FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Mar. 31, 2020

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values are as follows:

		March 31, 2020
		Carrying Amount			Fair Value			Level I			Level II			Level III
		(Dollars in Thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$		2,372	$		2,372	$		2,372	$		-	$		-
Certificates of deposit			1,592			1,592			1,592			-			-
Investment securities – held to maturity			3,495			3,625			-			3,625			-
Mortgage-backed securities – held to maturity:
Agency			101,615			100,008			-			100,008			-
Private-label			695			673			-			-			673
Net loans receivable			90,652			98,679			-			-			98,679
Accrued interest receivable			1,045			1,045			1,045			-			-
FHLB stock			6,889			6,889			6,889			-			-
Bank owned life insurance			4,878			4,878			4,878			-			-
FINANCIAL LIABILITIES
Deposits:
Non-interest bearing deposits	$		19,013	$		19,013	$		19,013	$		-	$		-
Interest-earning checking accounts			22,725			22,725			22,725			-			-
Savings accounts			43,319			43,319			43,319			-			-
Money market accounts			19,769			19,769			19,769			-			-
Certificates of deposit			46,849			47,061			-			-			47,061
Advance payments by borrowers for taxes and insurance			1,780			1,780			1,780			-			-
FHLB advances – fixed rate			15,000			14,789			-			-			14,789
FHLB advances – variable rate			85,000			85,000			85,000			-			-
FHLB short-term advances			60,802			60,802			60,802			-			-
Other short-term borrowings			24,800			24,800			24,800
Accrued interest payable			661			661			661			-			-

		June 30, 2019
		Carrying Amount			Fair Value			Level I			Level II			Level III
		(Dollars in Thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$		4,379	$		4,379	$		4,379	$		-	$		-
Certificates of deposit			1,843			1,843			1,843			-			-
Investment securities – held to maturity			3,995			4,080			-			4,080			-
Mortgage-backed securities – held to maturity:
Agency			107,448			107,832			-			107,832			-
Private-label			883			876			-			-			876
Net loans receivable			90,588			92,062			-			-			92,062
Accrued interest receivable			1,219			1,219			1,219			-			-
FHLB stock			7,010			7,010			7,010			-			-
Bank owned life insurance			4,789			4,789			4,789			-			-
FINANCIAL LIABILITIES
Deposits:
Non-interest earning checking	$		19,770	$		19,770	$		19,770	$		-	$		-
Interest-earning checking			23,541			23,541			23,541			-			-
Savings accounts			43,740			43,740			43,740			-			-
Money market accounts			19,958			19,958			19,958			-			-
Certificates of deposit			37,361			37,359			-			-			37,359
Advance payments by borrowers for taxes and insurance			2,065			2,065			2,065			-			-
FHLB advances – fixed rate			15,000			14,323			-			-			14,323
FHLB advances – variable rate			85,000			85,000			85,000			-			-
FHLB short-term advances			70,828			70,828			70,828			-			-
Other short-term borrowings			-			-			-			-			-
Accrued interest payable			823			823			823			-			-

Financial instruments are defined as cash, evidence of an ownership interest in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from or to a second entity on potentially favorable or unfavorable terms.

Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. If a quoted market price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument.

If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses, and other factors, as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by management based upon estimates, which are inherently uncertain, the resulting estimated values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the estimated values are based may have a significant impact on the resulting estimated values.

As certain assets and liabilities, such as deferred tax assets, premises and equipment, and many other operational elements of the Company, are not considered financial instruments, but have value, this estimated fair value of financial instruments would not represent the full market value of the Company.

Estimated fair values have been determined by the Company using the best available data, as generally provided in internal Savings Bank regulatory, or third party valuation reports, using an estimation methodology suitable for each category of financial instruments. The estimation methodologies used are as follows:

Cash and Cash Equivalents, Certificates of Deposit, Accrued Interest Receivable and Payable, and FHLB Short-term Advances

The fair value approximates the current carrying value.

Investment Securities, Mortgage-Backed Securities, and FHLB Stock

The fair value of investment and mortgage-backed securities is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities. For discussion of valuation of private-label CMOs, see Note 8 “Unrealized Losses on Securities”. Since the FHLB stock is not actively traded on a secondary market and held exclusively by member financial institutions, the estimated fair market value approximates the carrying amount.

Net Loans Receivable, Deposits, and Advance Payments by Borrowers for Taxes and Insurance

Fair value for consumer mortgage loans is estimated using market quotes or discounting contractual cash flows for prepayment estimates. Discount rates were obtained from secondary market sources, adjusted to reflect differences in servicing, credit, and other characteristics.

The estimated fair values for consumer, fixed-rate commercial, and multi-family real estate loans are estimated by discounting contractual cash flows for prepayment estimates. Discount rates are based upon rates generally charged for such loans with similar credit characteristics.

The estimated fair value for nonperforming loans is the appraised value of the underlying collateral adjusted for estimated credit risk.

Demand, savings, money market deposit accounts, and advance payments by borrowers for taxes and insurance are reported at book value. The fair value of certificates of deposit is based upon the discounted value of the contractual cash flows. The discount rate is estimated using average market rates for deposits with similar average terms.

Bank Owned Life Insurance (“BOLI”)

The fair value of BOLI approximates the cash surrender value of the policies at these dates.

FHLB Advances – Fixed and Variable Rate

The fair values of fixed-rate advances are estimated using discounted cash flows, based on current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount on variable rate advances approximates their fair value.

Other Short-Term Borrowings

The carrying amount of other short-term borrowings approximates their fair value.

Commitments to Extend Credit

These financial instruments are generally not subject to sale, and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, is not considered material for disclosure.