Note 15.Fair Value Measurements

The Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification defines fair value, establishes a framework for measuring fair value and requires disclosure of fair value measurements. The fair value hierarchy set forth in the Topic is as follows:

Level 1:	Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:	Significant other 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.

Level 3:	Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

There were no transfers between levels during the nine months ended March 31, 2015 and the year ended June 30, 2014, nor were there any changes in valuation techniques used for assets or liabilities measured at fair value at March 31, 2015 and June 30, 2014.

Assets and liabilities recorded at fair value on a recurring basis: A description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below:

Securities Available-for-Sale – Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

The following tables summarize assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and June 30, 2014, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Fair Value Measurement at March 31, 2015 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3
Assets
Securities available-for-sale	$	547,000	$	-	$	547,000	$	-

Total assets	$	547,000	$	-	$	547,000	$	-



	Fair Value Measurement at June 30, 2014 Using

			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3

Assets
Securities available-for-sale	$	882,000	$	-	$	882,000	$	-

Total assets	$	882,000	$	-	$	882,000	$	-

Assets and liabilities recorded at fair value on a nonrecurring basis: A description of the valuation methodologies used for assets and liabilities measured at fair value on a nonrecurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Impaired Loans – From time to time, a loan is considered impaired and an allowance for credit losses is established. The specific reserves for collateral dependent impaired loans are based on the fair value of the collateral less estimated costs to sell. The fair value of collateral was determined based on appraisals. In some cases, adjustments were made to the appraised values due to various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral. When significant adjustments were based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement.

Foreclosed Assets – Foreclosed assets are carried at estimated fair value of the property, less disposal costs. The fair value of the property is determined based upon appraisals. As with impaired loans, if significant adjustments are made to the appraised value, based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement.

The following tables summarize assets and liabilities measured at fair value on a nonrecurring basis as of March 31, 2015 and June 30, 2014, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Fair Value Measurement at March 31, 2015 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3
Assets
Impaired loans	$	95,000	$	-	$	-	$	95,000
Foreclosed assets	390,000		-		-		390,000

Total assets	$	485,000	$	-	$	-	$	485,000


	Fair Value Measurement at June 30, 2014 Using

			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3

Assets
Impaired loans	$	1,384,000	$	-	$	-	$	1,384,000
Foreclosed assets	373,000		-		-		373,000

Total assets	$	1,757,000	$	-	$	-	$	1,757,000

The Financial Instruments Topic of the FASB Accounting Standards Codification requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Fair value is determined under the framework discussed above. The Topic excludes all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following methods and assumptions used in estimating fair value disclosure for financial instruments are described below:

Cash and due from financial institutions – For cash and due from financial institutions, the current carrying amount is a reasonable estimate of fair value.

Time deposits with financial institutions – The fair value of fixed rate time deposits is estimated by discounting the future cash flows using the current rates for the same remaining maturities. The fair value of variable rate time deposits approximates carrying value.

Securities – The fair value of securities is determined using quoted prices, when available in an active market. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or a discounted cash flows model.

Federal Home Loan Bank stock – For restricted equity securities, the carrying value approximates fair value.

Loans, net – The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of variable rate loans approximates carrying value.

Deposits – The carrying value of noninterest-bearing deposits approximates fair value. The fair value of fixed rate deposits is estimated by discounting the future cash flows using the current rates for the same remaining maturities.

Federal funds purchased and securities sold under agreements to repurchase – For federal funds purchased and securities sold under agreements to repurchase, the carrying value approximates fair value.

Federal Home Loan Bank borrowings – The estimated fair value of fixed rate advances from the FHLB is determined by discounting the future cash flows of existing advances using rates currently available on advances from the FHLB having similar characteristics. Adjustable rate advances’ carrying value approximates fair value.

Accrued interest – The carrying amounts of accrued interest approximate fair value.

Off-balance sheet items – The fair value of off-balance-sheet items is based on current fees or cost that would be charged to enter into or terminate such arrangements. There were not considered material and are not presented in the below tables.

The estimated fair value of financial instruments is as follows:

	Fair Value	Carrying			Estimated
March 31, 2015	Hierarchy Level	Amount			Fair Value
Financial assets:
Cash and due from financial institutions	Level 1	$	20,234,883		$	20,235,000
Time deposits with financial institutions	Level 2	500,000			500,000
Securities available-for-sale	See previous table	547,123			547,000
Securities held-to-maturity	Level 2	3,386,205			3,411,000
Federal Home Loan Bank stock	Level 1	225,900			226,000
Loans, net	Level 2	164,924,682			162,817,000
Accrued interest receivable	Level 1	1,055,697			1,056,000
Financial liabilities:
Noninterest-bearing deposits	Level 2	(22,467,002		)	(22,467,000		)
Interest-bearing deposits	Level 2	(155,247,597		)	(154,383,000		)
Accrued interest payable and other liabilities	Level 1	(1,304,241		)	(1,304,000		)


	Fair Value	Carrying			Estimated
June 30, 2014	Hierarchy Level	Amount			Fair Value

Financial assets:
Cash and due from financial institutions	Level 1	$	7,776,305		$	7,776,000
Time deposits with financial institutions	Level 2	1,250,000			1,250,000
Securities available-for-sale	See previous table	882,308			882,000
Securities held-to-maturity	Level 2	3,642,304			3,668,000
Federal Home Loan Bank stock	Level 1	549,600			550,000
Loans, net	Level 2	157,509,440			155,197,000
Accrued interest receivable	Level 1	983,958			984,000
Financial liabilities:
Noninterest-bearing deposits	Level 2	(20,582,628		)	(20,583,000		)
Interest-bearing deposits	Level 2	(129,180,665		)	(127,003,000		)
Federal Home Loan Bank borrowings	Level 2	(10,767,815		)	(10,745,000		)
Accrued interest payable and other liabilities	Level 1	(991,894		)	(992,000		)