Disclosures about Fair Value of Assets

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Disclosures about Fair Value of Assets

Note 17: Disclosures about Fair Value of Assets

Fair value is the price that would be received to sell an asset 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
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets; 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
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets

Recurring Measurements

The following table presents the fair value measurements of assets  recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and 2015:

			December 31, 2016
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	13,333,540	$	—	$	13,333,540	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		44,413,177		—		44,413,177		—
Municipal bonds		42,414,723		—		42,414,723		—

			December 31, 2015
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	15,938,697	$	—	$	15,938,697	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		23,178,395		—		23,178,395		—
Municipal bonds		48,356,240		—		48,356,240		—

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques during the year ended December 31, 2016.

Available-for-Sale Securities

Where quoted market prices are available in an active market, securities are 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. 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 are classified within Level 3 of the hierarchy. 

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and 2015:

			December 31, 2016
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,157,329	$	—	$	—	$	1,157,329
Mortgage servicing rights		552,827		—		—		552,827

			December 31, 2015
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	899,981	$	—	$	—	$	899,981

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (Collateral Dependent)

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.  Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary.  Appraisals are reviewed for accuracy and consistency.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  Fair value adjustments on impaired loans were $391,745 and $(156,069) at December 31, 2016 and 2015.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices.  Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed and default rate.  Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

Mortgage servicing rights are tested for impairment on at least an annual basis.  The Company uses a third-party to measure mortgage servicing rights through the completion of a proprietary model.  Inputs to the model are reviewed by the Company.  Fair value adjustments on mortgage servicing rights were $(38,967) and $0 at December 31, 2016 and 2015.

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements.

	Fair Value at December 31, 2016		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,157,329	Market comparable properties	Marketability discount	20% – 30% (25%)
Mortgage servicing rights	$	552,827	Discounted cash flow	Discount rate	9% - 13.5% (10.25%)
				PSA standard prepayment model rate	104 – 300 (153)

	Fair Value at December 31, 2015		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	899,981	Market comparable properties	Marketability discount	20% – 30% (25%)

Fair Value of Other Financial Instruments

The following table presents estimated fair values of the Company’s other financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and 2015:

			December 31, 2016
			Fair Value Measurements Using
	Carrying  Amount		Quoted Prices  in Active  Markets for  Identical Assets (Level 1)		Significant  Other  Observable  Inputs (Level 2)		Significant  Unobservable  Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	12,909,924	$	12,909,924	$	—	$	—
Interest-earning time deposits		750,000		750,000		—		—
Other investments		55,481		—		55,481		—
Loans held for sale		503,003		—		503,003		—
Loans, net of allowance for loan losses		184,448,003		—		—		183,941,877
Federal Home Loan Bank stock		363,800		—		363,800		—
Interest receivable		1,588,545		—		1,588,545		—
Financial liabilities
Deposits		258,677,960		—		178,491,424		81,241,011
Short-term borrowings		7,135,182		—		7,135,182
Advances from borrowers for taxes and insurance		1,102,204		—		1,102,204		—
Interest payable		106,755		—		106,755		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

			December 31, 2015
			Fair Value Measurements Using
	Carrying  Amount		Quoted Prices  in Active  Markets for  Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	4,103,432	$	4,103,432	$	—	$	—
Interest-earning time deposits		2,724,000		2,724,000		—		—
Other investments		62,223		—		62,223		—
Loans held for sale		539,000		—		539,000		—
Loans, net of allowance for loan losses		193,039,879		—		—		193,006,301
Federal Home Loan Bank stock		1,113,800		—		1,113,800		—
Interest receivable		1,715,676		—		1,715,676		—
Financial liabilities
Deposits		239,281,930		—		160,227,406		80,300,060
Short-term borrowings		15,131,710		—		6,631,710		8,500,000
Advances from borrowers for taxes and insurance		990,917		—		990,917		—
Interest payable		118,335		—		118,335		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than fair value.

Cash and Cash Equivalents, Interest-Earning Time Deposits, Interest Receivable, Federal Home Loan Bank Stock, and Other Investments

The carrying amount approximates fair value.

Loans Held for Sale

For homogeneous categories of loans, such as mortgage loans held for sale, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics.

Loans

The fair value of loans is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.  Loans with similar characteristics were aggregated for purposes of the calculations.  

Deposits

Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits.  The carrying amount approximates fair value.  The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Short-term Borrowings, Interest Payable, and Advances from Borrowers for Taxes and Insurance

The carrying amount approximates fair value.

Commitments to Originate Loans, Letters of Credit, and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.  The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.