FAIR VALUE OF ASSETS AND LIABILITIES

3 Months Ended

Sep. 30, 2022

11.

FAIR VALUE OF ASSETS AND LIABILITIES

Determination of fair value

The Bank uses fair value measurements to record fair value adjustments to certain assets. Fair value is 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. Fair value is best determined based upon quoted market prices. However, in some instances, quoted market prices may not be available. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques, including collateral value. Those techniques are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value hierarchy

The Bank groups its assets that are measured 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.

Level 1 – Valuation is based on quoted prices in active exchange markets for identical assets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuation is based on 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 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Assets and liabilities measured at fair value on a recurring basis

At September 30, 2022 and June 30, 2022, securities available for sale were measured at Level 2 with a fair value of $183,000 and $199,000, respectively. All fair value measurements are obtained from a third-party pricing service and are not adjusted by management. Securities measured at fair value in Level 2 are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. There are no securities measured at fair value in Levels 1 and 3.

There are no liabilities measured at fair value on a recurring basis at September 30, 2022 or June 30, 2022.

Assets and liabilities measured at fair value on a non-recurring basis

The Bank may also be required, from time to time, to measure certain other financial assets on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There are no assets or liabilities measured at fair value on a non-recurring basis at September 30, 2022 or June 30, 2022.

The following table summarizes financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and June 30, 2022.


	September 30, 2022
(In thousands)	Carrying Value		Level 1		Fair Value Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	15,741	$	15,741	$	-	$	-	$	15,741
Securities available for sale		183		-		183		-		183
Securities held to maturity		152,141		-		133,775		-		133,775
Federal Home Loan Bank of Boston stock		191		-		-		191		191
Loans - net		175,245		-		-		159,301		159,301
Accrued interest receivable		1,306		-		-		1,306		1,306
Liabilities:
Deposits		280,052		-		-		256,139		256,139


	June 30, 2022
(In thousands)	Carrying Value		Level 1		Fair Value Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	31,667	$	31,667	$	-	$	-	$	31,667
Securities available for sale		199		-		199		-		199
Securities held to maturity		145,239		-		133,593		-		133,593
Federal Home Loan Bank of Boston stock		191		-		-		191		191
Loans - net		172,593		-		-		161,098		161,098
Accrued interest receivable		1,265		-		-		1,265		1,265
Liabilities:
Deposits		287,075		-		-		268,039		268,039

- 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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