale are continually evaluated for additional impairment and are adjusted accordingly if impairment is identified.

Unobservable (Level 3) Inputs. The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

					Range
	Fair value at		Valuation	Unobservable	of		Weighted-average
(dollars in thousands)	September 30, 2021		technique	inputs	inputs applied		inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	144	Third party appraisal	Marketability discount	8.0% - 51.0	%	24.4	%

					Range
	Fair value at		Valuation	Unobservable	of		Weighted-average
(dollars in thousands)	June 30, 2021		technique	inputs	inputs applied		inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	280	Third party appraisal	Marketability discount	7.2% - 80.6	%	37.1	%

Fair Value of Financial Instruments. The following table presents estimated fair values of the Company’s financial instruments not reported at fair value and the level within the fair value hierarchy in which the fair value measurements fell at September 30 and June 30, 2021.

	September 30, 2021
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	111,402	$	111,402	$	—	$	—
Interest-bearing time deposits		980		—		980		—
Stock in FHLB		5,425		—		5,425		—
Stock in Federal Reserve Bank of St. Louis		5,031		—		5,031		—
Loans receivable, net		2,249,478		—		—		2,265,086
Accrued interest receivable		11,203		—		11,203		—
Financial liabilities
Deposits		2,371,695		1,817,346		—		556,397
Advances from FHLB		46,522		—		47,419		—
Accrued interest payable		731		—		731		—
Subordinated debt		15,268		—		—		16,045
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

	June 30, 2021
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	123,592	$	123,592	$	—	$	—
Interest-bearing time deposits		979		—		979		—
Stock in FHLB		5,873		—		5,873		—
Stock in Federal Reserve Bank of St. Louis		5,031		—		5,031		—
Loans receivable, net		2,200,244		—		—		2,218,762
Accrued interest receivable		10,079		—		10,079		—
Financial liabilities
Deposits		2,330,803		1,768,217		—		565,123
Advances from FHLB		57,529		—		58,587		—
Accrued interest payable		779		—		779		—
Subordinated debt		15,243		—		—		15,468
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—