Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Measurements by Level of Valuation Inputs

The following tables summarize financial assets and financial liabilities measured at fair value as of June 30, 2018 and December 31, 2017, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value. There were no transfers of assets between fair value Level 1 and Level 2 during the six months ended June 30, 2018 or 2017.


			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
(Dollars in thousands)	June 30,		for Identical		Observable		Unobservable
	2018		Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies and corporations	$	33,714	$	-	$	33,714	$	-
Obligations of state and political subdivisions		20,286		-		20,286		-
Mortgage-backed securities		89,237		-		89,237		-
Equity securities		1,166		1,166		-		-

Measured at fair value on a non-recurring basis:
Impaired loans	$	1,306	$	-	$	-	$	1,306
Mortgage servicing rights		215		-		-		215


			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
(Dollars in thousands)	December 31,		for Identical		Observable		Unobservable
	2017		Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies and corporations	$	34,214	$	-	$	34,214	$	-
Obligations of state and political subdivisions		24,981		-		24,981		-
Mortgage-backed securities		93,510		-		93,510		-
Equity securities available-for-sale		1,119		1,119		-		-

Measured at fair value on a non-recurring basis:
Impaired loans	$	1,574	$	-	$	-	$	1,574
Other real estate owned		27		-		-		27
Mortgage servicing rights		225		-		-		225

Quantitative Information for Assets Measured at Fair Value

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs have been used to determine fair value:


(Dollars in thousands)
June 30, 2018	Fair Value Estimate		Valuation Technique	Unobservable Input	Range	Weighted Average
Impaired loans	$	1,306	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)	0% - 16%	15%
Mortgage servicing rights		215	Multiple of annual servicing fee	Estimated pre-payment speed, based on rate and term	300% - 400%	371%


(Dollars in thousands)
December 31, 2017	Fair Value Estimate		Valuation Technique	Unobservable Input	Range	Weighted Average
Impaired loans	$	1,574	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)	0% - 13%	8%
Other real estate owned		27	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)	22%	22%
Mortgage servicing rights		225	Multiple of annual servicing fee	Estimated pre-payment speed, based on rate and term	300% - 400%	371%

(1)

Fair value is generally determined through independent appraisals of the underlying collateral that generally include various Level 3 inputs which are not identifiable.

(2)

Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

Estimated Fair Values of Financial Instruments

The estimated fair values of the Company’s financial instruments are as follows:


	Financial Instruments
		June 30, 2018				December 31, 2017
(Dollars in thousands)		Carrying		Fair		Carrying		Fair
		Value		Value		Value		Value
Financial assets:
Cash and due from banks	$	15,956	$	15,956	$	9,839	$	9,839
Interest bearing deposits with banks		291		291		58		58
Federal funds sold		915		915		-		-
Interest bearing time deposits with banks		3,780		3,755		350		350
Equity securities		1,166		1,166		-		-
Available for sale securities		143,237		143,237		153,824		153,824
Restricted investment in FHLB stock		2,498		2,498		3,104		3,104
Loans, net of allowance for loan losses		418,653		410,158		380,965		372,906
Mortgage servicing rights		215		215		225		225
Accrued interest receivable		1,675		1,675		1,582		1,582

Financial liabilities:
Non-interest bearing deposits	$	122,101	$	122,101	$	115,911	$	115,911
Interest bearing deposits		410,338		409,610		361,757		361,468
Securities sold under agreements to repurchase		3,843		3,843		9,769		9,769
Short-term borrowings		7,500		7,500		12,000		12,000
Long-term debt		15,000		14,896		25,000		24,885
Other interest bearing liabilities		1,587		1,589		1,593		1,595
Accrued interest payable		298		298		300		300

Off-balance sheet financial instruments:
Commitments to extend credit	$	-	$	-	$	-	$	-
Letters of credit		-		-		-		-

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

This table excludes financial instruments for which the carrying amount approximates fair value.


					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
					Active Markets		Other		Other
(Dollars in thousands)	Carrying				for Identical		Observable		Unobservable
	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
June 30, 2018
Financial instruments - Assets
Interest bearing time deposits with banks	$	3,780	$	3,755	$	-	$	3,755	$	-
Loans, net of allowance for loan losses		418,653		410,158		-		-		410,158
Financial instruments - Liabilities
Interest bearing deposits	$	410,338	$	409,610	$	-	$	409,610	$	-
Long-term debt		15,000		14,896		-		14,896		-
Other interest bearing liabilities		1,587		1,589		-		1,589		-


					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
					Active Markets		Other		Other
(Dollars in thousands)	Carrying				for Identical		Observable		Unobservable
	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
December 31, 2017
Financial instruments - Assets
Interest bearing time deposits with banks	$	350	$	350	$	-	$	350	$	-
Loans, net of allowance for loan losses		380,965		372,906		-		-		372,906
Financial instruments - Liabilities
Interest bearing deposits	$	361,757	$	361,468	$	-	$	361,468	$	-
Long-term debt		25,000		24,885		-		24,885		-
Other interest bearing liabilities		1,593		1,595		-		1,595		-

- 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.

+ References + Details