Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2014

Assets Measured at Fair Value on Recurring Basis

The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of September 30, 2014 and December 31, 2013 (in thousands):



			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2014
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	94,659	$	—	$	94,659	$	—
Obligations of states and political subdivisions	74,996		—		74,996		—
Mortgage-backed securities	201,459		—		201,459		—
Trust preferred securities	462		—		—		462
Other securities	4,056		58		3,998		—
Total available-for-sale securities	$	375,632	$	58	$	375,112	$	462
December 31, 2013
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	190,368	$	—	$	190,368	$	—
Obligations of states and political subdivisions	64,562		—		64,562		—
Mortgage-backed securities	227,601		—		227,601		—
Trust preferred securities	191		—		—		191
Other securities	6,002		67		5,935		—
Total available-for-sale securities	$	488,724	$	67	$	488,466	$	191

Fair Value of Assets Measured on a Recurring Basis Using Significant Unobservable Inputs

The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2014 and 2013 is summarized as follows (in thousands):



	Trust Preferred Securities
	September 30, 2014			September 30, 2013
Beginning balance	$	191		$	585
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Total gains or losses:
Included in net income	—			—
Included in other comprehensive income (loss)	474			911
Purchases, issuances, sales and settlements:
Purchases	—			—
Issuances	—			—
Sales	—			(1,138		)
Settlements	(203		)	(184		)
Ending balance	$	462		$	174
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—		$	—

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2014 and December 31, 2013 (in thousands):



	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2014
Impaired loans (collateral dependent)	$	1,327	$	—	$	—	$	1,327
Foreclosed assets held for sale	222		—		—		222
December 31, 2013
Impaired loans (collateral dependent)	$	1,383	$	—	$	—	$	1,383
Foreclosed assets held for sale	172		—		—		172

Significant Assumptions Used in Valuation of Level 3 Financial Instruments

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill.



	Fair Value at September 30, 2014		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Trust Preferred Securities	$	462	Discounted cash flow	Discount rate	12.4%
				Constant prepayment rate (1)	1.3%
				Cumulative projected prepayments	24.3%
				Probability of default	0.2%
				Projected cures given deferral	43.5%
				Loss severity	97.1%
Impaired loans (collateral dependent)	$	1,327	Third party valuations	Discount to reflect realizable value	0	%	-	40%	(	20%	)
Foreclosed assets held for sale	$	222	Third party valuations	Discount to reflect realizable value less estimated selling costs	0	%	-	40%	(	35%	)



	Fair Value at December 31, 2013		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Trust Preferred Securities	$	191	Discounted cash flow	Discount rate	15.5%
				Constant prepayment rate (1)	1.3%
				Cumulative projected prepayments	23.5%
				Probability of default	0.2%
				Projected cures given deferral	50.7%
				Loss severity	96.1%
Impaired loans (collateral dependent)	$	1,383	Third party valuations	Discount to reflect realizable value	0	%	-	40%	(	20%	)
Foreclosed assets held for sale	$	172	Third party valuations	Discount to reflect realizable value less estimated selling costs	0	%	-	40%	(	35%	)


(1)	Every five years

Carrying Amounts and Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following tables present estimated fair values of the Company’s financial instruments at September 30, 2014 and December 31, 2013 in accordance with FAS 107-1 and APB 28-1, codified with ASC 805 (in thousands):



	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
September 30, 2014
Financial Assets
Cash and due from banks	$	57,077	$	57,077	$	57,077	$	—	$	—
Federal funds sold	495		495		495		—		—
Available-for-sale securities	375,632		375,632		58		375,112		462
Held-to-maturity securities	53,594		53,440		—		53,440		—
Loans held for sale	1,680		1,680		—		1,680		—
Loans net of allowance for loan losses	1,025,623		1,035,552		—		—		1,035,552
Interest receivable	6,976		6,976		—		6,976		—
Federal Reserve Bank stock	1,522		1,522		—		1,522		—
Federal Home Loan Bank stock	3,391		3,391		—		3,391		—
Financial Liabilities
Deposits	$	1,298,840	$	1,298,767	$	—	$	1,057,612	$	241,155
Securities sold under agreements to repurchase	88,066		88,071		—		88,071		—
Interest payable	311		311		—		311		—
Federal Home Loan Bank borrowings	15,000		15,428		—		15,428		—
Junior subordinated debentures	20,620		12,397		—		12,397		—



December 31, 2013
Financial Assets
Cash and due from banks	$	64,605	$	64,605	$	64,605	$	—	$	—
Federal funds sold	497		497		497		—		—
Available-for-sale securities	488,724		488,724		67		488,466		191
Loans held for sale	514		514		—		514		—
Loans net of allowance for loan losses	969,041		964,253		—		—		964,253
Interest receivable	6,614		6,614		—		6,614		—
Federal Reserve Bank stock	1,522		1,522		—		1,522		—
Federal Home Loan Bank stock	3,391		3,391		—		3,391		—
Financial Liabilities
Deposits	$	1,287,616	$	1,287,887	$	—	$	1,058,965	$	228,922
Securities sold under agreements to repurchase	119,187		119,190		—		119,190		—
Interest payable	277		277		—		277		—
Federal Home Loan Bank borrowings	20,000		20,530		—		20,530		—
Junior subordinated debentures	20,620		12,041		—		12,041		—

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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