Fair Value Measurements and Disclosure (Tables)

9 Months Ended

Sep. 30, 2016

The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized at the periods indicated:



September 30, 2016
(in 000's)	Carrying Amount		Estimated Fair Value		Quoted Prices In Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Financial Assets:
Cash and cash equivalents	$	111,747	$	111,747	$	111,747	$	—	$	—
Interest-bearing deposits	1,534		1,534		—		1,534		—
Investment securities	60,388		60,388		3,872		56,516		—
Loans	551,733		550,680		—		—		550,680
Accrued interest receivable	3,581		3,581		—		3,581		—
Financial Liabilities:
Deposits:
Noninterest-bearing	283,462		283,462		283,462		—		—
NOW and money market	238,473		238,473		238,473		—		—
Savings	68,779		68,779		68,779		—		—
Time deposits	80,572		80,552		—		—		80,552
Total deposits	671,286		671,266		590,714				80,552
Junior subordinated debt	8,262		8,262		—		—		8,262
Accrued interest payable	39		39		—		39		—



December 31, 2015
(in 000's)	Carrying Amount		Estimated Fair Value		Quoted Prices In Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Financial Assets:
Cash and cash equivalents	$	125,751	$	125,751	$	125,751	$	—	$	—
Interest-bearing deposits	1,528		1,528		—		1,528		—
Investment securities	30,893		30,893		3,812		27,081		—
Loans	505,663		503,047		—		—		503,047
Accrued interest receivable	2,220		2,220		—		2,220		—
Financial Liabilities:
Deposits:
Noninterest-bearing	262,168		262,168		262,168		—		—
NOW and money market	226,886		226,886		226,886		—		—
Savings	63,592		63,592		63,592		—		—
Time deposits	69,159		69,031		—		—		69,031
Total deposits	621,805		621,677		552,646		—		69,031
Junior subordinated debt	8,300		8,300		—		—		8,300
Accrued interest payable	29		29		—		29		—

Description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the company's assets and liabilities classified as level 3 and measured at fair value on a recurring basis

The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at September 30, 2016 and 2015:



September 30, 2016				December 31, 2015
Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average	Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average
Junior Subordinated Debt	Discounted cash flow	Discount Rate	5.83%	Junior Subordinated Debt	Discounted cash flow	Discount Rate	6.82%

Assets and liabilities measured at fair value on recurring and non-recurring basis

The following tables summarize the Company’s assets and liabilities that were measured at fair value on a recurring and non-recurring basis as of September 30, 2016 (in 000’s):



Description of Assets	September 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
AFS Securities (2):
U.S. Government agencies	$	23,922	$	—	$	23,922	$	—
U.S. Government collateralized mortgage obligations	32,594		—		32,594		—
Mutual Funds	3,872		3,872		—		—
Total AFS securities	$	60,388	$	3,872	$	56,516	$	—
Impaired loans (1):
Commercial and industrial	301		—		—		301
Real estate mortgage	—		—		—		—
RE construction & development	—		—		—		—
Agricultural	—		—		—		—
Installment/Other	—		—		—		—
Total impaired loans	$	301	$	—	$	—	$	301
Other real estate owned (1)	—		—		—		—
Total	$	60,689	$	3,872	$	56,516	$	301



Description of Liabilities	September 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Junior subordinated debt (2)	$	8,262	—	—	$	8,262
Total	$	8,262	—	—	$	8,262

(1)Nonrecurring

(2)Recurring

The following tables summarize the Company’s assets and liabilities that were measured at fair value on a recurring and non-recurring basis as of December 31, 2015 (in 000’s):



Description of Assets	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
AFS Securities (2):
U.S. Government agencies	$	10,123	$	—	$	10,123	$	—
U.S. Government collateralized mortgage obligations	16,958		—		16,958		—
Mutual Funds	3,812		3,812		—		—
Total AFS securities	30,893		3,812		27,081		$	—
Impaired Loans (1):
Commercial and industrial	—		—		—		—
Real estate mortgage	—		—		—		—
RE construction & development	—		—		—		—
Agricultural	—		—		—		—
Installment/Other	—		—		—		—
Total impaired loans	$	—	$	—	$	—	$	—
Other real estate owned (1)	9,208		—		—		9,208
Total	$	40,101	$	3,812	$	27,081	$	9,208



Description of Liabilities	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Junior subordinated debt (2)	$	8,300	$	—	$	—	$	8,300
Total	$	8,300	$	—	$	—	$	8,300

(1)Nonrecurring

(2)Recurring

Fair value inputs, assets, quantitative information

The following table presents quantitative information about Level 3 fair value measurements for the Company's assets measured at fair value on a non-recurring basis at September 30, 2016 and December 31, 2015 (in 000's).



September 30, 2016
Financial Instrument	Fair Value		Valuation Technique	Unobservable Input	Range, Weighted Average
Impaired Loans:
Commercial and industrial	$	301	Sales Comparison Approach	Adjustment for difference between comparable sales	7%-29%, 19.1%



December 31, 2015
Financial Instrument	Fair Value		Valuation Technique	Unobservable Input	Range, Weighted Average
Other real estate owned:
Real estate construction	$	9,208	Discounted cash flow	Discount rate	1%-10%, 8.49%

Significant unobservable inputs (level 3) on a recurring basis

The following tables provide a reconciliation of assets and liabilities at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine months ended September 30, 2016 and 2015 (in 000’s):



	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016			Three Months Ended September 30, 2015			Nine Months Ended September 30, 2015
Reconciliation of Liabilities:	Junior Subordinated Debt			Junior Subordinated Debt			Junior Subordinated Debt			Junior Subordinated Debt
Beginning balance	$	7,837		$	8,300		$	9,916		$	10,115
Total gains included in earnings	(423		)	48			148			346
Canceled debt	—			—			(1,122		)	(1,122		)
Gain on redemption of liability	—			—			78			78
Capitalized interest	848			(86		)	(1,140		)	(1,537		)
Ending balance	$	8,262		$	8,262		$	7,880		$	7,880
The amount of total (loss) gains for the period included in earnings attributable to the change in unrealized gains or losses relating to liabilities still held at the reporting date	$	(423	)	$	48		$	148		$	346

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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