Fair Value

6 Months Ended

Jun. 30, 2024

Fair Value

Fair Value

11.  Fair Value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. A description of the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial and non-financial instruments not recorded at fair value, is set forth below.

Cash and Cash Equivalents

The carrying amount is a reasonable estimate of fair value.

Available for Sale Securities

Where quoted prices are available in an active market for identical securities, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include marketable equity securities and U.S. Treasury obligations. If quoted prices are not available, then fair values are estimated by using pricing models (i.e., matrix pricing) or quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. Examples of such instruments include government agency bonds, mortgage-backed securities and municipal bonds. Level 3 securities include securities for which significant unobservable inputs are utilized. Available for sale securities are recorded at fair value on a recurring basis.

FHLB Stock

The carrying value of FHLB stock approximates fair value based on the redemption provisions of the FHLB.

Loans

Loans receivable are carried at cost. For variable rate loans, which reprice frequently, carrying values are a reasonable estimate of fair values adjusted for credit losses inherent in the portfolios. The fair value of fixed rate loans is estimated by discounting the future cash flows using the year end rates, estimated using local market data, at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, adjusted for credit losses inherent in the portfolios. The Company does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent individually analyzed loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of collateral.

Other Real Estate Owned

Other real estate owned represents real estate acquired through foreclosure and is carried at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. These assets are included as Level 3 fair values, based upon the lowest level of input that is utilized in the fair value measurements.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

Mortgage Servicing Rights

The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated future net servicing income. Mortgage servicing rights are carried at the lower of amortized cost or estimated fair value and are included in other assets on the consolidated statements of financial condition.

Deposits

Deposit liabilities are carried at cost. The fair value of NOW, savings and money market deposits is the amount payable on demand at the reporting date. The fair value of time certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities estimated using local market data to a schedule of aggregated expected maturities on such deposits.

Mortgagors’ Escrow Accounts

The fair value is estimated using a discounted cash flow calculation that applies interest rates currently being offered on deposited escrow accounts of similarly expected maturities.

Advances from the FHLB

The fair value of the advances is estimated using a discounted cash flow calculation that applies current FHLB interest rates for advances of similar maturity to a schedule of maturities of such advances.

Subordinated Debt

Based on the floating rate characteristic of these instruments, the carrying value is considered to approximate fair value.

Off-Balance-Sheet Instruments

Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standings. Such amounts are not significant.

Loan Level Interest Rate Swaps

The fair value is based on settlement values adjusted for credit risks associated with the counterparties and the Company and observable market interest rate curves.

The following tables detail the assets that are carried at fair value on a recurring basis as of the periods shown and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

			Quoted Prices in
			Active Markets		Significant		Significant
			for Identical		Observable		Unobservable
	Balance		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)
	June 30, 2024
Assets:
U.S. Treasury securities	$	14,304	$	14,304	$	—	$	—
U.S. government agency mortgage-backed securities-residential		120,672		—		120,672		—
U.S. government agency securities		23,277		—		23,277		—
Municipal securities		2,462		—		2,347		115
Corporate bonds		12,861		—		12,861		—
Other		676		—		676		—
Total available for sale securities		174,252		14,304		159,833		115
Loan level interest rate swaps		6,438		—		6,438		—
Total assets	$	180,690	$	14,304	$	166,271	$	115
Liabilities:
Loan level interest rate swaps	$	6,438	$	—	$	6,438	$	—
Total liabilities	$	6,438	$	—	$	6,438	$	—

	December 31, 2023
Assets:
U.S. Treasury securities	$	24,006	$	24,006	$	—	$	—
U.S. government agency mortgage-backed securities – residential		128,580		—		128,580		—
U.S. government agency securities		23,158		—		23,158		—
Municipal securities		2,903		—		2,788		115
Corporate bonds		12,640		—		12,640		—
Other		698		—		698		—
Total available for sale securities		191,985		24,006		167,864		115
Loan level interest rate swaps		6,278		—		6,278		—
Total assets	$	198,263	$	24,006	$	174,142	$	115
Liabilities:
Loan level interest rate swaps	$	6,278	$	—	$	6,278	$	—
Total liabilities	$	6,278	$	—	$	6,278	$	—

The following tables detail the assets carried at fair value and measured at fair value on a nonrecurring basis as of  June 30, 2024 and December 31, 2023, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

			Quoted Prices in
			Active Markets		Significant		Significant
			for Identical		Observable		Unobservable
	Balance		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)
	June 30, 2024
Individually analyzed loans, with specific reserves	$	368	$	—	$	—	$	368
Total	$	368	$	—	$	—	$	368

	December 31, 2023
Individually analyzed loans, with specific reserves	$	758	$	—	$	—	$	758
Other real estate owned		25		—		—		25
Total	$	783	$	—	$	—	$	783

Loans that were individually analyzed using the fair value of the collateral had recorded investments of $565 and $973 with valuation allowances of $197 and $215 and fair values of $368 and $758 at June 30, 2024 and December 31, 2023, respectively. The valuation allowance represents specific allocations to the allowance for credit losses.

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

	Quantitative Information About Level 3 Fair Value Measurements
	Fair Value		Valuation		Unobservable		Range
	Estimate		Techniques		Input		(Weighted Average)
	June 30, 2024
Individually analyzed loans, with specific reserves	$	368	Appraisal of collateral	(1)	Liquidation expenses	(3)	0% to 8%
					Appraisal adjustments	(2)	0% to 20%
	December 31, 2023
Individually analyzed loans, with specific reserves	$	758	Appraisal of collateral	(1)	Liquidation expenses	(3)	0% to 8%
					Appraisal adjustments	(2)	0% to 20%
Other real estate owned		25	Appraisal of collateral	(1)	Liquidation expenses	(3)	0% to 6%
					Appraisal adjustments	(2)	0% to 20%

(1) Fair value is generally through independent appraisals of the underlying collateral that generally include various level 3 inputs which are not identifiable.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraised value.

(3) Estimated costs to sell.

The estimated fair value amounts for 2024 and 2023 have been measured as of their respective reporting dates and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than amounts reported at each year-end.

The information presented should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a limited portion of the Company’s assets and liabilities. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

As of the following dates, the carrying value and fair values of the Company’s financial instruments were:

	June 30,				December 31,
	2024				2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Cash and cash equivalents (Level 1)	$	34,438	$	34,438	$	22,129	$	22,129
Available for sale securities (Level 1)		14,304		14,304		24,006		24,006
Available for sale securities (Level 2)		159,833		159,833		167,864		167,864
Available for sale securities (Level 3)		115		115		115		115
Loan level interest rate swaps (Level 2)		6,438		6,438		6,278		6,278
FHLB stock (Level 2)		4,410		4,410		6,514		6,514
Loans, net (Level 3)		982,392		955,608		1,008,851		979,037
Accrued interest receivable (Level 2)		4,501		4,501		4,616		4,616
Mortgage servicing rights (Level 3)		1,782		4,398		1,977		4,720
Financial Liabilities:
Deposits (Level 2)		1,031,949		960,780		1,030,503		948,140
Mortgagors' escrow accounts (Level 2)		12,028		12,028		9,274		9,274
FHLB advances (Level 2)		79,773		78,680		128,064		127,592
Subordinated debt (Level 2)		5,155		5,155		5,155		5,155
Loan level interest rate swaps (Level 2)		6,438		6,438		6,278		6,278
Accrued interest payable (Level 2)		1,351		1,351		1,488		1,488