XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Disclosures About Fair Value of Assets and Liabilities
 3 Months Ended
Sep. 30, 2018
Disclosures About Fair Value of Assets and Liabilities [Abstract]  
Disclosures About Fair Value of Assets and Liabilities

5. Disclosures About Fair Value of Assets and Liabilities

 

ASC topic 820 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 (exit price) at the measurement date. ASC 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 that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

 

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. Level 2 securities include agency mortgage-backed securities and agency bonds.

 

Impaired Loans

 

At the time a loan is considered impaired, it is evaluated for loss based on the fair value of collateral securing the loan if the loan is collateral dependent. If a loss is identified, a specific allocation will be established as part of the allowance for loan losses such that the loan’s net carrying value is at its estimated fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral-dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

 

Other Real Estate

 

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

 

Financial assets measured at fair value on a recurring basis are summarized below:

 

          Fair Value Measurements Using  
(in thousands)   Fair Value     Quoted Prices in Active Markets for Identical Assets
(Level 1)		     Significant Other Observable Inputs
(Level 2)		     Significant Unobservable Inputs
(Level 3)		  
                         
September 30, 2018                                
Agency mortgage-backed: residential   $ 46     $ --     $ 46     $     --  
Agency bonds     500       --       500       --  
    $ 546     $ --     $ 546     $ --  
                                 
June 30, 2018                                
Agency mortgage-backed: residential   $ 48     $ --     $ 48     $ --  

 

Assets measured at fair value on a non-recurring basis are summarized below:

 

          Fair Value Measurements Using  
(in thousands)   Fair Value     Quoted Prices in Active Markets for Identical Assets
(Level 1)		     Significant Other Observable Inputs
(Level 2)		     Significant Unobservable Inputs
(Level 3)		  
                         
September 30, 2018                        
Loans                        
One- to four-family   $ 198     $           --     $              --     $ 198  
                                 
Other real estate owned, net                                
One- to four-family   $ 234     $ --     $ --     $ 234  
                                 
June 30, 2018                                
Loans                                
One- to four-family   $ 513     $ --     $ --     $ 513  
                                 
Other real estate owned, net                                
One- to four-family   $ 5     $ --     $ --     $ 5  

  

There were two impaired loans, which were measured using the fair value of the collateral for collateral-dependent loans, at September 30, 2018, and five impaired loans at June 30, 2018. There was a charge off of $10,000 made for the three month period ended September 30, 2018 and no charge off for the three month period ended September 30, 2017.

 

Other real estate owned measured at fair value less costs to sell, had carrying amounts of $234,000 and $5,000 at September 30, 2018 and June 30, 2018, respectively. Other real estate owned was written down $18,000 and zero during the three months ended September 30, 2018 and 2017, respectively.

 

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2018 and June 30, 2017:

 

                  Range
    Fair Value     Valuation   Unobservable   (Weighted
September 30, 2018   (in thousands)     Technique(s)   Input(s)   Average)
                   
Loans:                  
One- to four-family   $ 198     Sales comparison approach   Adjustments for differences between comparable sales   -11.6% to 2.4% (-3.2%)
                     
Foreclosed and repossessed assets:                    
One- to four-family   $ 234     Sales comparison approach   Adjustments for differences between comparable sales   28.5% to 45.8% (39.9%)

  

                  Range
    Fair Value     Valuation   Unobservable   (Weighted
June 30, 2018   (in thousands)     Technique(s)   Input(s)   Average)
                   
Loans:                  
One- to four-family   $ 513     Sales comparison approach   Adjustment for differences between comparable sales   -38.5% to 20.7% (-27.8%)
                     
Foreclosed and repossessed assets:                    
One- to four-family   $ 5     Sales comparison approach   Adjustments for differences between comparable sales   0.0% to 0.0% (0.0%)

  

The following is a disclosure of the fair value of financial instruments, both assets and liabilities, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. For financial instruments where quoted market prices are not available, fair values are based on estimates using present value and other valuation methods.

 

The methods used are greatly affected by the assumptions applied, including the discount rate and estimates of future cash flows. Therefore, the fair values presented may not represent amounts that could be realized in an exchange for certain financial instruments.

 

Based on the foregoing methods and assumptions, the carrying value and fair value of the Company’s financial instruments at September 30, 2018 and June 30, 2018 are as follows:

 

    Fair Value Measurements at  
(in thousands)   Carrying     September 30, 2018 Using  
    Value     Level 1     Level 2     Level 3     Total  
Financial assets                              
Cash and cash equivalents   $ 9,931     $ 9,931                     $ 9,931  
Time deposits in other financial institutions     4,952       4,896                       4,896  
Available-for-sale securities     546             $ 546               546  
Held-to-maturity securities     902               890               890  
Loans held-for-sale     110                       109       109  
Loans receivable - net     268,881                       266,192       266,192  
Federal Home Loan Bank stock     6,482                               n/a  
Accrued interest receivable     721               721               721  
                                         
Financial liabilities                                        
Deposits   $ 196,810     $ 75,315     $ 121,188               196,503  
Federal Home Loan Bank advances     50,014               49,994               49,994  
Advances by borrowers for taxes and insurance     1,039       1,039                       1,039  
Accrued interest payable     24               24               24  

  

          Fair Value Measurements at  
(in thousands)   Carrying     June 30, 2018 Using  
    Value     Level 1     Level 2     Level 3     Total  
Financial assets                              
Cash and cash equivalents   $ 9,943     $ 9,943                 $ 9,943  
Term deposits in other financial institutions     5,692       5,692                       5,692  
Available-for-sale securities     48             $ 48               48  
Held-to-maturity securities     1,002               998               998  
Loans receivable – net     270,310                     $ 271,295       271,295  
Federal Home Loan Bank stock     6,482                               n/a  
Accrued interest receivable     706               706               706  
                                         
Financial liabilities                                        
Deposits   $ 195,056     $ 75,163     $ 120,215             $ 195,378  
Federal Home Loan Bank advances     53,052               53,043               53,043  
Advances by borrowers for taxes and insurance     762               762               762  
Accrued interest payable     22               22               22