NOTE

– FAIR VALUES OF FINANCIAL INSTRUMENTS

The following table presents information about assets and liabilities measured at fair value on a recurring and non-recurring basis and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair values as of

June 30, 2020

and

December 31, 2019.

	Fair Value Measurements Using
	Quoted Prices		Significant
	in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	Level 1		Level 2		Level 3		Fair Value

June 30, 2020:
Recurring basis
Mortgage-backed securities	$	-	$	31,889,027	$	-	$	31,889,027
U.S. Government agencies		-		924,286		-		924,286
Municipal obligations		-		30,754,968		-		30,754,968
Nonrecurring basis
Impaired loans		-		-		3,401,448		3,401,448

Totals	$	-	$	63,568,281	$	3,401,448	$	66,969,729

December 31, 2019:
Recurring basis
Mortgage-backed securities	$	-	$	31,018,748	$	-	$	31,018,748
U.S. Government agencies		-		1,079,447		-		1,079,447
Municipal obligations		-		12,418,983		-		12,418,983
Nonrecurring basis
Impaired loans		-		-		3,505,288		3,505,288

Totals	$	-	$	44,517,178	$	3,505,288	$	48,022,466

The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because

market exists for certain of these financial instruments and because management does

not

intend to sell these financial instruments, the Bank does

not

know whether the fair values shown represent values at which the respective financial instruments could be sold individually or in the aggregate.

There were

transfers between levels of the fair value hierarchy during the

three

six

months ended

June 30, 2020

2019.

The following methods and assumptions were used to estimate the fair value of the classes of financial instruments shown:

Available-for-sale Securities –

Where quoted market prices are available in an active market, securities are classified within Level

of the valuation hierarchy. Level

securities include highly-liquid government bonds, mortgage products 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 flows. Level

securities include certain collateralized mortgage and debt obligations and certain municipal securities. In certain cases, where Level

or Level

inputs are

not

available, securities are classified within Level

of the hierarchy and include certain residual municipal securities and other less liquid securities.

Loans Held for Investment, Net –

Loans held for investment are generally

not

recorded at fair value on a recurring basis. Periodically, the Bank records nonrecurring adjustments to the carrying value of these loans based on fair value measurements for loans subject to impairment. The fair value of impaired loans is typically determined using a combination of observable inputs, such as interest rates, contract terms, appraisals of collateral supporting the loan and recent comparable sales of similar properties, and unobservable inputs such as creditworthiness, disposition costs and underlying cash flows associated with the loan. Since the estimates of fair value utilized for loans also involve unobservable inputs, valuations of impaired loans have been classified as Level

The following table presents the significant unobservable inputs used in the fair value measurements for Level

financial assets measured on a non-recurring basis:

	Fair Value		Valuation Methodologies	Valuation Model	Unobservable Input Valuation
At June 30, 2020
Impaired loans
Commercial real estate	$	2,578,003	Appraisal	Appraisal discount and estimated selling costs	17	-	18%
One- to four-family residential real estate		823,445	Appraisal	Appraisal discount and estimated selling costs	17	-	18%
Total Impaired Loans	$	3,401,448


At December 31, 2019
Impaired loans
Commercial real estate	$	2,718,731	Appraisal	Appraisal discount and estimated selling costs	17	-	18%
One- to four-family residential real estate		786,557	Appraisal	Appraisal discount and estimated selling costs	17	-	18%
Total Impaired Loans	$	3,505,288

The following table presents estimated fair values of the Company's financial instruments at

June 30, 2020

and

December 31, 2019.

					Quoted Prices		Significant
					in Active		Other		Significant
					Markets for		Observable		Unobservable
	Carrying				Identical Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
At June 30, 2020:
Financial assets:
Cash and due from banks	$	6,810	$	6,810	$	6,810	$	-	$	-
Interest-bearing deposits with banks		10,635		10,635		10,635		-		-
Available-for-sale securities		63,568		63,568		-		63,568		-
Loans held for investment, net		347,372		346,498		-		-		346,498
Stock in financial institutions		4,053		4,053		-		4,053		-

Financial liabilities:
Demand deposits, savings and NOW deposits		253,181		252,132		252,132		-		-
Time deposits		77,754		78,368		-		78,368		-
Federal Home Loan Bank advances		75,000		75,187		-		75,187		-

At December 31, 2019
Financial assets:
Cash and due from banks	$	4,496	$	4,496	$	4,496	$	-	$	-
Interest-bearing deposits with banks		24,990		24,990		24,990		-		-
Available-for-sale securities		44,517		44,517		-		44,517		-
Loans held for investment, net		291,739		292,246		-		-		292,246
Stock in financial institutions		4,017		4,017		-		4,017		-

Financial liabilities:
Demand deposits, savings and NOW deposits		222,509		214,611		214,611		-		-
Time deposits		81,388		81,638		-		81,638		-
Federal Home Loan Bank advances		40,000		40,075		-		40,075		-