Note

19:

Fair Value Measurements

Generally accepted accounting principles define fair value, establish a framework for measuring fair value, and establish a hierarchy for determining fair value measurement.

The hierarchy includes

three

levels and is based upon the valuation techniques used to measure assets and liabilities. The

three

levels are as follows:

Level

Valuation is based on quoted prices (unadjusted) for identical assets or liabilities in active markets;

Level

Valuation is determined from quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar instruments in markets that are

not

active or by model-based techniques in which all significant inputs are observable in the market; and

Level

Valuation is derived from model-based techniques in which at least

one

significant input is unobservable and based on the Company’s own estimates about the assumptions that market participants would use to value the asset or liability.

The following is a description of the valuation methods used for instruments measured at fair value as well as the general classification of such instruments pursuant to the applicable valuation method.

Fair value measurements on a recurring basis

Securities available for sale – If quoted prices are available in an active market for identical assets, securities are classified within Level

of the hierarchy. If quoted market prices are

not

available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. As of

March 31, 2017

and

2016,

the Bank has categorized its investment securities available for sale as follows:

	Level 1		Level 2		Level 3
March 31, 2017	inputs		inputs		inputs		Total

U.S. government agencies	$	-	$	3,512,303	$	-	$	3,512,303
Municipal bonds		-		14,239,526		1,928,313		16,167,839
Corporate bonds				1,916,522		-		1,916,522
Mortgage-backed securities		-		80,829,991		2,473		80,832,464
Total investment securities available for sale	$	-	$	100,498,342	$	1,930,786	$	102,429,128

	Level 1		Level 2		Level 3
March 31, 2016	inputs		inputs		inputs		Total

U.S. government agencies	$	-	$	10,532,996	$	-	$	10,532,996
Municipal bonds		-		4,112,564		-		4,112,564
Corporate bonds				-		1,898,640		1,898,640
Mortgage-backed securities		-		53,940,200		-		53,940,200
Total investment securities available for sale	$	-	$	68,585,760	$	1,898,640	$	70,484,400

During fiscal

2017,

several municipal bonds and mortgage-backed security were moved from Level

input to Level

input. The quantitative unobservable input for these bonds was obtained based upon pricing from an independent

third

party. The securities were moved to Level

input because there was

active market for these securities to obtain a fair value. Conversely, in fiscal

2017

a corporate bond was moved from Level

input to Level

input as additional market data and inputs became available

Derivative – Interest rate swap agreement -

Our methodology consists of a discounted cash flow model where all future floating cash flows are projected and both floating and fixed cash flows are discounted to the valuation date. The curve utilized for discounting and projecting is built by obtaining publicly available

third

party market quotes. As of

March 31, 2017,

the bank has categorized its interest rate swap and related loan as follows:

	Level 1		Level 2			Level 3
March 31, 2017	inputs		inputs			inputs		Total

Loans - Commercial real estate loan	$	-	$	3,201,691		$	-	$	3,201,691
Derivative - Interest rate swap designated as fair value hedge		-		(26,647	)		-		(26,647	)
Derivatives - Interest rate swaps designated as cash flow hedge		-		(83,634	)		-		(83,634	)

	Level 1		Level 2			Level 3
March 31, 2016	inputs		inputs			inputs		Total

Loans - Commercial real estate loan	$	-	$	3,462,417		$	-	$	3,462,417
Derivative - Interest rate swap designated as fair value hedge		-		(207,511	)		-		(207,511	)

The following table presents the valuation and unobservable inputs for Level

assets measured at fair value on a recurring basis at

December 31, 2017:

Valuation

Unobservable

Range of

Description

Fair Value

Methodology

Inputs

Investment securities

1,930,786

3rd party valuation

Discount to reflect current market conditions

0.00%

10.00%

The following table presents a reconciliation of the investments which are measured at fair value on a recurring basis using significant unobservable inputs (Level

) for the periods presented:

	March 31, 2017		March 31, 2016
Balance, beginning of year	$	1,898,640	$	-

Transfers in:
Municipal bonds		1,928,313		-
Mortgage-backed securities		2,473		-
Corporate bonds		-		1,898,640

Transfers out:
Corporate bonds		1,898,640		-

Balance, end of year	$	1,930,786	$	1,898,640

Fair value measurements on a nonrecurring basis

Impaired Loans - The Bank has measured impairment generally based on the fair value of the loan's collateral. Fair value is generally determined based upon independent appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level

fair values. At

March 31, 2017

and

2016,

the fair values consist of loan balances of

$5,657,048

and

$7,438,106

that have been written down by

$285,359

and

$59,571,

respectively, as a result of specific loan loss allowances.

