Fair Value Measurements and Disclosures

12 Months Ended

Jun. 30, 2025

17.

Fair Value Measurements and Disclosures

The Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company's securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Bank may be required to record at fair value other assets or liabilities on a non-recurring basis. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets.

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as an exit price representing the amount that would be received to sell an asset or settle a liability in an orderly transaction between market participants. A three-level hierarchy has been established for fair value measurements based upon the inputs to the valuation of an asset or liability.

Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities;

Level 2 - Valuation is determined from quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument;

Level 3 - Valuation is derived from model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company’s own estimates about the assumptions that a market participant would use to value the asset or liability.

The Banks’ available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss. The securities available-for-sale portfolio consists of U.S. government-sponsored enterprise and mortgage-backed securities. The fair values of these securities were obtained from an independent nationally recognized pricing service. The independent pricing service provided prices categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.

For financial assets measured at fair value on a recurring basis as of June 30, 2025 and June 30, 2024, the fair value measurements by level within the fair value hierarchy used are as follows:


	June 30, 2025
Description	(Level 1)		(Level 2)		(Level 3)		Total
	(In thousands)
Equity securities		37		—		—		37
Total	$	37	$	—	$	—	$	37


	June 30, 2024
Description	(Level 1)		(Level 2)		(Level 3)		Total
	(In thousands)
Equity securities		25		—		—		25
Total	$	25	$	—	$	—	$	25

The classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Other securities are measured at fair value using quoted market prices in an active market for identical assets and are classified as Level 1 in the hierarchy. The estimated fair values of equity securities are determined by obtaining quoted prices on nationally recognized exchanges (Level 1 inputs).

All debt securities are measured at fair value using 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 by relying on the securities’ relationship to other benchmark quoted prices and are classified as Level 2 in the hierarchy.

The fair value of deposits with no defined maturities (e.g. demand deposits, interest-bearing demand accounts, money market accounts and savings accounts) is the amount payable on demand of the liabilities at the reporting date (i.e. their carrying amounts). This approach to estimating fair value excludes the significant benefit that results from the low-cost funding provided by such deposit liabilities, as compared to alternative sources of funding.

Deposits with stated maturities (time deposits) have been valued using the present value of cash flows discounted at rates approximating the current market for similar deposits.

Financial Assets Measured at Fair Value on a Nonrecurring Basis

The following tables present those assets and liabilities measured at fair value on a non-recurring basis at June 30, 2025 and June 30, 2024, and additional quantitative information about the valuation techniques and inputs utilized to determine fair value. All such assets and liabilities were measured using Level 3 inputs:

          
         June 30, 2025

          
         Fair Value Measurement

         Quantitative Information

          
         Recorded Investment

         Valuation Allowance

         Fair Value

         Valuation
Technique

         Unobservable Inputs

         Value/Range

          
         (In thousands)

Individually evaluated

—

—

—

Appraisal of collateral

Selling costs

15%

          
         June 30, 2024

          
         Fair Value Measurement

         Quantitative Information

          
         Recorded Investment

         Valuation Allowance

         Fair Value

         Valuation
Technique

         Unobservable Inputs

         Value/Range

          
         (In thousands)

Individually evaluated

50

—

50

Appraisal of collateral

Selling costs

15%

Loans which meet certain criteria are evaluated individually for impairment. A loan is impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Bank's impaired loans are generally collateral dependent whose fair value is estimated through current appraisals, and adjusted as necessary by management to reflect current market conditions. Appraisals of collateral securing impaired loans are conducted by approved, qualified, and independent third-party appraisers. Such appraisals are ordered once the loan is deemed impaired, as previously described. Impaired loans are generally classified as Level 3 assets. There were no transfers between levels within the fair value hierarchy during the years ended June 30, 2025 and June 30, 2024.

Fair Value on a Nonrecurring Basis

The Company discloses fair value information about financial assets, whether or not recognized in the statements of financial condition, for which it is practicable to estimate that value. The fair value of financial assets that are not measured at fair value in the financial statements were based on the exit price notion. The following estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, the estimates below are not necessarily indicative of amounts that could be realized in the marketplace. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2025 and June 30, 2024 were as follows:


	June 30, 2025
Description	Carrying Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	57,779	$	57,779	$	57,779	$	—	$	—
Securities held-to-maturity, at amortized cost		141,845		120,195		—		120,195		—
Restricted equity securities, at cost		2,608		2,608		—		2,608		—
Loans receivable, net		797,166		770,473		—		—		770,473
Accrued interest receivable		3,072		3,072		—		3,072		—
Financial Liabilities:
Deposits		846,022		764,094		—		764,094		—
Borrowings		30,000		30,000		30,000		—		—


	June 30, 2024
Description	Carrying Value		Fair Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	45,909	$	45,909	$	45,909	$	—	$	—
Securities held-to-maturity, at amortized cost		156,144		129,436		—		129,436		—
Restricted equity securities, at cost		1,231		1,231		—		1,231		—
Loans receivable, net		731,859		696,757		—		—		696,757
Accrued interest receivable		2,695		2,695		—		2,695		—
Financial Liabilities:
Deposits		807,100		704,566		—		704,566		—
Borrowings		—		—		—		—		—

- 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.

+ References

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+ Details

SR Bancorp, Inc. 10-K