Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Financial assets and liabilities measured at fair value on a recurring basis

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013.



(Dollars in thousands)	September 30, 2014
Description	Total		Level I		Level II		Level III
Assets:
U.S. government agencies	$	32,363	$	—	$	32,363	$	—
Obligations of states and political subdivisions	60,010		—		60,010		—
Mortgage-backed securities:
Agency	168,763		—		168,763		—
Non-agency	27,951		—		27,951		—
Other asset backed securities	27,690		—		27,690		—
Corporate preferred stock	15		—		15		—
Corporate securities	18,242		—		17,752		490
Mortgage loans held for sale	5,344		—		5,344		—
Interest rate swaps	164		—		164		—
Liabilities:
Interest rate swaps	248		—		248		—



(Dollars in thousands)	December 31, 2013
Description	Total		Level I		Level II		Level III
Assets:
U.S. government agencies	$	21,339	$	—	$	21,339	$	—
Obligations of states and political subdivisions	67,238		—		67,238		—
Mortgage-backed securities:
Agency	168,010		—		168,010		—
Non-agency	21,934		—		21,934		—
Other asset backed securities	34,418		—		34,418		—
Corporate preferred stock	74		—		74		—
Corporate securities	15,410		—		14,922		488
Mortgage loans held for sale	33,175		—		33,175		—
Mortgage interest rate locks	16		—		16		—
Interest rate swaps	334		—		334		—
Mortgage servicing rights	203		—		203		—
Mortgage banking hedge instruments	202		—		202		—
Liabilities:
Interest rate swaps	303		—		303		—

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents changes in Level III assets measured at fair value on a recurring basis during the nine months ended September 30, 2014:



(Dollars in thousands)	September 30, 2014
Description	Balance December 31, 2013		Included in Earnings		Included in Other Comprehensive Income		Transfers In/Out of Level II and III		Balance September 30, 2014
Available for sale securities - corporate securities	$	488	$	—	$	2	$	—	$	490

Quantitative information related to Level III inputs

The following table presents quantitative information as of September 30, 2014 and December 31, 2013 related to Level III fair value measurements for assets measured at fair value on a recurring basis:



	Fair Value (Dollars in thousands)		Valuation Technique	Unobservable Inputs
September 30, 2014
Corporate securities	$	490	Third party trading desk	Prices heavily influenced by unobservable market inputs.



	Fair Value (Dollars in thousands)		Valuation Technique	Unobservable Inputs
December 31, 2013
Corporate securities	$	488	Third party trading desk	Prices heavily influenced by unobservable market inputs.

Estimated fair values and related carrying amounts of financial instruments

The following table summarizes the Company’s non-financial assets that were measured at fair value on a nonrecurring basis during the period.



(Dollars in thousands)	September 30, 2014
	Total		Level I		Level II		Level III
Assets:
Impaired loans	$	6,307	$	—	$	1,396	$	4,911
Other real estate owned	$	5,064	$	—	$	5,064	$	—
Repossessed assets	$	1,132	$	—	$	—	$	1,132

(Dollars in thousands)	December 31, 2013
	Total		Level I		Level II		Level III
Assets:
Impaired loans	$	7,614	$	—	$	5,756	$	1,858
Other real estate owned	$	3,424	$	—	$	3,424	$	—

The estimated fair values, and related carrying amounts, of the Company's financial instruments are as follows:



(Dollars in thousands)	September 30, 2014
					Fair value measurements using:
	Carrying Amount		Total Fair Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents	$	79,125	$	79,125	$	79,125	$	—	$	—
Securities available for sale	335,034		335,034		—		334,544		490
Loans held for sale	—		—		—		—		—
Loans, net	717,329		726,311		—		1,396		724,915
Bank owned life insurance	22,450		22,450		—		22,450		—
Accrued interest receivable	3,964		3,964		—		3,964		—
Interest rate swaps	164		164		—		164		—
Financial liabilities:
Deposits	$	986,566	$	987,276	$	—	$	987,276	$	—
Securities sold under agreements to repurchase	36,469		36,469		—		36,469		—
FHLB borrowings	45,000		45,275		—		45,275		—
Subordinated notes	5,155		5,186		—		5,186		—
Accrued interest payable	378		378		—		378		—
Interest rate swaps	248		248		—		248		—



(Dollars in thousands)	December 31, 2013
					Fair value measurements using:
	Carrying Amount		Total Fair Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents	$	67,343	$	67,343	$	67,343	$	—	$	—
Securities available for sale	328,423		328,423		—		327,935		488
Loans held for sale	33,175		33,175		—		33,175		—
Net loans	715,160		726,239		—		5,756		720,483
Bank-owned life insurance	21,955		21,955		—		21,955		—
Accrued interest receivable	3,992		3,992		—		3,992		—
Mortgage interest rate locks	16		16		—		16		—
Interest rate swap	334		334		—		334		—
Mortgage banking hedge instruments	202		202		—		202		—
Mortgage servicing rights	203		203		—		203		—
Financial liabilities:
Deposits	$	982,396	$	984,420	$	—	$	984,420	$	—
Securities sold under agreements to repurchase	34,539		34,539		—		34,539		—
FHLB borrowings and other debt	80,000		80,666		—		80,666		—
Subordinated notes	5,155		5,198		—		5,198		—
Accrued interest payable	501		501		—		501		—
Interest rate swap	303		303		—		303		—

Quantitative information about Level III fair value measurements

The following table presents quantitative information as of September 30, 2014 and December 31, 2013 about Level III fair value measurements for assets measured at fair value on a non-recurring basis:



September 30, 2014	Fair Value (in thousands)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans	$	4,911	Discounted appraised value	Discount for selling costs and age of appraisals	0% - 100% (7%)
Repossessed assets	$	1,132	Market analysis	Historical sales activity	50%



December 31, 2013	Fair Value (in thousands)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans	$	1,858	Discounted appraised value	Discount for selling costs and age of appraisals.	0% - 100% (4%)

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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