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, 2018

and

2017,

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

	Level 1		Level 2		Level 3
March 31, 2018	inputs		inputs		inputs		Total

U.S. government agencies	$	-	$	2,718,649	$	-	$	2,718,649
Municipal bonds		-		11,705,991		-		11,705,991
Corporate bonds				-		1,954,076		1,954,076
Mortgage-backed securities		-		59,025,404		16		59,025,420
Total investment securities available for sale	$	-	$	73,450,044	$	1,954,092	$	75,404,136

	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

During fiscal

2018,

a corporate bond and

one

mortgage-backed security were moved from a Level

input to a Level

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

third

party. The securities were classified as a Level

input because there was

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

2018,

several municipal bonds and mortgage backed securities were moved from Level

input to Level

input as additional market data and inputs became available.

Derivative – Interest rate swap agreements - The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level

). The quantitative models that are used utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and

third

-party pricing services. As of

March 31, 2018

and

2017,

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

	Level 1		Level 2		Level 3
March 31, 2018	inputs		inputs		inputs		Total

Loans - Commercial real estate loan	$	-	$	3,022,744	$	-	$	3,022,744
Derivative - Interest rate swap designated as fair value hedge		-		69,148		-		69,148
Derivatives - Interest rate swaps designated as cash flow hedge		-		217,464		-		247,736

	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	)

The following table presents the valuation and unobservable inputs for Level

assets measured at fair value on a recurring basis at

March 31, 2018:

Valuation

Unobservable

Range of

Description

Fair Value

Methodology

Inputs

Investment securities

1,954,092

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, 2018		March 31, 2017
Balance, beginning of year	$	1,930,786	$	1,898,640

Transfers in:
Corporate bonds		1,954,076		-
Mortgage-backed securities		16		2,473
Municipal bonds		-		1,928,313

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

Balance, end of year	$	1,954,092	$	1,930,786

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, 2018

and

2017,

the fair values consist of loan balances of

$8,720,339

and

$5,657,048

that have been written down by

$266,256

and

$285,359,

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, 2018

and

2017,

the fair value of foreclosed real estate was estimated to be

$457,778

and

$503,094,

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

totaling

$547,884

were acquired in the acquisition of Fraternity and sold during the quarter ending

December 31, 2017.

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

	Level 1		Level 2		Level 3
	inputs		inputs		inputs		Total
March 31, 2018

Impaired loans	$	-	$	-	$	8,454,083	$	8,454,083
Foreclosed real estate		-		-		457,778		457,778
Premises and equipment held for sale		-		-		-		-
Loans held for sale		-		-		-		-

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

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		-		-		-		-

The following table presents the valuation and unobservable inputs for Level

assets measured at fair value on a nonrecurring basis at

March 31, 2018:

			Valuation	Unobservable	Range of
Description	Fair Value		Methodology	Inputs	Inputs

Impaired loans, net of allowance	$	8,454,083	Appraised value	Discount to reflect current market conditions	0.00%	-	25.00%
			Discounted cash flows	Discount rates	2.63%	-	7.25%

Foreclosed real estate	$	457,778	Appraised value	Discount to reflect current market conditions	0.00%	-	25.00%

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

March 31, 2018

and

2017,

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

inputs:

	Year Ended March 31,
	2018			2017
Balance at beginning of period	$	503,094		$	443,015
Transfer to foreclosed real estate		23,834			126,575
Write-down of foreclosed real estate		(31,955	)		0
Proceeds from sale of foreclosed real estate		(35,896	)		(60,258	)
Loss on sale of foreclosed real estate		(1,299	)		(6,238	)
Balance at end of period	$	457,778		$	503,094

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, 2018				March 31, 2017
	Carrying		Fair		Carrying		Fair
	amount		value		amount		value
Financial assets
Level 1 inputs
Cash and cash equivalents	$	23,368,415	$	23,368,415	$	29,353,921	$	29,353,921

Level 2 inputs
Federal Home Loan Bank stock		3,122,400		3,122,400		2,020,200		2,020,200
Bank-owned life insurance		17,455,850		17,455,850		18,253,348		18,253,348

Level 3 inputs
Certificates of deposit held as investment		499,189		492,751		499,280		505,641
Loans receivable, net of unearned income		387,328,993		385,818,260		335,758,154		337,444,534

Financial liabilities
Level 3 inputs
Deposits		405,142,975		405,026,957		412,855,774		413,148,503
Advance payments by borrowers for taxes and insurance		1,962,665		1,962,665		1,868,110		1,868,110
Borrowings		60,672,140		60,494,922		36,124,899		36,697,631

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 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.