FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2025

FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS

11. FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Management uses its best judgment in estimating the fair value of the Company’s assets and liabilities; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all assets and liabilities, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of assets and liabilities subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

Accounting guidance establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1:   Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities.

Level 2:   Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3:   Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported with little or no market activity).

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used are as follows:

During the period, the Company transferred an investment security from Level 2 to Level 3 as a result of the lack of observable market inputs, which required the use of significant unobservable inputs to determine fair value. There were no securities transferred out of Level 2 securities available-for-sale during the twelve months ended December 31, 2024.

(In thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale Securities:
December 31, 2025:
U.S. Treasury securities	$	14,795	$	—	$	14,795	$	—
U.S. Government Agency securities		900		—		900		—
Municipal securities		13,527		—		13,379		148
Mortgage-backed securities and collateralized mortgage obligations		10,915		—		10,915		—
Corporate securities		8,498		—		8,498		—
	$	48,635	$	—	$	48,487	$	148
December 31, 2024:
U.S. Treasury securities	$	15,811	$	—	$	15,811	$	—
U.S. Government Agency securities		838		—		838		—
Municipal securities		14,281		—		14,281		—
Mortgage-backed securities and collateralized mortgage obligations		5,755		—		5,755		—
Corporate securities		9,799		—		9,799		—
	$	46,484	$	—	$	46,484	$	—

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31:

	Municipal Securities
(In thousands)	2025
Balance of recurring Level 3 assets at January 1	$	—
Transfers into Level 3		148
Balance of recurring Level 3 assets at December 31	$	148

Fair values are calculated using discounted cash flows. The valuation model utilizes the estimated future cash flows from the underlying creditor discounted using the original bond interest rate.

Required disclosures include fair value information about financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate, and estimates of future cash flows. In that regard, the fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Due to a 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. The following methods and assumptions were used to estimate the fair values of certain of the Company’s assets and liabilities at December 31, 2025 and 2024.

Cash and cash equivalents

The carrying amounts of these assets approximate their fair values.

Securities Available-For-Sale

The fair value of securities available-for-sale (carried at fair value) are determined by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather relying on the securities’ relationship to other benchmark quoted prices and is a Level 2 measurement.

Investment in FHLBNY Stock

The carrying value of FHLBNY stock approximates its fair value based on the redemption provisions of the FHLBNY stock, resulting in a Level 2 classification.

Investment in Federal Reserve Stock

The carrying value of Federal Reserve Bank stock approximates its fair value based on the redemption provisions of the Federal Reserve Bank stock, resulting in a Level 2 classification.

Loans, Net

The fair values of loans held in portfolio are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate risk inherent in the loans, resulting in a Level 3 classification. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments, and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Accrued Interest Receivable and Payable and Advances from Borrowers for Taxes and Insurance

The carrying amount approximates fair value.

Deposits

The fair values disclosed for demand deposits (e.g., NOW accounts, non-interest checking, regular savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts), resulting in a Level 1 classification. The carrying amounts for variable-rate certificates of deposit approximate their fair values at the reporting date, resulting in a Level 1 classification. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits, resulting in a Level 2 classification.

Advances and borrowings from FHLB

The fair values of FHLB long-term borrowings are estimated using discounted cash flow analyses, based on the quoted rates for new FHLB advances with similar credit risk characteristics, terms and remaining maturity, resulting in a Level 2 classification.

The carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2025 and 2024 are as follows:

	Carrying								Fair
(In thousands)	Amount		Level 1		Level 2		Level 3		Value
December 31, 2025:
Financial assets:
Cash and cash equivalents	$	5,328	$	5,328	$	—	$	—	$	5,328
Securities available-for-sale, net of allowance for credit losses of $518		48,635		—		48,487		148		48,635
Federal Home Loan Bank of New York stock, at cost		3,272		—		3,272		—		3,272
Federal Reserve Bank stock, at cost		131		—		131		—		131
Loans, net of allowance for credit losses of $1,915		226,030		—		—		213,685		213,685
Accrued interest receivable		1,479		1,479		—		—		1,479
Financial liabilities:
Deposits		234,426		85,684		140,079		—		225,763
Federal Home Loan Bank advances		35,567		—		36,987		—		36,987
Accrued interest payable		120		120		—		—		120
Advances from borrowers for taxes and insurance		2,389		2,389		—		—		2,389
December 31, 2024:
Financial assets:
Cash and cash equivalents	$	6,788	$	6,788	$	—	$	—	$	6,788
Securities available-for-sale, net of allowance for credit losses of $498		46,484		—		46,484		—		46,484
Federal Home Loan Bank of New York stock, at cost		3,361		—		3,361		—		3,361
Loans, net of allowance for credit losses of $1,804		202,429		—		—		189,034		189,034
Accrued interest receivable		1,247		1,247		—		—		1,247
Financial liabilities:
Deposits		210,571		80,449		122,793		—		203,242
Federal Home Loan Bank advances		41,253		—		41,920				41,920
Accrued interest payable		146		146		—		—		146
Advances from borrowers for taxes and insurance		2,349		2,349		—		—		2,349

Assets Measured at Fair Value on a Nonrecurring Basis

In addition to disclosure of the fair value of assets on a recurring basis, ASC Topic 820 requires disclosures for assets and liabilities measured at fair value on a nonrecurring basis, such as impaired assets and foreclosed real estate. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of these loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated as required by ASC Topic 310, “Receivables — Loan Impairment” when establishing the allowance for credit losses. Impaired loans are those in which the Company has measured impairment generally based on the fair value of the loan’s collateral less estimated selling costs.

Fair value of real estate collateral is generally determined based upon independent third-party appraisals of the properties, which consider sales prices of similar properties in the proximate vicinity or by discounting expected cash flows from the properties by an appropriate risk adjusted discount rate. Management may adjust the appraised values as deemed appropriate. Fair values of collateral other than real estate is based on an estimate of the liquidation proceeds. Impaired loans and foreclosed real estate are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the asset balances net of a valuation allowance.

Assets taken in foreclosure of defaulted loans generally measured at the lower cost or fair value less costs to sell. The fair value of the real property is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace, and the related nonrecurring fair value measurement adjustments have generally been classified as Level 3.

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2025 and 2024 were as follows:

(In thousands)	Total		Level 1		Level 2		Level 3
December 31, 2025:
Collateral-dependent loans	$	2,259	$	—	$	—	$	2,259
	$	2,259	$	—	$	—	$	2,259
December 31, 2024:
Collateral-dependent loans	$	652	$	—	$	—	$	652
	$	652	$	—	$	—	$	652

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

	Quantitative Information about Level 3 Fair Value Measurements
			Adjustment
	Valuation	Unobservable		(Weighted-
	Techniques	Input	Range	average)
Collateral-dependent loans	Lower of appraisal	Appraisal	10%-55%	(26%) 2025
	of collateral or	adjustments	10%	(10%) 2024
	asking priceless
	selling costs
		Selling costs	7%-14%	(10%) 2025
			8%-13%	(10%) 2024

At December 31, 2025 and 2024, the fair value consists of loan balances of $2,388,000 and $652,000, respectively, net of a valuation allowance of  $135,000 and $0, respectively.