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FAIR VALUE

3 Months Ended

Sep. 30, 2024

10.FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The fair value of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2). The fair value of derivatives are classified as a component of other assets and other liabilities on the consolidated statements of condition.

The fair value of individually evaluated loans are valued at the lower of cost or fair value. Individually evaluated loans carried at fair value have been partially charged-off or receive a specific allocation of the allowance for credit losses on loans. For collateral dependent loans, fair value is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value.

Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (“OREO”) are measured at fair value, less costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below (dollars in thousands):


					Fair Value Measurements at
					September 30, 2024 Using
								Significant
					Quoted Prices in			Other			Significant
					Active Markets for			Observable			Unobservable
					Identical Assets			Inputs			Inputs
		Fair Value			(Level 1)			(Level 2)			(Level 3)
Assets:
Available for sale securities:
U.S. Treasury		$	216,760		$	216,760		$	—		$	—
Mortgage-backed securities:
U.S. Government agency securities			9,801			—			9,801			—
Collateralized mortgage obligations:
U.S. Government agency securities			4,915			—			4,915			—
Government-sponsored enterprises			15,284			—			15,284			—
Municipal obligations			15,773			—			15,773			—
Total available for sale securities			262,533			216,760			45,773			—
Derivative assets ⁽¹⁾			9,745			—			9,745			—
Total		$	272,278		$	216,760		$	55,518		$	—

Liabilities:
Derivative liabilities ⁽¹⁾		$	9,745		$	—		$	9,745		$	—
Total		$	9,745		$	—		$	9,745		$	—


					Fair Value Measurements at
					June 30, 2024 Using
								Significant
					Quoted Prices in			Other			Significant
					Active Markets for			Observable			Unobservable
					Identical Assets			Inputs			Inputs
		Fair Value			(Level 1)			(Level 2)			(Level 3)
Assets:
Available for sale securities:
U.S. Treasury		$	243,549		$	243,549		$	—		$	—
Municipal obligations			13,416			—			13,416			—
Other debt securities			444			—			444
Total available for sale securities			257,409			243,549			13,860			—
Derivative assets ⁽¹⁾			16,781			—			16,781			—
Total		$	274,190		$	243,549		$	30,641		$	—

Liabilities:
Derivative liabilities ⁽¹⁾		$	16,781		$	—		$	16,781		$	—
Total		$	16,781		$	—		$	16,781		$	—

(1)

Additional information regarding the impact of offseting cash collateral can be found in Note 6 – Derivatives.

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below (dollars in thousands):


					Fair Value Measurements Using
								Significant
					Quoted Prices in			Other			Significant
					Active Markets for			Observable			Unobservable
					Identical Assets			Inputs			Inputs
		Fair Value			(Level 1)			(Level 2)			(Level 3)
September 30, 2024
Individually evaluated loans:
Commercial loans		$	—		$	—		$	—		$	—
OREO			—			—			—			—

June 30, 2024
Individually evaluated loans:
Commercial loans		$	539		$	—		$	—		$	539
OREO			153			—			—			153

There were no loans individually evaluated for credit losses where the amortized cost was adjusted to fair value as of September 30, 2024. Loans individually evaluated for credit losses where the amortized cost was adjusted to fair value had a carrying amount of $673,000 with a valuation allowance of $134,000 resulting in an estimated fair value of $539,000 as of June 30, 2024.

The Company had no OREO at September 30, 2024 and $153,000 of OREO at June 30, 2024.

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 (dollars in thousands):

Significant

Significant Unobservable

Valuation

Unobservable

Input Range

Fair Value

Technique

Inputs

(Weighted Average)

September 30, 2024

Individually evaluated loans:

Commercial loans

$

—

OREO

—

June 30, 2024

Individually evaluated loans:

Commercial loans

$

539

Appraisal of collateral (1)

Liquidation expense (2)

11.0%

OREO

153

Appraisal of collateral (1)

Liquidation expense (2)

10.0%

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

(2)	Estimated selling costs.

