NSTS Bancorp, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 6 - Fair Value Measurements

Note 6 - Fair Value Measurements

6 Months Ended

Jun. 30, 2024

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

Note 6: Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices in active markets for identical assets or liabilities

Level 2

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 for substantially the full term of the assets or liabilities

Level 3

Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities

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

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2024 or December 31, 2023.

Securities available for sale (Recurring)

Where quoted market prices are available in an active market, securities such as U.S. Treasuries, would be classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities would be classified within Level 3 of the hierarchy.

The following table presents the Bank’s assets that are measured at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of June 30, 2024 and December 31, 2023:

	*Fair Value Measurements Using*
	*Fair Value*		*Level 1*		*Level 2*		*Level 3*
	(Dollars in thousands)
June 30, 2024
Securities available-for-sale
U.S. Treasury Notes	$	1,500	$	1,500	$	—	$	—
U.S. government agency obligations		8,793		—		8,793		—
Municipal obligations		11,916		—		11,916		—
Mortgage-backed residential obligations		27,744		—		27,744		—
Collateralized mortgage obligations		25,348		—		25,348		—
Total	$	75,301	$	1,500	$	73,801	$	—

December 31, 2023
Securities available-for-sale
U.S. Treasury Notes	$	2,973	$	2,973	$	—	$	—
U.S. government agency obligations		9,106		—		9,106	$	—
Municipal obligations		13,570		—		13,570		—
Mortgage-backed residential obligations		30,351		—		30,351		—
Collateralized mortgage obligations		26,135		—		26,135		—
Total	$	82,135	$	2,973	$	79,162	$	—

The Bank may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with accounting principles generally accepted in the United States of America. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. There were no assets measured at fair value on a nonrecurring basis as of June 30, 2024 and December 31, 2023.