Note

12.

Financial Instruments

FASB ASC

825,

“Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or

not

recognized in the balance sheet. In cases where quoted market prices are

not

available, fair values are based on estimates using present value of future cash flows or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could

not

be realized in immediate settlement of the instruments. FASB ASC

825

excludes certain financial instruments and 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 presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company's financial instruments as of

December 31, 2020

and

December 31, 2019.

This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For non-marketable equity securities such as Federal Home Loan Bank and Federal Reserve Bank stock, the carrying amount is a reasonable estimate of the fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government supported institution or to another member institution. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having

stated maturity.

For loans, the carrying amount is net of unearned income and the allowance for loan losses. In accordance with the prospective adoption of ASU

No.

2016

01,

the fair value of loans as of

December 31, 2020

and

2019

was measured using an exit price notion.

					Fair Value Measurements
(dollars in thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

December 31, 2020

Financial Instruments – Assets
Net Loans	$	659,195	$	653,454	$	-	$	653,255	$	199

Financial Instruments – Liabilities
Time Deposits		194,419		196,522		-		196,522		-
FHLB Advances		10,000		9,765		9,765		-		-

December 31, 2019

Financial Instruments – Assets
Net Loans	$	566,460	$	557,054	$	-	$	556,851	$	203

Financial Instruments – Liabilities
Time Deposits		191,988		192,365		-		192,365		-
FHLB Advances		10,000		10,021		10,021		-		-

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, the Company

may

be required to record at fair value other assets on a nonrecurring basis, such as loans or foreclosed assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

Under FASB ASC

820,

“Fair Value Measurements and Disclosures”, the Company groups assets and liabilities at fair value in

three

levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level

– Valuation is based upon quoted prices for identical instruments traded in active markets.

Level

– Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are

not

active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level

– Valuation is generated from model-based techniques that use at least

one

significant assumption

not

observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques

may

include the use of option pricing models, discounted cash flow models and similar techniques.

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

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are

not

available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level

securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level

securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level

include asset-backed securities in less liquid markets.

Loans

The Company does

not

record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will

not

be made in accordance with the contractual terms of the loan agreement are considered impaired. If a loan is identified as individually impaired, management measures impairment in accordance with applicable accounting guidance. The fair value of impaired loans is estimated using

one

of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans

not

requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At

December 31, 2020,

a small percentage of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with accounting standards, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price the Company records the impaired loan as nonrecurring Level

When the fair value is based on either an external or internal appraisal and there is

observable market price, the Company records the impaired loan as nonrecurring Level

Derivative Assets and Liabilities

Derivative instruments held or issued by the Company for risk management purposes are traded in over-the-counter markets where quoted market prices are

not

readily available. Management engages

third

-party intermediaries to determine the fair market value of these derivative instruments and classifies these instruments as Level

Examples of Level

derivatives are interest rate swaps, caps and floors.

derivative instruments were held during the years ended

December 31, 2020

2019.

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value 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 the Company records the foreclosed asset as nonrecurring Level

When the fair value of the collateral is based on either an external or internal appraisal and there is

observable market price, the Company records the foreclosed asset as nonrecurring Level

There were

foreclosed assets held as of

December 31, 2020

2019.

Assets Recorded at Fair Value on a Recurring Basis

(dollars in thousands)	Total		Level 1		Level 2		Level 3

December 31, 2020
Investment securities available for sale
Mortgage-backed securities	$	15,684	$	-	$	15,684	$	-
Corporate securities		1,500		-		1,500		-
State and municipal securities		16,323		-		16,323		-
Total assets at fair value	$	33,507	$	-	$	33,507	$	-

December 31, 2019
Investment securities available for sale
Mortgage-backed securities	$	19,504	$	-	$	19,504	$	-
Corporate securities		1,433		-		1,433		-
State and municipal securities		11,944		-		11,944		-
Total assets at fair value	$	32,881	$	-	$	32,881	$	-

liabilities were recorded at fair value on a recurring basis as of

December 31, 2020

2019.

There were

significant transfers between levels during the years ended

December 31, 2020

2019.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company

may

be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets and liabilities that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.

liabilities were recorded at fair value on a nonrecurring basis at

December 31, 2020

2019.

Assets measured at fair value on a nonrecurring basis are included in the table below.

(dollars in thousands)	Total		Level 1		Level 2		Level 3

December 31, 2020
Impaired loans	$	199	$	-	$	-	$	199
Total assets at fair value	$	199	$	-	$	-	$	199

December 31, 2019
Impaired loans	$	203	$	-	$	-	$	203
Total assets at fair value	$	203	$	-	$	-	$	203

For Level

assets measured at fair value on a recurring or non-recurring basis as of

December 31, 2020

and

2019,

the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value at December 31, 2020		Fair Value at December 31, 2019		Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values

Impaired Loans	$	199	$	203	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0	–	10%

Foreclosed Assets	$	-	$	-	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0	–	10%