Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Measurements by Level of Valuation Inputs

The following tables summarize financial assets and financial liabilities measured at fair value as of March 31, 2019 and December 31, 2018, 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 three months ended March 31, 2019 or 2018.


			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
(Dollars in thousands)	March 31,		for Identical		Observable		Unobservable
	2019		Assets		Inputs		Inputs
Measured at fair value on a recurring basis:
Debt securities available-for-sale:
Obligations of U.S. Government agencies and corporations	$	23,671	$	-	$	23,671	$	-
Obligations of state and political subdivisions		6,720		-		6,720		-
Mortgage-backed securities		109,817		-		109,817		-

Measured at fair value on a non-recurring basis:
Impaired loans	$	1,044	$	-	$	-	$	1,044
Other real estate owned		149		-		-		149
Mortgage servicing rights		193		-		-		193


			(Level 1)		(Level 2)		(Level 3)
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Other
(Dollars in thousands)	December 31,		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	$	23,266	$	-	$	23,266	$	-
Obligations of state and political subdivisions		18,181		-		18,181		-
Mortgage-backed securities		100,506		-		100,506		-

Measured at fair value on a non-recurring basis:
Impaired loans	$	1,104	$	-	$	-	$	1,104
Other real estate owned		149		-		-		149
Mortgage servicing rights		200		-		-		200

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)
March 31, 2019	Fair Value Estimate		Valuation Technique	Unobservable Input	Range	Weighted Average
Impaired loans	$	1,044	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)	0% - 15%	14%
Other real estate owned		149	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)	2%	2%
Mortgage servicing rights		193	Multiple of annual servicing fee	Estimated pre-payment speed, based on rate and term	300% - 400%	370%


(Dollars in thousands)
December 31, 2018	Fair Value Estimate		Valuation Technique	Unobservable Input	Range	Weighted Average
Impaired loans	$	1,104	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)	0% - 15%	14%
Other real estate owned		149	Appraisal of collateral (1)	Appraisal and liquidation adjustments (2)	2%	2%
Mortgage servicing rights		200	Multiple of annual servicing fee	Estimated pre-payment speed, based on rate and term	300% - 400%	369%

(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
		March 31, 2019				December 31, 2018
(Dollars in thousands)		Carrying		Fair		Carrying		Fair
		Value		Value		Value		Value
Financial assets:
Cash and due from banks	$	15,002	$	15,002	$	15,617	$	15,617
Interest bearing deposits with banks		5,539		5,539		110		110
Federal funds sold		3,736		3,736		729		729
Interest bearing time deposits with banks		2,800		2,792		3,290		3,290
Securities		141,335		141,335		141,953		141,953
Restricted investment in FHLB stock		2,535		2,535		2,441		2,441
Loans, net of allowance for loan losses		411,985		412,579		414,597		415,195
Mortgage servicing rights		193		193		200		200
Accrued interest receivable		1,709		1,709		1,681		1,681

Financial liabilities:
Non-interest bearing deposits	$	128,670	$	128,670	$	126,057		126,057
Interest bearing deposits		395,186		394,889		395,665		395,226
Securities sold under agreements to repurchase		2,683		2,683		2,911		2,911
Short-term borrowings		-		-		11,600		11,600
Long-term debt		25,000		25,058		15,000		14,958
Other interest bearing liabilities		1,572		1,573		1,596		1,597
Accrued interest payable		415		415		289		289

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

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

The tables exclude 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
March 31, 2019
Financial instruments - Assets
Interest bearing time deposits with banks	$	2,800	$	2,792	$	-	$	2,792	$	-
Loans, net of allowance for loan losses		411,985		412,579		-		-		412,579
Financial instruments - Liabilities
Interest bearing deposits	$	395,186	$	394,889	$	-	$	394,889	$	-
Long-term debt		25,000		25,058		-		25,058		-
Other interest bearing liabilities		1,572		1,573		-		1,573		-


					(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, 2018
Financial instruments - Assets
Interest bearing time deposits with banks	$	3,290	$	3,290	$	-	$	3,290	$	-
Loans, net of allowance for loan losses		414,597		415,195		-		-		415,195
Financial instruments - Liabilities
Interest bearing deposits	$	395,665	$	395,226	$	-	$	395,226	$	-
Long-term debt		15,000		14,958		-		14,958		-
Other interest bearing liabilities		1,596		1,597		-		1,597		-

- 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