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FAIR VALUE | 6 Months Ended
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Mar. 31, 2022
FAIR VALUE |
FAIR VALUE | 8. FAIR VALUE FASB ASC No. 820-10 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. Fair value is best determined using quoted market prices. However, in many instances, quoted market prices are not available. In such instances, fair values are determined using appropriate valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. Accordingly, categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As such, the fair value estimates may not be realized in an immediate transfer of the respective asset or liability. FASB ASC 820-10 also establishes a fair value hierarchy and describes three levels of inputs that may be used to measure fair values: The three levels within the fair value hierarchy are as follows:
| ● | Level 1: Valuation is based upon unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
| ● | Level 2: Fair value is calculated using significant inputs other than quoted market prices that are directly or indirectly observable for the asset or liability. The valuation may rely on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, rate volatility, prepayment speeds, credit ratings,) or inputs that are derived principally or corroborated by market data, by correlation, or other means.
| ● | Level 3: Inputs for determining the fair value of the respective assets or liabilities are not observable. Level 3 valuations are reliant upon pricing models and techniques that require significant management judgment or estimation.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. Assets Measured at Fair Value on a Recurring Basis The following presents fair value measurements on a recurring basis at March 31, 2022 and September 30, 2021:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2022
​ | ​ | ​ | ​ | Fair Value Measurements Using:
​ | ​ | ​ | ​ | Quoted Prices In | ​ | ​ | ​ | Significant
​ |  | ​ |  | Active Markets |  | Significant Other |  | Unobservable
​ | ​ | Carrying | ​ | for Identical Assets | ​ | Observable Inputs | ​ | Inputs
(In thousands) | ​ | Amount | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
Financial assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available-for-sale securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. GSE residential mortgage-backed securities | ​ | $ | 410 | ​ | $ | — | ​ | $ | 410 | ​ | $ | —
Corporate bonds | ​ |  | 4,660 | ​ |  | — | ​ |  | 4,660 | ​ |  | —
Mortgage servicing rights | ​ |  | 4,028 | ​ |  | — | ​ |  | — | ​ |  | 4,028
Total | ​ | $ | 9,098 | ​ | $ | — | ​ | $ | 5,070 | ​ | $ | 4,028
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2021
​ | ​ | ​ | ​ | Fair Value Measurements Using:
​ | ​ | ​ | ​ | Quoted Prices In | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Active Markets | ​ | ​ | ​ | Significant
​ |  | ​ |  | for Identical |  | Significant Other |  | Unobservable
​ | ​ | Carrying | ​ | Assets | ​ | Observable Inputs | ​ | Inputs
(In thousands) | ​ | Amount | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
Financial assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Available-for-sale securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. GSE residential mortgage-backed securities | ​ | $ | 833 | ​ | $ | — | ​ | $ | 833 | ​ | $ | —
Corporate bonds | ​ |  | 6,914 | ​ |  | — | ​ |  | 6,914 | ​ |  | —
Mortgage servicing rights | ​ |  | 3,690 | ​ |  | — | ​ |  | — | ​ |  | 3,690
Total | ​ | $ | 11,437 | ​ | $ | — | ​ | $ | 7,747 | ​ | $ | 3,690
​ The fair value for the securities available-for-sale were obtained from an independent broker based upon matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. The Company has determined these are classified as Level 2 inputs within the fair value hierarchy. The fair value of mortgage servicing rights are based on a valuation model that calculates the present value of estimated future servicing income. The valuation model utilizes interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future net servicing income. Fair value of loan servicing rights related to residential mortgage loans at March 31, 2022 was determined based on discounted expected future cash flows using discount rates ranging from 12.0% to 14.5%, a prepayment speed of 26.25% and a weighted average life ranging from 1.73 to 3.02 years. Fair value at September 30, 2021 for mortgage servicing rights was determined based on discounted expected future cash flows using discount rates ranging from 12.0% to 14.5%, prepayment speeds ranging from 24.18% to 24.33% and a weighted average life ranging from 1.96 to 3.30 years. The fair value of loan servicing rights for SBA loans at March 31, 2022 was determined based on discounted expected future cash flows using discount rates ranging from 1.33% to 22.68%, prepayment speeds ranging from 9.23% to 23.63% and a weighted average life ranging from 0.16 to 5.91 years. The Company has determined these are mostly unobservable inputs and considers them Level 3 inputs within the fair value hierarchy. The following table presents the changes in mortgage servicing rights for the periods presented:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended March 31, |  | Six Months Ended March 31,