The carrying and estimated fair values of financial assets and liabilities were as follows (dollars in thousands):


		September 30, 2024
									Fair Value Measurements Using
											Significant
								Quoted Prices in			Other			Significant
								Active Markets for			Observable			Unobservable
		Carrying			Estimated			Identical Assets			Inputs			Inputs
		Amount			Fair Value			(Level 1)			(Level 2)			(Level 3)
Financial assets
Cash and cash equivalents		$	224,974		$	224,974		$	224,974		$	—		$	—
Securities available for sale			262,533			262,533			216,760			45,773			—
Securities held to maturity			24,589			22,863			—			22,863			—
FHLBNY and FRBNY stock			3,646			3,646			—			3,646			—
Net loans receivable			1,399,725			1,385,112			—			—			1,385,112
Accrued interest receivable			7,667			7,667			—			7,667			—
Derivative assets ⁽¹⁾			9,745			9,745			—			9,745			—

Financial liabilities
Deposits
Savings, money market, and demand accounts		$	1,518,927		$	1,518,927		$	—		$	1,518,927		$	—
Time deposits			156,353			155,409			—			155,409			—
Mortgagors’ escrow deposits			3,854			3,854			—			3,854			—
Accrued interest payable			116			116			—			116			—
Derivative liabilities ⁽¹⁾			9,745			9,745			—			9,745			—


		June 30, 2024
									Fair Value Measurements Using
											Significant
								Quoted Prices in			Other			Significant
								Active Markets for			Observable			Unobservable
		Carrying			Estimated			Identical Assets			Inputs			Inputs
		Amount			Fair Value			(Level 1)			(Level 2)			(Level 3)
Financial assets
Cash and cash equivalents		$	165,190		$	165,190		$	165,190		$	—		$	—
Securities available for sale			257,409			257,409			243,549			13,860			—
Securities held to maturity			25,090			22,437			—			22,437			—
FHLBNY and FRBNY stock			3,546			3,546			—			3,546			—
Net loans receivable			1,344,069			1,293,472			—			—			1,293,472
Accrued interest receivable			7,559			7,559			—			7,559			—
Derivative assets ⁽¹⁾			16,781			16,781			—			16,781			—

Financial liabilities
Deposits
Savings, money market, and demand accounts		$	1,383,222		$	1,383,222		$	—		$	1,383,222		$	—
Time deposits			167,030			165,420			—			165,420			—
Mortgagors’ escrow deposits			9,701			9,701			—			9,701			—
Accrued interest payable			137			137			—			137			—
Derivative liabilities ⁽¹⁾			16,781			16,781			—			16,781			—

(1)

Additional information regarding the impact of offseting cash collateral can be found in Note 6 – Derivatives.

Short-Term Financial Instruments

The fair value of certain financial instruments are estimated to approximate their carrying amounts because the remaining term to maturity or period to repricing of the financial instrument is less than ninety days. Such financial instruments include cash and cash equivalents, accrued interest receivable and payable, and mortgagor’s escrow deposits.

Securities

Fair values of securities available for sale, securities held to maturity and equity securities are determined as outlined earlier in this footnote.

FHLBNY and FRBNY Stock

The fair value of FHLBNY and FRBNY stock approximates its carrying value due to transferability restrictions.

Loans

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, including residential real estate, commercial real estate, and consumer loans and whether the interest rates are fixed and/or variable.

The estimated fair values of performing loans are calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the respective loan portfolio.

Estimated fair values for nonperforming loans are based on estimated cash flows discounted using a rate commensurate with the credit risk involved. Assumptions regarding credit risk, cash flows, and discount rates are judgmentally determined using available market information and specific borrower information.

Derivatives

Fair values of derivative assets and liabilities are determined as outlined earlier in this footnote.

Deposits

The estimated fair value of deposits with no stated maturity, such as savings, money market and demand deposits, is regarded to be the amount payable on demand. The estimated fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using market rates for time deposits with similar maturities. The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposits as compared to the cost of borrowing funds in the market.

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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