FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 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 September 30, 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)
Mortgage-backed securities, residential	$	203,524	$	—	$	203,524	$	—
Obligations of states and political subdivisions	47,270		—		47,270		—
Corporate bonds and notes	250		—		250		—
SBA loan pools	16,485		—		16,485		—
Total available for sale securities	$	267,529	$	—	$	267,529	$	—

Equity investments, at fair value	$	1,231	$	1,231	$	—	$	—
Derivative assets	7,885		—		7,885		—

Financial Liabilities:
Derivative liabilities	$	8,311	$	—	$	7,885	$	426

There were no transfers between Level 1 and Level 2 during the three and nine month periods ended September 30, 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, at fair value	$	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 September 30, 2019 and 2018 (in thousands):



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	September 30, 2019		September 30, 2018		September 30, 2019			September 30, 2018
Balance of recurring Level 3 assets at July 1	$	—	$	—	$	(365	)	$	(18	)
Derivative instruments entered into	—		—		(7		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		(54		)	5
Included in other comprehensive income	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance of recurring Level 3 assets at September 30	$	—	$	—	$	(426	)	$	(13	)

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 nine month periods ended September 30, 2019 and September 30, 2018 (in thousands):



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	September 30, 2019		September 30, 2018		September 30, 2019			September 30, 2018
Balance of recurring Level 3 assets at January 1	$	—	$	—	$	(140	)	$	(75	)
Derivative instruments entered into	—		—		(42		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		(244		)	62
Included in other comprehensive income	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance of recurring Level 3 assets at September 30	$	—	$	—	$	(426	)	$	(13	)

Reconciliation of liabilities measured at fair value



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	September 30, 2019		September 30, 2018		September 30, 2019			September 30, 2018
Balance of recurring Level 3 assets at July 1	$	—	$	—	$	(365	)	$	(18	)
Derivative instruments entered into	—		—		(7		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		(54		)	5
Included in other comprehensive income	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance of recurring Level 3 assets at September 30	$	—	$	—	$	(426	)	$	(13	)



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	September 30, 2019		September 30, 2018		September 30, 2019			September 30, 2018
Balance of recurring Level 3 assets at January 1	$	—	$	—	$	(140	)	$	(75	)
Derivative instruments entered into	—		—		(42		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		(244		)	62
Included in other comprehensive income	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance of recurring Level 3 assets at September 30	$	—	$	—	$	(426	)	$	(13	)

Nonrecurring fair value measurement, valuation techniques

The following table presents information related to Level 3 recurring fair value measurements at September 30, 2019 and December 31, 2018 (in thousands):



Description	Fair Value at September 30, 2019		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at September 30, 2019
Derivative liabilities	$	426	Historical trend	Credit default rate	5.65% - 5.65% [5.65%]



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 September 30, 2019 and December 31, 2018 (in thousands):



Description	Fair Value at September 30, 2019		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at September 30, 2019
Impaired loans:
Commercial mortgages:
Commercial mortgages	$	7,627	Sales comparison	Discount to appraised value	10.00% - 15.43% [10.13%]
	$	7,627

OREO:
Commercial mortgages:
Commercial mortgages	$	62	Sales comparison	Discount to appraised value	22.00% - 22.00% [22.00%]
Residential mortgages	62		Sales comparison	Discount to appraised value	20.80% -20.80% [20.80%]
Consumer loans:
Home equity lines and loans	86		Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
	$	210



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 September 30, 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	$	7,627	$	—	$	—	$	7,627	$	(1,673	)
Total impaired loans	$	7,627	$	—	$	—	$	7,627	$	(1,673	)
Other real estate owned:
Commercial mortgages:
Commercial mortgages	$	62	$	—	$	—	$	62	$	—
Residential mortgages	62		—		—		62		—
Consumer loans:
Home equity lines and loans	86		—		—		86		—
Total other real estate owned, net	$	210	$	—	$	—	$	210	$	—



			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 September 30, 2019 and December 31, 2018, are as follows (in thousands):



	September 30, 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	$	36,497	$	36,497	$	—	$	—	$	36,497
Interest-earning deposits in other financial institutions	109,801		109,801		—		—		109,801
Equity investments	834		834		—		—		834
Securities held to maturity	3,420		—		2,318		1,125		3,443
FHLBNY and FRBNY stock	3,091		—		—		—		N/A
Loans, net and loans held for sale	1,284,028		—		—		1,262,536		1,262,536
Accrued interest receivable	4,714		89		943		3,682		4,714

Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,406,681	$	1,406,681	$	—	$	—	$	1,406,681
Time deposits	169,825		—		172,617		—		172,617
Accrued interest payable	326		30		296		—		326

(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	834		834		—		—		834
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

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