Note 15 - Fair Values Measurements and Disclosures

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

Note

1

5

. Fair Values Measurements and Disclosures 

FASB ASC Topic

820,

Fair Value Measurements and Disclosures, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and is

not

adjusted for transaction costs. This guidance also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level

1

measurement inputs) and the lowest priority to unobservable inputs (Level

3

measurement inputs). The

three

levels of the fair value hierarchy under FASB ASC

820

are described below:

Basis of Fair Value Measurement:

• Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets.

• Level 2 - Significant other observable inputs other than Level 1 prices such as quoted prices in markets that are not active, quoted prices for similar assets, or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset.

• Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

 Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Securities Available for Sale

Securities classified as available for sale are recorded at fair value on a recurring basis using pricing obtained from an independent pricing service. Where quoted market prices are available in an active market, securities are classified within Level

1.

The Company has

no

securities classified within Level

1.

If quoted market prices are

not

available, the pricing service estimates the fair values by using pricing models or quoted prices of securities with similar characteristics. For these securities, the inputs used by the pricing service to determine fair value consider observable data that

may

include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and bonds’ terms and conditions, among other things resulting in classification within Level

2.

Level

2

securities include state and municipal securities and residential mortgage-backed securities. In cases where Level

1

or Level

2

inputs are

not

available, securities are classified within Level

3.

The Company has

no

securities classified within Level

3.

Foreclosed Assets

Foreclosed assets consisting of foreclosed real estate and repossessed assets, are adjusted to fair value less estimated costs to sell upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of cost or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as non-recurring Level

2.

When an appraised value is

not

available or management determines the fair value of the collateral is further impaired below the appraised value and there is

no

observable market price, the Company records the foreclosed asset as non-recurring Level

3.

Impaired Loans

Impaired loans are evaluated and adjusted to the lower of carrying value or fair value less estimated costs to sell at the time the loan is identified as impaired. Impaired loans are carried at the lower of cost or fair value.  Fair value is measured based on the value of the collateral securing these loans. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as non-recurring Level

2.

When an appraised value is

not

available or management determines the fair value of the collateral is further impaired below the appraised value and there is

no

observable market price, the Company records the impaired loan as non-recurring Level

3.

 

Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above. Management believes it is more likely than

not

that a workout solution or liquidation of the collateral is the best use of the asset and therefore has measured fair value based on the underlying collateral of the loans.  If management were to sell the impaired loan portfolio to a

third

party instead of liquidating the collateral, the measurement of fair value could be significantly different.

The tables below present the recorded amount of assets measured at fair value on a recurring basis at

December 31, 2019

and

2018.

							Total
December 31, 201 9	Level 1		Level 2		Level 3		Fair Value
State and municipal securities available for sale	$	-	$	13,465,317	$	-	$	13,465,317
Residential mortgage-backed securities available for sale		-		11,050,442		-		11,050,442
	$	-	$	24,515,759	$	-	$	24,515,759

							Total
December 31, 201 8	Level 1		Level 2		Level 3		Fair Value
State and municipal securities available for sale	$	-	$	13,186,788	$	-	$	13,186,788
Residential mortgage-backed securities available for sale		-		12,346,979		-		12,346,979
	$	-	$	25,533,767	$	-	$	25,533,767

The tables below present the recorded amount of assets and liabilities measured at fair value on a non-recurring basis at

December 31, 2019

and

December 31, 2018.

							Total
December 31, 201 9	Level 1		Level 2		Level 3		Fair Value
Foreclosed assets	$	-	$	-	$	12,926	$	12,926
Impaired loans, net		-		-		351,236		351,236

							Total
December 31, 201 8	Level 1		Level 2		Level 3		Fair Value
Foreclosed real estate	$	-	$	-	$	78,926	$	78,926
Impaired loans, net		-		-		841,522		841,522

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level

3

inputs to determine fair value (dollars in thousands):

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value		Valuation	Unobservable
	Estimate		Techniques	Input	Range
December 31, 201 9
Foreclosed assets	$	12,926	Appraisal of collateral	Appraisal adjustments	(50)%	to	(76)%
Impaired loans, net	$	287,815	Appraisal of collateral	Appraisal adjustments		(46.67)%
Impaired loans, net	$	63,421	Discounted Future Cash Flows	Payment Stream		N/A
				Discount Rate		10%
December 31, 201 8
Foreclosed assets	$	78,926	Appraisal of collateral	Appraisal adjustments	(36)%	to	(49)%
Impaired loans, net	$	662,799	Appraisal of collateral	Appraisal adjustments	(44)%	to	(69)%
Impaired loans, net	$	54,199	Discounted Future Cash Flows	Payment Stream		N/A
				Discount Rate		10%