Fair Value Measurements |
NOTE 5 – FAIR VALUE MEASUREMENTS
The Company provides disclosures about assets and liabilities
carried at fair value. The framework provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities and lowest priority to unobservable inputs. The three
broad levels of the fair value hierarchy are described below:
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Level I: |
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Inputs to the valuation methodology are unadjusted
quoted prices for identical assets or liabilities in active markets
that the Company has the ability to access. |
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Level II: |
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Inputs to the valuation methodology include quoted
prices for similar assets or liabilities in active markets; quoted
prices for identical or similar assets or liabilities in inactive
markets; inputs other than quoted prices that are observable for
the asset or liability; and inputs that are derived principally
from or corroborated by observable market data by corroborated or
other means. If the asset or liability has a specified
(contractual) term, the Level II input must be observable for
substantially the full term of the asset or liability. |
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Level III: |
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Inputs to the valuation methodology are
unobservable and significant to the fair value measurement. |
The following table presents the assets reported on the
Consolidated Balance Sheets at their fair value on a recurring
basis as of March 31, 2019 and December 31, 2018 by level
within the fair value hierarchy. No liabilities are carried at fair
value. Financial assets and liabilities are classified in their
entirety based on the lowest level of input that is significant to
the fair value measurement. Equity securities with readily
determinable values and U.S. Treasury Notes are valued at the
closing price reported on the active market on which the individual
securities are traded. Obligations of U.S. government agencies,
mortgage-backed securities, asset-backed securities, obligations of
states and political subdivisions and corporate bonds are valued at
observable market data for similar assets. Equity securities
without readily determinable values are carried at amortized cost
adjusted for impairment and observable price changes.
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(Dollars in thousands)
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Level I |
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Level II |
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Level III |
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Total |
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March 31, 2019
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Assets:
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Securities available-for-sale
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U.S. Treasury security
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$ |
998 |
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$ |
— |
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$ |
— |
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$ |
998 |
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U.S. Government agencies
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— |
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7,248 |
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— |
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7,248 |
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Mortgage-backed securities of government agencies
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— |
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45,524 |
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— |
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45,524 |
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Asset-backed securities of government agencies
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— |
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996 |
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— |
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996 |
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State and political subdivisions
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— |
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23,319 |
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— |
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23,319 |
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Corporate bonds
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— |
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8,293 |
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— |
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8,293 |
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Total available-for-sale
securities
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$ |
998 |
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$ |
85,380 |
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$ |
— |
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$ |
86,378 |
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Equity securities
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$ |
43 |
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$ |
— |
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$ |
46 |
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$ |
89 |
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December 31, 2018
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Assets:
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Securities available-for-sale
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U.S. Treasury security
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$ |
996 |
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$ |
— |
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$ |
— |
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$ |
996 |
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U.S. Government agencies
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— |
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7,170 |
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— |
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7,170 |
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Mortgage-backed securities of government agencies
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— |
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44,901 |
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— |
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44,901 |
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Asset-backed securities of government agencies
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— |
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1,024 |
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— |
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1,024 |
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State and political subdivisions
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— |
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23,125 |
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— |
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23,125 |
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Corporate bonds
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— |
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8,312 |
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— |
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8,312 |
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Total available-for-sale
securities
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$ |
996 |
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$ |
84,532 |
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$ |
— |
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$ |
85,528 |
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Equity securities
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$ |
37 |
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$ |
— |
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$ |
46 |
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$ |
83 |
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The following table presents the assets measured on a nonrecurring
basis on the Consolidated Balance Sheets at their fair value as of
March 31, 2019 and December 31, 2018, by level within the
fair value hierarchy. Impaired loans are written down to fair value
through the establishment of specific reserves. Techniques used to
value the collateral that secure the impaired loans include: quoted
market prices for identical assets classified as Level I inputs;
and observable inputs, employed by certified appraisers, for
similar assets classified as Level II inputs. In cases where
valuation techniques included inputs that are unobservable and are
based on estimates and assumptions developed by management based on
the best information available under each circumstance, the asset
valuation is classified as Level III inputs.
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(Dollars in thousands)
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Level I |
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Level II |
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Level III |
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Total |
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March 31, 2019
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Assets measured on a nonrecurring basis:
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Impaired loans
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$ |
— |
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$ |
— |
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$ |
459 |
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$ |
459 |
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Other real estate owned
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— |
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— |
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99 |
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99 |
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December 31, 2018
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Assets measured on a nonrecurring basis:
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Impaired loans
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$ |
— |
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$ |
— |
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$ |
636 |
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$ |
636 |
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Other real estate owned
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— |
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— |
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99 |
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99 |
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The following table presents additional quantitative information
about assets measured at fair value on a nonrecurring basis and for
which the Company has utilized Level III inputs to determine fair
value:
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Quantitative Information about Level
III Fair Value Measurements |
(Dollars in thousands) |
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Fair Value
Estimate |
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Valuation
Techniques
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Unobservable
Input
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Range
(Weighted Average)
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March 31, 2019
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Impaired loans
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$ |
459 |
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Discounted cash flow |
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Remaining term
Discount rate
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11 mos to 26.3 yrs / (14.2 yrs)
5.1% to 7.5% / (5.7%) |
Other real estate owned
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99 |
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Appraisal of collateral (1) |
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Appraisal adjustments (2) Liquidation expense
(2) |
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-33%
-10%
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December 31, 2018
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Impaired loans
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$ |
636 |
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Discounted cash flow |
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Remaining term
Discount rate
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1.2 yrs to 26.5 yrs / (10.9
yrs) 5.1% to 7.5% / (5.88%) |
Other real estate owned
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99 |
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Appraisal of collateral (1) |
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Appraisal adjustments (2)
Liquidation expense (2)
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-33%
-10%
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(1) |
Fair value is generally determined through independent
appraisals of the underlying collateral, which generally include
various inputs which are not identifiable.
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(2) |
Appraisals may be adjusted by management for
qualitative factors. The range of liquidation expenses and other
appraisal adjustments are presented as a percent of the
appraisal.
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