FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2019

Summary of assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):



			Fair Value Measurement at March 31, 2019 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	5,488	$	—	$	5,488	$	—
Mortgage-backed securities, residential	203,938		—		203,938		—
Obligations of states and political subdivisions	48,332		—		48,332		—
Corporate bonds and notes	249		—		249		—
SBA loan pools	8,714		—		8,714		—
Total available for sale securities	$	266,721	$	—	$	266,721	$	—

Equity investments	$	1,198	$	1,198	$	—	$	—
Derivative assets	4,091		—		4,091		—

Financial Liabilities:
Derivative liabilities	$	4,321	$	—	$	4,091	$	230

There were no transfers between Level 1 and Level 2 during the three month period ended March 31, 2019.



			Fair Value Measurement at December 31, 2018 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	5,472	$	—	$	5,472	$	—
Mortgage-backed securities, residential	183,192		—		183,192		—
Obligations of states and political subdivisions	44,152		—		44,152		—
Corporate bonds and notes	247		—		247		—
SBA loan pools	9,195		—		9,195		—
Total available for sale securities	$	242,258	$	—	$	242,258	$	—

Equity investments	$	1,075	$	1,075	$	—	$	—
Derivative assets	3,142		—		3,142		—

Financial Liabilities:
Derivative liabilities	$	3,282	$	—	$	3,142	$	140

Reconciliation of all assets measured at fair value

The table below presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three-month periods ended March 31, 2019 and 2018 (in thousands):



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	March 31, 2019		March 31, 2018		March 31, 2019			March 31, 2018
Balance of recurring Level 3 assets at January 1	$	—	$	—	$	(140	)	$	(75	)
Derivative instruments entered into	—		—		(24		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		(66		)	25
Included in other comprehensive income	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance of recurring Level 3 assets at March 31,	$	—	$	—	$	(230	)	$	(50	)

Reconciliation of liabilities measured at fair value



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	March 31, 2019		March 31, 2018		March 31, 2019			March 31, 2018
Balance of recurring Level 3 assets at January 1	$	—	$	—	$	(140	)	$	(75	)
Derivative instruments entered into	—		—		(24		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		(66		)	25
Included in other comprehensive income	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance of recurring Level 3 assets at March 31,	$	—	$	—	$	(230	)	$	(50	)

Nonrecurring fair value measurement, valuation techniques

The following table presents information related to Level 3 recurring fair value measurements at March 31, 2019 and December 31, 2018 (in thousands):



Description	Fair Value at March 31, 2019		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at March 31, 2019
Derivative liabilities	$	230	Historical trend	Credit default rate	7.27% - 7.27% [7.27%]



Description	Fair Value at December 31, 2018		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at December 31, 2018
Derivative liabilities	$	140	Historical trend	Credit default rate	7.46% - 7.46% [7.46%]

The following tables present information related to Level 3 non-recurring fair value measurement at March 31, 2019 and December 31, 2018 (in thousands):



Description	Fair Value at March 31, 2019		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at March 31, 2019
Impaired loans:
Commercial mortgages:
Commercial mortgages	$	2,913	Sales comparison	Discount to appraised value	10.00% - 11.76% [10.89%]
	$	2,913

OREO:
Commercial mortgages:
Commercial mortgages	$	62	Sales comparison	Discount to appraised value	22.00% - 22.00% [22.00%]
Residential mortgages	27		Sales comparison	Discount to appraised value	13.14% -13.14% [13.14%]
Consumer loans:
Home equity lines and loans	55		Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
	$	144



Description	Fair Value at December 31, 2018		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at December 31, 2018
Impaired loans:
Commercial and agricultural:
Commercial and industrial	$	1,456	Sales comparison	Discount to appraised value	11.76% - 11.76% [11.76%]
	$	1,456

OREO:
Commercial mortgages:
Commercial mortgages	$	213	Sales comparison	Discount to appraised value	10.00% - 24.80% [17.72%]
Residential mortgages	204		Sales comparison	Discount to appraised value	20.80% - 39.78% [22.94%]
Consumer loans:
Home equity lines and loans	157		Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
	$	574

Summary of assets and liabilities measured at fair value on a non-recurring basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below (in thousands):



			Fair Value Measurement at March 31, 2019 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
Impaired Loans:
Commercial mortgages:
Commercial mortgages	$	2,913	$	—	$	—	$	2,913	$	(1,785	)
Total impaired loans	$	2,913	$	—	$	—	$	2,913	$	(1,785	)
Other real estate owned:
Commercial mortgages:
Commercial mortgages	$	62	$	—	$	—	$	62	$	—
Residential mortgages	27		—		—		27		—
Consumer loans:
Home equity lines and loans	55		—		—		55		—
Total other real estate owned, net	$	144	$	—	$	—	$	144	$	—



			Fair Value Measurement at December 31, 2018 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
Impaired Loans:
Commercial mortgages:
Commercial mortgages	$	1,456	$	—	$	—	$	1,456	$	240
Total impaired loans	$	1,456	$	—	$	—	$	1,456	$	240
Other real estate owned:
Commercial mortgages:
Commercial mortgages	$	213	$	—	$	—	$	213	$	—
Residential mortgages	204		—		—		204		—
Consumer loans:
Home equity lines and loans	157		—		—		157		(14		)
Total other real estate owned, net	$	574	$	—	$	—	$	574	$	(14	)

Carrying value and estimated fair value of financial instruments

The carrying amounts and estimated fair values of other financial instruments, at March 31, 2019 and December 31, 2018, are as follows (in thousands):



	March 31, 2019
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	28,153	$	28,153	$	—	$	—	$	28,153
Interest-earning deposits in other financial institutions	97,657		97,657		—		—		97,657
Equity investments	1,198		1,198		—		—		1,198
Securities available for sale	266,721		—		266,721		—		266,721
Securities held to maturity	3,861		—		1,851		2,006		3,857
FHLBNY and FRBNY stock	3,143		—		—		—		N/A
Loans, net and loans held for sale	1,279,950		—		—		1,277,534		1,277,534
Accrued interest receivable	4,940		18		927		3,995		4,940
Derivative assets	4,091		—		4,091		—		4,091

Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,409,509	$	1,409,509	$	—	$	—	$	1,409,509
Time deposits	156,993		—		157,939		—		157,939
Accrued interest payable	279		41		238		—		279
Derivative liabilities	4,321		—		4,091		230		4,321

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.



	December 31, 2018
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	33,040	$	33,040	$	—	$	—	$	33,040
Interest-earning deposits in other financial institutions	96,932		96,932		—		—		96,932
Equity investments	1,075		1,075		—		—		1,075
Securities available for sale	242,258		—		242,258		—		242,258
Securities held to maturity	4,875		—		1,838		3,020		4,858
FHLBNY and FRBNY stock	3,138		—		—		—		N/A
Loans, net and loans held for sale	1,293,464		—		—		1,287,495		1,287,495
Accrued interest receivable	4,480		80		697		3,703		4,480
Derivative assets	3,142		—		3,142		—		3,142

Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,419,011	$	1,419,011	$	—	$	—	$	1,419,011
Time deposits	150,226		—		150,938		—		150,938
Accrued interest payable	232		26		206		—		232
Derivative liabilities	3,282		—		3,142		140		3,282