Note 8 - Fair Value of Financial Instruments

3 Months Ended

Jun. 30, 2011

Fair Value Disclosures [Text Block]

(8)           Fair Value of Financial Instruments

ASC Topic 820-10 defines fair value, establishes a framework for measuring fair value in U.S. generally accepted accounting principles, and expands disclosure requirements for fair value measurements.  ASC Topic 820 does not require any new fair value measurements.  The adoption of ASC Topic 820-10 did not have a material impact on the consolidated financial statements.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below:

● Level 1 Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

● Level 2 Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly.  Level 2 inputs include quoted prices for similar assets, quoted prices in markets that are not considered to be active, and observable inputs other than quoted prices such as interest rates.

● Level 3 Level 3 inputs are unobservable inputs.

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

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Other Unobservable Inputs (Level 3)
June 30, 2011
Available-for-sale securities	$	251	NONE	NONE
March 31, 2011
Available-for-sale securities	$	248	NONE	NONE

Assets and Liabilities on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis at June 30, 2011 and March 31, 2011 are as follows (dollars in thousands):

		Fair Value Measurements at Reporting Date Using
		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
June 30, 2011
Impaired loans	$		$	5,777	$
Real estate owned				369
Total	$	NONE	$	6,146	$	NONE
March 31, 2011
Impaired loans	$		$	4,956	$
Real estate owned				771
Total	$	NONE	$	5,727	$	NONE

The fair value of impaired loans and real estate owned with specific allocations of the allowance for loan losses 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.

Off-balance sheet instruments

Off-balance sheet instruments are primarily comprised of loan commitments and unfunded lines of credit which are generally priced at market rate at the time of funding.  Therefore, these instruments have nominal value prior to funding.

A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input significant to the fair value measurement.

As required by ASC Topic 825-10-65, the estimated fair value of financial instruments at June 30, 2011 and March 31, 2011 was as follows:

	June 30, 2011				March 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
(Dollars in Thousands)
Financial Assets:
Cash and cash equivalents	$	5,034	$	5,034	$	5,663	$	5,663
Investment securities		15,513		15,703		15,945		15,929
Loans – net		105,511		109,288		103,867		107,877
FHLB stock		264		264		275		275
Accrued interest receivable		485		485		459		459
Real estate owned		369		369		771		771
Total financial assets	$	127,176	$	131,143	$	126,979	$	130,973
Financial Liabilities:
Deposits		121,680		122,065		120,842		122,053
Line of credit from ACBB		-		-		1,000		1,000
Advances from FHLB		1,000		1,000		1,100		1,100
Advance payments by borrowers for taxes and insurance		424		424		395		395
Accrued interest payable		23		23		23		23
Total financial liabilities	$	123,127	$	123,512	$	123,360	$	124,571

	June 30, 2011				March 31, 2011
	Contract Value		Estimated Fair Value		Contract Value		Estimated Fair Value
Off-balance sheet instruments
Commitments to extend credit	$	5,567	$	5,567	$	5,706	$	5,706