Fair Value

12 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value

14.FAIR VALUE

The following disclosures show the hierarchal disclosure framework associated within the level of pricing observations utilized in measuring assets and liabilities at fair value. The definition of fair value maintains the exchange price notion in earlier definitions of fair value but focuses on the exit price of the asset or liability. The exit price is the price that would be received to sell the asset or paid to transfer the liability adjusted for certain inherent risks and restrictions. Expanded disclosures are also required about the use of fair value to measure assets and liabilities.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

The following tables provide the fair value for assets and liabilities required to be measured and reported at fair value on a recurring basis on the Consolidated Balance Sheet as of September 30, 2024 and September 30, 2023 by level within the fair value hierarchy (in thousands).

Reoccurring Fair Value Measurements at Reporting Date
	September 30, 2024
	Level I		Level II		Level III		Total
Assets:
Investment securities available for sale:
Mortgage-backed securities	$	-	$	122,225	$	-	$	122,225
Obligations of states and political subdivisions		-		8,791		-		8,791
U.S. government agency securities		-		6,266		-		6,266
Corporate obligations		-		66,561		4,556		71,117
Other debt securities		-		7,470		-		7,470
Total debt securities		-		211,313		4,556		215,869
Equity securities - financial services		26		-		-		26
Derivatives and hedging activities		-		8,203		-		8,203
Liabilities:
Derivatives and hedging activities		-		9,183		-		9,183

Reoccurring Fair Value Measurements at Reporting Date
	September 30, 2023
	Level I		Level II		Level III		Total
Assets:
Investment securities available for sale:
Mortgage-backed securities	$	-	$	100,331	$	-	$	100,331
Obligations of states and political subdivisions		-		9,052		-		9,052
U.S. government treasury securities		-		123,580		-		123,580
U.S. government agency securities		-		28,952		-		28,952
Corporate obligations		-		62,885		2,836		65,721
Other debt securities		-		6,420		-		6,420
Total debt securities		-		331,220		2,836		334,056
Equity securities - financial services		32		-		-		32
Derivatives and hedging activities		-		19,662		-		19,662
Liabilities:
Derivatives and hedging activities		-		9,579		-		9,579

The following tables present a summary of changes in the fair value of the Company’s Level III investments for years ended September 30, 2024 and 2023 (in thousands).

	Fair Value Measurement Using Significant Unobservable Inputs (Level III)
	September 30, 2024		September 30, 2023
Beginning balance	$	2,836	$	7,374
Purchases, sales, issuances, settlements, net		-		-
Total unrealized gain:
Included in earnings		-		-
Included in other comprehensive income		15		(188	)
Transfers into Level III		1,705		-
Transfers out of Level III		-		(4,350	)
	$	4,556	$	2,836

Each financial asset and liability is identified as having been valued according to a specified level of input, 1, 2 or 3. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly. Level 2 inputs include quoted prices for similar assets in active markets, and inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy, within which the fair value measurement in its entirety falls, has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset.

The measurement of fair value should be consistent with one of the following valuation techniques: market approach, income approach, and/or cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). For example, valuation techniques consistent with the market approach often use market multiples derived from a set of comparable. Multiples might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering factors specific to the measurement (qualitative and quantitative). Valuation techniques consistent with the market approach include matrix pricing. Matrix pricing is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on a security’s relationship to other benchmark quoted securities. Most of the securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quoted market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Securities reported at fair value utilizing Level 1 inputs are limited to actively traded equity securities whose market price is readily available from the New York Stock Exchange or the NASDAQ exchange. A few securities are valued using Level 3 inputs, all of these are classified as available for sale and are reported at fair value using Level 3 inputs.

