XML 44 R31.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

12 Months Ended

Sep. 30, 2021

Fair value is defined under GAAP as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of three levels. These levels are:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2: Significant observable inputs other than quoted prices included within Level 1, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability based on the best information available in the circumstances.

The Company's assets measured at fair value on a recurring basis consist of investment securities available for sale and investments in equity securities. The estimated fair values of MBS are based upon market prices of similar securities or observable inputs (Level 2). The estimated fair values of mutual funds are based upon quoted market prices (Level 1).

The Company had no liabilities measured at fair value on a recurring basis at September 30, 2021 and 2020. The Company's assets measured at estimated fair value on a recurring basis at September 30, 2021 and 2020 are as follows (dollars in thousands):


	Estimated Fair Value
September 30, 2021	Level 1		Level 2		Level 3		Total
Available for sale investment securities

MBS: U.S. government agencies	$	—	$	63,176	$	—	$	63,176

Investments in equity securities
Mutual funds	955		—		—		955
Total	$	955	$	63,176	$	—	$	64,131



September 30, 2020
Available for sale investment securities

MBS: U.S. government agencies	$	—	$	57,907	$	—	$	57,907

Investments in equity securities
Mutual funds	977		—		—		977
Total	$	977	$	57,907	$	—	$	58,884

There were no transfers among Level 1, Level 2 and Level 3 during the years ended September 30, 2021 and 2020.

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period.

The Company uses the following methods and significant assumptions to estimate fair value on a non-recurring basis:

Impaired Loans: The estimated fair value of impaired loans is calculated using the collateral value method or on a discounted cash flow basis. The specific reserve for collateral dependent impaired loans is based on the estimated fair value of the collateral less estimated costs to sell, if applicable. In some cases, adjustments are made to the appraised values due to various factors including age of the appraisal, age of comparables included in the appraisal and known changes in the market and in the collateral. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Investment Securities Held to Maturity: The estimated fair value of investment securities held to maturity is based upon the assumptions market participants would use in pricing the investment security. Such assumptions include quoted market prices (Level 1), market prices of similar securities or observable inputs (Level 2) and unobservable inputs such as dealer quotes, discounted cash flows or similar techniques (Level 3).

OREO and Other Repossessed Assets, net: OREO and other repossessed assets are recorded at estimated fair value less estimated costs to sell. Estimated fair value is generally determined by management based on a number of factors, including third-party appraisals of estimated fair value in an orderly sale. Estimated costs to sell are based on standard market factors. The valuation of OREO and other repossessed assets is subject to significant external and internal judgment (Level 3).

The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at September 30, 2021 (dollars in thousands):


	Estimated Fair Value
Impaired loans:	Level 1		Level 2		Level 3
Mortgage loans:




Land	$	—	$	—	$	286



Commercial business loans	—		—		123
Total impaired loans	—		—		409

Investment securities – held to maturity:
MBS - Private label residential	—		10		—
OREO and other repossessed assets	—		—		157
Total	$	—	$	10	$	566

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis as of September 30, 2021 (dollars in thousands):

Estimated Fair Value

Valuation Technique(s)

Unobservable Input(s)

Range

Impaired loans

409

Market approach

Appraised value less estimated selling costs

OREO and other repossessed assets

157

Market approach

Lower of appraised value or
listing price less estimated selling costs

The following table summarizes the balances of assets measured at estimated fair value on a non-recurring basis at September 30, 2020 (dollars in thousands):


	Estimated Fair Value
Impaired loans:	Level 1		Level 2		Level 3
Mortgage loans:
One- to four-family	$	—	$	—	$	481









Commercial business loans	—		—		210
Total impaired loans	—		—		691

Investment securities – held to maturity:
MBS - Private label residential	—		8		—
OREO and other repossessed assets	—		—		1,050
Total	$	—	$	8	$	1,741

Estimated Fair Value

Valuation Technique(s)

Unobservable Input(s)

Range

Impaired loans

691

Market approach

Appraised value less estimated selling costs

OREO and other repossessed assets

1,050

Market approach

Lower of appraised value or
listing price less estimated selling costs

GAAP requires disclosure of estimated fair values for financial instruments. Such estimates are subjective in nature, and significant judgment is required regarding the risk characteristics of various financial instruments at a discrete point in time. Therefore, such estimates could vary significantly if assumptions regarding uncertain factors were to change. In addition, as the Company normally intends to hold the majority of its financial instruments until maturity, it does not expect to realize many of the estimated amounts disclosed. The disclosures also do not include estimated fair value amounts for certain items which are not defined as financial instruments but which may have significant value. The Company does not believe that it would be practicable to estimate a fair value for these types of items as of September 30, 2021 and 2020. Because GAAP excludes certain items from fair value disclosure requirements, any aggregation of the fair value amounts presented would not represent the underlying value of the Company. Additionally, the Company uses the exit price notion in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

The recorded amounts and estimated fair values of financial instruments were as follows as of September 30, 2021 (dollars in thousands):


					Fair Value Measurements Using:
	Recorded Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	580,196	$	580,196	$	580,196	$	—	$	—
CDs held for investment	28,482		28,482		28,482		—		—
Investment securities	132,278		133,286		28,670		104,616		—
Investments in equity securities	955		955		955		—		—
FHLB stock	2,103		2,103		2,103		—		—
Other investments	3,000		3,000		3,000		—		—
Loans held for sale	3,217		3,290		3,290		—		—
Loans receivable, net	968,454		981,905		—		—		981,905
Accrued interest receivable	3,745		3,745		3,745		—		—

Financial Liabilities
Certificates of deposit	134,129		135,178		—		—		135,178

Accrued interest payable	134		134		134		—		—

The recorded amounts and estimated fair values of financial instruments were as follows as of September 30, 2020 (dollars in thousands):


					Fair Value Measurements Using:
	Recorded Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	314,452	$	314,452	$	314,452	$	—	$	—
CDs held for investment	65,545		65,545		65,545		—		—
Investment securities	85,797		87,734		—		87,235		499
Investments in equity securities	977		977		977		—		—
FHLB stock	1,922		1,922		1,922		—		—
Other investments	3,000		3,000		3,000		—		—
Loans held for sale	4,509		4,664		4,664		—		—
Loans receivable, net	1,013,875		1,034,876		—		—		1,034,876
Accrued interest receivable	4,484		4,484		4,484		—		—

Financial Liabilities
Certificates of deposit	158,524		160,921		—		—		160,921

Accrued interest payable	274		274		274		—		—

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the estimated fair value of the Company’s financial instruments will change when interest rate levels change, and that change may either be favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to appropriately manage interest rate risk. However, borrowers with fixed interest rate obligations are less likely to prepay in a rising interest rate environment and more likely to prepay in a falling

interest rate environment. Conversely, depositors who are receiving fixed interest rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors interest rates and maturities of assets and liabilities, and attempts to manage interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

- 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 + Details