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Disclosures About Fair Value of Assets

6 Months Ended

Dec. 31, 2023

Note 13: Disclosures About Fair Value of Assets

Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices in active markets for identical assets

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets; 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

Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets

Recurring Measurements

The following table presents 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, 2023 and June 30, 2023:


	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2023:
Available-for-sale securities:
U.S. Treasury	$	447	$	447	$	—	$	—
U.S. Government and federal agency and Government sponsored enterprises (GSE’s)		6,584		—		6,584		—
Mortgage-backed: GSE residential		172,893		—		172,893		—
Small Business Administration		14,654		—		14,654		—
State and political subdivisions		5,352		—		3,294		2,058
Mortgage servicing rights		1,410		—		—		1,410


	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2023:
Available-for-sale securities:
U.S. Treasury	$	438	$	—	$	438	$	—
U.S. Government and federal agency and Government sponsored enterprises (GSE’s)		6,477		—		6,477		—
Mortgage-backed: GSE residential		175,726		—		175,726		—
Small Business Administration		15,233		—		15,233		—
State and political subdivisions		3,425		—		1,064		2,361
Mortgage servicing rights		1,482		—		—		1,482

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 condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the period ended December 31, 2023. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

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 pricing models, quoted prices of securities with similar characteristics or discounted cash flows. For these investments, the inputs used by the pricing service to determine fair value may include one, or a combination of, observable inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads,

two-sided

markets, benchmark securities, bid, offers and reference data market research publications and are classified within Level 2 of the valuation hierarchy. Level 2 securities include U.S. Treasury, U.S. Government and federal agency, mortgage-backed securities (GSE—residential), Small Business Administration and state and political subdivisions. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

Level 3 Reconciliation

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs:


Six months ended December 31, 2023
	Obligations of State and Political Subdivisions			Mortgage Servicing Rights			Total
Beginning balance	$	2,361		$	1,482		$	3,843
Transfers into Level 3		—			64			64
Transfers out of Level 3		—			(75	)		(75	)
Total realized and unrealized gains and losses included in net income		—			(61	)		(61	)
Purchases		—			—			—
Sales		—			—			—
Settlements		(303	)		—			(303	)

Ending balance	$	2,058		$	1,410		$	3,468

Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—		$	(61	)	$	(61	)


Year ended June 30, 2023
	Obligations of State and Political Subdivisions			Mortgage Servicing Rights			Total
Beginning balance	$	2,662		$	1,463		$	4,125
Transfers into Level 3		—			89			89
Transfers out of Level 3		—			(171	)		(171	)
Total realized and unrealized gains and losses included in net income		—			101			101
Purchases		—			—			—
Sales		—			—			—
Settlements		(301	)		—			(301	)

Ending balance	$	2,361		$	1,482		$	3,843

Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—		$	101		$	101

Realized and unrealized gains and losses for items reflected in the table above are included in net income in the consolidated statements of income as noninterest income.

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at December 31, 2023 and June 30, 2023.


	Fair Value at December 31, 2023		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Mortgage servicing rights	$	1,410	Discounted cash flow	Discount rate	9.5% (9.5%)
				Constant prepayment rate	6.1% - 7.5% (7.2%)
				Probability of default	0.10% - 0.14% (0.12%)
State and political subdivision		2,058	Discounted cash flow	Maturity/Call Date	1 month – 8 years
				Weighted average coupon	2.97% - 3.08% (3.03%)
				Marketability yield adjustment	1.0% - 2.0% (1.6%)


	Fair Value at June 30, 2023		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Mortgage servicing rights	$	1,482	Discounted cash flow	Discount rate	9.5% (9.5%)
				Constant prepayment rate	6.0% - 7.0% (6.9%)
				Probability of default	0.09% - 0.12% (0.12%)
State and political subdivision		2,361	Discounted cash flow	Maturity/Call Date	1 month – 9 years
				Weighted average coupon	2.97% - 3.08% (3.03%)
				Marketability yield adjustment	1.0% - 2.0% (1.6%)

Fair Value of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2023 and June 30, 2023.


	Carrying Amount		Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2023:
Financial assets
Cash and cash equivalents	$	8,169	$	8,169	$	—	$	—
Interest-bearing time deposits in banks		750		750		—		—
Loans, net of allowance for loan losses		653,549		—		—		629,305
Federal Home Loan Bank stock		5,419		—		5,419		—
Accrued interest receivable		3,758		—		3,758		—
Financial liabilities
Deposits		678,045		—		359,980		317,804
Repurchase agreements		16,040		—		16,040		—
Federal Home Loan Bank advances		98,050		—		98,145		—
Other borrowings		34,375		—		34,450
Advances from borrowers for taxes and insurance		1,235		—		1,235		—
Accrued interest payable		2,849		—		2,849		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—


	Carrying Amount		Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2023:
Financial assets
Cash and cash equivalents	$	10,988	$	10,988	$	—	$	—
Interest-bearing time deposits in banks		1,250		1,250		—		—
Loans, net of allowance for loan losses		587,457		—		—		564,432
Federal Home Loan Bank stock		3,127		—		3,127		—
Accrued interest receivable		2,781		—		2,781		—
Financial liabilities
Deposits		735,314		—		451,718		282,351
Repurchase agreements		10,787		—		10,787		—
Federal Home Loan Bank advances		19,500		—		19,382		—
Advances from borrowers for taxes and insurance		1,233		—		1,233		—
Accrued interest payable		1,666		—		1,666		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—

The methods utilized to measure the fair value of financial instruments at December 31, 2023, represent an approximation of exit price; however, an actual exit price may differ.

- 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.

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