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FAIR VALUE DISCLOSURES
 9 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
FAIR VALUE DISCLOSURES

NOTE F – FAIR VALUE DISCLOSURES

 

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The securities available-for-sale and the Company’s derivative assets and liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity securities, mortgage servicing rights, loans receivable and OREO. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets.

 

In accordance with ASC 820, the Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

  Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.
     
  Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.
     
  Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

 

The Company based its fair values on 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. ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

The following is a description of valuation methodologies used for assets measured at fair value on a recurring basis.

 

Securities available-for-sale

The securities available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. The securities available-for-sale portfolio consists of U.S. government-sponsored mortgage-backed securities. The fair values of these securities are obtained from an independent nationally recognized pricing service. An independent pricing service provides the Company with prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities in the Company’s portfolio. Various modeling techniques are used to determine pricing for Company’s mortgage-backed securities, including option pricing and discounted cash flow models. The inputs to these models include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.

 

Derivatives

The Bank executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. The fair values of such derivatives are based on valuation models from a third party using current market terms (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counter party as of the measurement date (Level 2).

 

The following tables provide the level of valuation assumptions used to determine the carrying value of the Company’s assets measured at fair value on a recurring basis.

 

   Fair Value on a Recurring Basis 
   Total   Level 1   Level 2   Level 3 
   (In thousands) 
June 30, 2025                    
Assets:                    
Securities available for sale:                    
Obligations of U.S. government agencies:                    
Mortgage-backed securities - residential  $82   $
—
   $82   $
—
 
Obligations of U.S. government-sponsored enterprises:                    
Mortgage-backed securities-residential   14,876    
—
    14,876    
—
 
Corporate securities   6,646    
—
    6,646    
—
 
Total securities available for sale  $21,604   $
—
   $21,604   $
—
 
Derivative assets   977    
—
    977    
—
 
Total assets  $22,581   $
—
   $22,581   $
—
 
Liabilities:                    
Derivative liabilities  $977   $
—
   $977   $
—
 
Total liabilities  $977   $
—
   $977   $
—
 
   Fair Value on a Recurring Basis 
   Total   Level 1   Level 2   Level 3 
   (In thousands) 
September 30, 2024                    
Assets:                    
Securities available for sale:                    
Obligations of U.S. government agencies:                    
Mortgage-backed securities - residential  $89   $
—
   $89   $
—
 
Obligations of U.S. government-sponsored enterprises:                    
Mortgage-backed securities-residential   11,506    
—
    11,506    
—
 
Corporate securities   4,021    
—
    4,021    
—
 
Total securities available for sale  $15,616   $
—
   $15,616   $
—
 
Derivative assets   1,405    
—
    1,405    
—
 
Total assets  $17,021   $
—
   $17,021   $
—
 
Liabilities:                    
Derivative liabilities  $1,405   $
—
   $1,405   $
—
 
Total liabilities  $1,405   $
—
   $1,405   $
—
 

 

The following is a description of valuation methodologies used for assets measured at fair value on a non-recurring basis.

 

Other Real Estate owned

Other real estate owned is measured and reported at fair value based on the fair value of the underlying collateral.

 

The following tables provide the level of valuation assumptions used to determine the carrying value of the other real estate owned measured at fair value on a non-recurring basis at June 30, 2025 and September 30, 2024.

 

   Total   Level 1   Level 2   Level 3 
June 30, 2025  (In thousands) 
Other real estate owned  $2,167    
—
    
—
   $2,167 
Total  $2,167   $
—
   $
—
   $2,167 
                     

 

   Total   Level 1   Level 2   Level 3 
September 30, 2024  (In thousands) 
Other real estate owned  $1,501    
—
    
—
   $1,501 
Total  $1,501   $
—
   $
—
   $1,501 

 

The following tables present additional quantitative information about assets measured at fair value on a non-recurring basis and for which Company has utilized Level 3 inputs to determine fair value:

 

Quantitative Information about Level 3 Fair Value Measurements
(Dollars in thousands)
                
   Fair Value   Valuation        
June 30, 2025  Estimate   Techniques   Unobservable Input  Range (Weighted Average) 
                   
Other real estate owned  $2,167    Appraisal   Liquidation expenses (1)   -1.5% to -1.5% (-1.5%) 

 

Quantitative Information about Level 3 Fair Value Measurements
(Dollars in thousands)
                
   Fair Value   Valuation        
September 30, 2024  Estimate   Techniques   Unobservable Input  Range (Weighted Average) 
                   
Other real estate owned  $1,501    Appraisal   Liquidation expenses (1)   -13.0% to -19.6% (-14.6%) 
(1)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

 

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments carried at cost or amortized cost as of June 30, 2025 and September 30, 2024.  For short-term financial assets such as cash and cash equivalents and accrued interest receivable, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as interest-bearing demand, NOW, and money market savings deposits, the carrying amount is a reasonable estimate of fair value due to these products being payable on demand and having no stated maturity. The Company’s bank-owned life insurance is not a marketable asset and may generally only be redeemed with the insurance company and, therefore, is not included in the table below.

 

   Carrying   Fair   Fair Value Measurement Placement 
   Value   Value   (Level 1)   (Level 2)   (Level 3) 
   (In thousands) 
June 30, 2025                         
Financial instruments - assets                         
Investment securities held to maturity  $69,520   $62,591   $
—
   $62,591   $
—
 
Loan receivable net allowance for credit losses   835,932    838,336    
—
    
—
    838,336 
                          
Financial instruments - liabilities                         
Certificates of deposit including retirement certificates   180,523    179,819    
—
    179,819    
—
 
Borrowings   36,054    35,409    
—
    35,409    
—
 
                          
September 30, 2024                         
Financial instruments - assets                         
Investment securities held to maturity  $79,816   $72,617   $
—
   $72,617   $
—
 
Loan receivable net allowance for credit losses   772,614    766,822    
—
    
—
    766,822 
                          
Financial instruments - liabilities                         
Certificates of deposit including retirement certificates   159,652    159,582    
—
    159,582    
—
 
Borrowings   28,568    28,151    
—
    28,151    
—