Assets and Liabilities Required to be Measured and Reported on a Non-Recurring Basis

The following tables provide the fair value for assets required to be measured and reported at fair value on a non recurring basis on the Consolidated Balance Sheet as of September 30, 2024 and September 30, 2023 by level within the fair value hierarchy:

	September 30, 2024
		Level I		Level II		Level III		Total Fair Value
Financial assets:
Foreclosed real estate owned		$	-	$	-	$	3,195	$	3,195
Individually evaluated loans held for investment			-		-		7,615		7,615
	September 30, 2023
		Level I		Level II		Level III		Total Fair Value
Financial assets:
Foreclosed real estate owned		$	-	$	-	$	3,311	$	3,311
Impaired loans			-		-		9,693		9,693

The following tables present 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 III Fair Value Measurements
	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
September 30, 2024
Individually evaluated loans held for investment	$	7,615	Appraisal of collateral (1)	Appraisal adjustments (2)	0% to 35% (20.9%)
Foreclosed real estate owned		3,195	Appraisal of collateral (1)	Appraisal adjustments (2)	10% (10.0%)
September 30, 2023
Impaired loans	$	9,693	Appraisal of collateral (1)	Appraisal adjustments (2)	0% to 35% (20.8%)
Foreclosed real estate owned		3,311	Appraisal of collateral (1)	Appraisal adjustments (2)	10 to 35% (10.2%)

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which 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 percent of the appraisal.

Investment Securities Available for Sale

The fair value of securities available for sale are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), 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 by relying on the securities’ relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) are used to support fair values of certain Level 3 investments, if applicable.

Equity Securities

The fair value of equity securities are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1).

Individually Analyzed Loans (generally carried at fair value)

The Company has measured impairment on individually evaluated loans generally based on the fair value of the loan’s collateral. Individually evaluated loans are evaluated on the collateral method based on Level II inputs utilizing outside appraisals. Those individually evaluated loans for which management incorporates significant adjustments for sales costs and other discount assumptions regarding market conditions are considered Level III fair values. The fair value investment in individually analyzed loans totaled $7.6 million less their valuation allowances of $2,000 at September 30, 2024. The fair value consists of the loan balances of $9.7 million less their valuation allowances of $42,000 at September 30, 2023.

Foreclosed Real Estate Owned

Foreclosed real estate owned is measured at fair value, less cost to sell at the date of foreclosure; valuations are periodically performed by management; and the assets are carried at fair value, less cost to sell. Income and expenses from operations and changes in valuation allowance are included in the net expenses from foreclosed real estate.

Derivatives

The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed payments. The fair value of the swap asset and liability is based on an external derivative model using data inputs as of the valuation date and are classified Level 2.

Assets and Liabilities not Required to be Measured and Reported at Fair Value

The methods and assumptions used by the Company in estimating fair values of financial instruments at September 30, 2024 and 2023 is in accordance with ASC Topic 825, Financial Instruments which requires public entities to use exit pricing in the calculations of the tables below.

	September 30, 2024
	Carrying Value		Level I		Level II		Level III		Total Fair Value
Financial assets:
Loans receivable, net	$	1,744,284	$	-	$	-	$	1,635,032	$	1,635,032
Mortgage servicing rights		1,051		-		-		1,450		1,450
Investment securities held to maturity		47,378		-		41,519		-		41,519
Financial liabilities:
Deposits		1,629,051		1,046,990		-		581,842		1,628,832
Short-term borrowings		280,000		-		-		280,631		280,631
Other borrowings		10,000		-		-		10,042		10,042

	September 30, 2023
	Carrying Value		Level I		Level II		Level III		Total Fair Value
Financial assets:
Loans receivable, net	$	1,680,525	$	-	$	-	$	1,524,615	$	1,524,615
Mortgage servicing rights		874		-		-		1,470		1,470
Investment securities held to maturity		52,242		-		42,090		-		42,090
Financial liabilities:
Deposits		1,661,016		1,157,045		-		499,101		1,656,146
Short-term borrowings		374,652		-		-		364,291		364,291

For Cash and Cash Equivalents, Accrued Interest Receivable, Regulatory Stock, Bank Owned Life Insurance, Advances by Borrowers for Taxes and Insurance, and Accrued Interest Payable the carrying value is a reasonable estimate of the fair value and are considered Level 1 measurements.

The fair value approximates the current book value.