Foreclosed real estate – The Bank's foreclosed real estate is measured at the lower of carrying value or fair value less estimated cost to sell. At

March 31, 2017

and

2016,

the fair value of foreclosed real estate was estimated to be

$503,094

and

$443,015,

respectively. Fair value was determined based on offers and/or appraisals. Cost to sell the assets was based on standard market factors. The Company has categorized its foreclosed assets as Level

Premises and equipment held for sale – The Bank’s premises and equipment held for sale is measured at the fair value less estimated cost to sell. The assets in fiscal

2017

and

2016

were acquired in the acquisition of Fraternity and Fairmount, respectively. As of

March 31, 2017

and

2016,

the fair value of premises and equipment held for sale was estimated to be

$547,884

and

$405,000

accordingly. Fair value was determined based upon appraisals and the cost to sell these assets was determined using standard market factors. The Company has categorized its premises and equipment held for sale as Level

Loans held for sale – The Bank’s loans held for sale are carried at the lower of aggregate cost or estimated fair value less costs to sell in the secondary market. Fair value of loans held for sale is based upon outstanding investor commitments or, in the absence of such commitments, based on current investor yield requirements or

third

party pricing models and are considered Level

	Level 1		Level 2		Level 3
March 31, 2017	inputs		inputs		inputs		Total

Impaired loans	$	-	$	-	$	5,371,689	$	5,371,689
Foreclosed real estate		-		-		503,094		503,094
Premises and equipment held for sale		-		-		547,884		547,884
Loans held for sale		-		-		-		-

	Level 1		Level 2		Level 3
March 31, 2016	inputs		inputs		inputs		Total

Impaired loans	$	-	$	-	$	7,378,535	$	7,378,535
Foreclosed real estate		-		-		443,015		443,015
Premises and equipment held for sale		-		-		405,000		405,000
Loans held for sale		-		266,176		-		266,176

The following table presents the valuation and unobservable inputs for Level

assets measured at fair value on a nonrecurring basis at

March 31, 2017:

			Valuation	Unobservable	Range of
Description	Fair Value		Methodology	Inputs	Inputs

Impaired loans, net of allowance	$	5,371,689	Appraised value	Discount to reflect current market conditions		0.00%	-	25.00%
			Discounted cash flows	Discount rates		2.63%	-	7.25%

Foreclosed real estate	$	503,094	Appraised value	Discount to reflect current market conditions		0.00%	-	25.00%

Premises and equipment held for sale	$	547,844	Appraised Value	Discount to reflect current market conditions		0.00%	-	10.00%

The following table summarizes changes in foreclosed real estate for the years ended

March 31, 2017

and

2016,

which is measured on a nonrecurring basis using significant unobservable, level

inputs:

	Year Ended March 31,
	2017			2016
Balance, March 31, 2016	$	443,015		$	455,575
Transfer to foreclosed real estate		126,575			-
Foreclosed real estate acquired in acquisition		-			20,000
Proceeds from sale of foreclosed real estate		(60,258	)		(31,752	)
Loss on sale of foreclosed real estate		(6,238	)		(808	)
Write down of foreclosed real estate		-			-
Balance, March 31, 2017	$	503,094		$	443,015

The remaining financial assets and liabilities are

not

reported on the balance sheets at fair value on a recurring basis. The calculation of estimated fair values is based on market conditions at a specific point in time and

may

not

reflect current or future fair values.

	March 31, 2017				March 31, 2016
	Carrying		Fair		Carrying		Fair
	amount		value		amount		value
Financial assets
Level 1 inputs
Cash and cash equivalents	$	29,353,921	$	29,353,921	$	67,448,536	$	67,448,536

Level 2 inputs
Loans held for sale		-		-		259,450		266,176
Federal Home Loan Bank stock		2,020,200		2,020,200		1,042,500		1,042,500
Bank-owned life insurance		18,253,348		18,253,348		12,709,908		12,709,908

Level 3 inputs
Certificates of deposit held as investment		499,280		505,641		3,968,229		3,911,474
Loans receivable, net of unearned income		335,678,292		337,183,808		218,604,150		220,671,409

Financial liabilities
Level 3 inputs
Deposits		412,855,774		413,148,503		313,993,651		314,095,055
Advance payments by borrowers for taxes and insurance		1,868,110		1,868,110		1,079,794		1,079,794
Borrowings		36,124,899		36,697,631		14,805,237		15,146,307

The fair values of cash and cash equivalents and advances by borrowers for taxes and insurance are estimated to equal the carrying amount.

The fair value of loans held for sale is based on commitments from investors.

The fair values of Federal Home Loan Bank stock and bank-owned life insurance are estimated to equal carrying amounts, which are based on repurchase prices of the FHLB stock and the insurance company.

The fair value of fixed-rate loans is estimated to be the present value of scheduled payments discounted using interest rates currently in effect. The fair value of variable-rate loans, including loans with a demand feature, is estimated to equal the carrying amount. The valuation of loans is adjusted for estimated loan losses.

The fair value of certificates of deposit held as investments is estimated based on interest rates currently offered for certificates of deposit with similar remaining maturities.

The fair value of interest-bearing checking, savings, and money market deposit accounts is equal to the carrying amount. The fair value of fixed-maturity time deposits is estimated based on interest rates currently offered for deposits of similar remaining maturities.

The fair value of borrowings is estimated based on interest rates currently offered for borrowings of similar remaining maturities.

The fair value of outstanding loan commitments and unused lines of credit are considered to be the same as the contractual amounts, and are

not

included in the table above. These commitments generate fees that approximate those currently charged to originate similar commitments.