(23)	DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes the carrying value and estimated fair value of financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2016 and 2015.

	Carrying		Fair Value Measurements Using:
	Amount		Level 1		Level 2		Level 3
	(In thousands)
September 30, 2016:
Financial assets:
Cash and due from banks	$	11,449	$	11,449	$	-	$	-
Interest-bearing deposits with banks		17,893		17,893		-		-
Interest-bearing time deposits		3,100		-		3,114		-
Trading account securities		9,255		-		9,255		-
Securities available for sale		174,493		-		174,493		-
Securities held to maturity		3,166		-		3,654		-

Loans, net		518,611		-		-		522,560

Loans held for sale		5,471		-		5,471		-
FRB and FHLB stock		6,936		-		6,936		-
Accrued interest receivable		2,806		-		2,806		-
Loan servicing rights (included in other assets)		310		-		-		310

Financial liabilities:
Deposits		579,467		-		-		581,844
Short-term repurchase agreements		1,345		-		1,345		-
Borrowings from FHLB		121,633		-		123,794		-
Accrued interest payable		195		-		195		-
Advance payments by borrowers for taxes and insurance		1,014		-		1,014		-

September 30, 2015:
Financial assets:
Cash and due from banks	$	9,884	$	9,884	$	-	$	-
Interest-bearing deposits with banks		15,110		15,110		-		-
Interest-bearing time deposits		3,100		-		3,099		-
Trading account securities		9,044		-		9,044		-
Securities available for sale		178,328		-		178,328		-
Securities held to maturity		4,620		-		5,191		-

Loans, net		457,112		-		-		456,331

Loans held for sale		6,803		-		6,803		-
FRB and FHLB stock		6,720		-		6,720		-
Accrued interest receivable		2,655		-		2,655		-
Investment in historic tax credit entity (included in other assets)		4,169		-		4,169		-

Financial liabilities:
Deposits		533,297		-		-		536,121
Short-term repurchase agreements		1,342		-		1,342		-
Borrowings from FHLB		104,867		-		106,446		-
Other long-term debt		4,632		-		4,632		-
Accrued interest payable		186		-		186		-
Advance payments by borrowers for taxes and insurance		883		-		883		-

The carrying amounts in the preceding table are included in the consolidated balances sheets under the applicable captions. The contract or notional amounts of the Bank’s financial instruments with off-balance-sheet risk are disclosed in Note 19, and the fair value of these instruments is considered immaterial.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate:

Cash and Cash Equivalents

For cash and short-term instruments, including cash and due from banks, interest-bearing deposits with banks with original maturities of 90 days or less and money market funds, the carrying amount is a reasonable estimate of fair value.

Investments and Interest-Bearing Time Deposits

For debt securities and interest-bearing time deposits, the Company obtains fair value measurements from an independent pricing service and the fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors. For FRB and FHLB stock, which are restricted equity securities, the carrying amount is a reasonable estimate of fair value because the stock is not marketable.

Loans

The fair value of loans, excluding loans held for sale, is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and terms. Impaired loans are valued at the lower of their carrying value or fair value. The carrying amount of accrued interest receivable approximates its fair value.

The fair value of loans held for sale is estimated based on specific prices of underlying contracts for sales to investors, as previously discussed.

Other Assets

For equity method investments, such as the Company’s investment in the historic tax credit entity, where a quoted market value is not available, the carrying amount is a reasonable estimate of fair value. However, subsequent to the recognition of the historic tax credits (as discussed in Note 6), management has determined that its investment in the historic tax credit entity has no residual value and therefore has recorded an impairment loss for the amount of the investment as of September 30, 2016.

The fair value of loan serving rights is determined by a valuation model employed by an independent third party using market-based discount rate and prepayment assumptions, as previously described.

Deposits

The fair value of demand and savings deposits and other transaction accounts is the amount payable on demand at the balance sheet date. The fair value of fixed-maturity time deposits is estimated by discounting the future cash flows using the rates currently offered for deposits with similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.

Borrowed Funds

Borrowed funds include borrowings from the FHLB, repurchase agreements and other long-term debt. Fair value for FHLB advances and long-term repurchase agreements is estimated by discounting the future cash flows at current interest rates for FHLB advances of similar maturities. For short-term repurchase agreements, FHLB line of credit borrowings and other debt, the carrying value is a reasonable estimate of fair value.