(in thousands) |  | 2022 |  | 2021 | ​ | 2022 |  | 2021
Balance, October 1 | ​ | $ | 3,741 | ​ | $ | 144 |  | $ | 3,690 | ​ | $ | 155
Additions | ​ |  | 405 | ​ |  | — | ​ |  | 573 | ​ |  | —
Adjustment to fair value | ​ |  | (118) | ​ |  | (14) | ​ |  | (235) | ​ |  | (25)
Balance, March 31 | ​ | $ | 4,028 | ​ | $ | 130 | ​ | $ | 4,028 | ​ | $ | 130
​ Assets Measured at Fair Value on a Non-recurring Basis The Company had no financial instruments measured at fair value on a non-recurring basis at March 31, 2022 and September 30, 2021. The Company’s impaired loans had no related specific allowances recorded at March 31, 2022 and September 30, 2021. Financial Instruments Not Measured at Fair Value The following presents the carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value at March 31, 2022 and September 30, 2021:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2022
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using: | ​ | ​
​ |  |  | ​ |  | Quoted Prices In |  |  | ​ |  |  | ​ |  |  | ​
​ | ​ | ​ | ​ | ​ | Active Markets | ​ | ​ | ​ | ​ | Significant | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | for Identical | ​ | Significant Other | ​ | Unobservable | ​ | ​ | ​
​ | ​ | Carrying | ​ | Assets | ​ | Observable Inputs | ​ | Inputs | ​ | Total Fair
(In thousands) | ​ | Amount | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3) | ​ | Value
Financial assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | $ | 127,140 | ​ | $ | 127,140 | ​ | $ | — | ​ | $ | — | ​ | $ | 127,140
Securities held-to-maturity | ​ |  | 4,629 | ​ |  | — | ​ |  | 4,581 | ​ |  | — | ​ |  | 4,581
Securities available-for-sale | ​ |  | 5,070 | ​ |  | — | ​ |  | 5,070 | ​ |  | — | ​ |  | 5,070
Loans, net | ​ |  | 1,279,155 | ​ |  | — | ​ |  | — | ​ |  | 1,260,283 | ​ |  | 1,260,283
FHLB stock | ​ |  | 3,612 | ​ |  | N/A | ​ |  | N/A | ​ |  | N/A | ​ |  | N/A
Accrued interest receivable | ​ |  | 7,894 | ​ |  | — | ​ |  | 105 | ​ |  | 7,789 | ​ |  | 7,894
Financial Liabilities: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Time deposits | ​ |  | 286,247 | ​ |  | — | ​ |  | 282,653 | ​ |  | — | ​ |  | 282,653
Demand and other deposits | ​ |  | 943,995 | ​ |  | 943,995 | ​ |  | — | ​ |  | — | ​ |  | 943,995
Borrowings | ​ |  | 75,823 | ​ |  | — | ​ |  | 76,057 | ​ |  | — | ​ |  | 76,057
Subordinated debentures | ​ |  | 24,541 | ​ |  | — | ​ |  | 24,666 | ​ |  | — | ​ |  | 24,666
Accrued interest payable | ​ |  | 980 | ​ |  | 1 | ​ |  | 979 | ​ |  | — | ​ |  | 980
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2021
​ | ​ | ​ | ​ | ​ | Fair Value Measurements Using: | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Quoted Prices In | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Active Markets | ​ | ​ | ​ | ​ | Significant | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | for Identical | ​ | Significant Other | ​ | Unobservable | ​ | ​ | ​
​ | ​ | Carrying | ​ | Assets | ​ | Observable Inputs | ​ | Inputs | ​ | Total Fair
(In thousands) | ​ | Amount | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3) | ​ | Value
Financial assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents |  | $ | 166,544 |  | $ | 166,544 |  | $ | — |  | $ | — |  | $ | 166,544
Securities held-to-maturity | ​ |  | 8,611 | ​ |  | — | ​ |  | 8,865 | ​ |  | — | ​ |  | 8,865
Securities available-for-sale | ​ |  | 7,747 | ​ |  | — | ​ |  | 7,747 | ​ |  | — | ​ |  | 7,747
Loans, net | ​ |  | 1,238,573 | ​ |  | — | ​ |  | — | ​ |  | 1,278,056 | ​ |  | 1,278,056
FHLB stock | ​ |  | 3,714 | ​ |  | N/A | ​ |  | N/A | ​ |  | N/A | ​ |  | N/A
Accrued interest receivable | ​ |  | 9,363 | ​ |  | — | ​ |  | 211 | ​ |  | 9,152 | ​ |  | 9,363
Financial Liabilities: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Time deposits | ​ |  | 377,836 | ​ |  | — | ​ |  | 378,333 | ​ |  | — | ​ |  | 378,333
Demand and other deposits | ​ |  | 786,826 | ​ |  | 786,826 | ​ |  | — | ​ |  | — | ​ |  | 786,826
Borrowings | ​ |  | 159,642 | ​ |  | — | ​ |  | 159,608 | ​ |  | — | ​ |  | 159,608
Subordinated debentures | ​ | ​ | 24,513 | ​ | ​ | — | ​ | ​ | 27,092 | ​ | ​ | — | ​ | ​ | 27,092
Accrued interest payable | ​ |  | 1,290 | ​ |  | 1 | ​ |  | 713 | ​ |  | 576 | ​ |  | 1,290
​

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- References No definition available. + Details
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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 http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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