FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Measurements Tables

Schedule of significant unobservable inputs used to measure fair value

Significant unobservable inputs at September 30, 2013 used to measure fair value included:

Direct annual servicing cost per loan	$	50
Direct annual servicing cost per loan in process of foreclosure	$	500
Weighted average prepayment speed: CPR		27.02%
Weighted average prepayment speed: PSA		530.21%
Weighted average discount rate		7.96%
Asset reinvestment rate		4.00%
Short-term cost of funds		0.25%
Escrow inflation adjustment		1.00%
Servicing cost inflation adjustment		1.00%

Schedule of fair value measured on a recurring basis

Interest rate swap agreements – Fair values for interest rate swap agreements are based on the amounts required to settle the contracts based on valuations provided by third-party dealers in the contracts, which is considered a Level 2 fair value measurement, and are measured on a recurring basis.

			Recurring Fair Value Measurements Using
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
(dollars in thousands)			(Level 1)		(Level 2)		(Level 3)
Assets measured at fair value on a recurring basis at September 30, 2013:
Securities available for sale:
U.S. Treasury and agency debentures	$	994	$	—	$	994	$	—
U.S. agency issued residential MBS and CMO		59,175		—		59,175		—
Privately issued residential MBS and CMO		114		—		114		—
Solomon Hess SBA loan fund (CDFI Fund)		950		—		950		—
Other equity securities		47		—		—		47
Total securities available for sale		61,280		—		61,233		47
Loans held for sale		824		—		824		—
Mortgage rate lock commitments		26		—		26		—
Interest rate swap agreements		361		—		361		—
Total assets	$	62,491	$	—	$	62,444	$	47
Liabilities – Interest rate swap agreements	$	846	$	—	$	846	$	—
Assets measured at fair value on a recurring basis at December 31, 2012:
Securities available for sale:
U.S. Treasury and agency debentures	$	10,027	$	—	$	10,027	$	—
U.S. agency issued residential MBS and CMO		59,640		—		59,640		—
Privately issued residential MBS and CMO		173		—		173		—
Nonrated commercial paper		5,500		—		5,500		—
Other equity securities		47		—		—		47
Total securities available for sale		75,387		—		75,340		47
Loans held for sale		884		—		884		—
Mortgage rate lock commitments		91		—		91		—
Interest rate swap agreements		673		—		673		—
Total assets	$	77,035	$	—	$	76,988	$	47
Liabilities – Interest rate swap agreements	$	1,372	$	—	$	1,372	$	—

Reconciliation of fair value measurements using significant unobservable inputs

Reconciliation of fair value measurements using significant unobservable inputs:

	Securities
	Available
(dollars in thousands)	For Sale
Balance at January 1, 2012:	$	47
Total realized/unrealized gains and (losses):
Included in earnings		—
Included in other comprehensive income		—
Purchases, maturities, and sales		—
Transferred from Level 2 to Level 3		—
Transferred to held to maturity classification		—
Balance at September 30, 2012	$	47
Total gains or (losses) for the period included in earnings attributable to the
change in unrealized gains or losses relating to assets still held at September 30, 2012	$	—
Balance at January 1, 2013	$	47
Total realized/unrealized gains and (losses):
Included in earnings		—
Included in other comprehensive income		—
Purchases, maturities, and sales		—
Transferred from Level 2 to Level 3		—
Transferred to held to maturity classification		—
Balance at September 30, 2013	$	47
Total gains or (losses) for the period included in earnings attributable to the
change in unrealized gains or losses relating to assets still held at September 30, 2013	$	—

Schedule of fair value measured on a nonrecurring basis

			Nonrecurring Fair Value Measurements Using
			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	($000s)		(Level 1)		(Level 2)		(Level 3)
Assets measured at fair value on a nonrecurring basis at September 30, 2013:
Impaired loans	$	1,758	$	—	$	323	$	1,435
Foreclosed assets		1,606		—		695		911
Mortgage servicing rights		1,662		—		—		1,662
Total assets	$	5,026	$	—	$	1,018	$	4,008
Assets measured at fair value on a nonrecurring basis at December 31, 2012:
Impaired loans	$	2,973	$	—	$	328	$	2,645
Foreclosed assets		1,774		—		752		1,022
Mortgage servicing rights		1,233		—		—		1,233
Total assets	$	5,980	$	—	$	1,080	$	4,900

Schedule of carrying value and estimated fair values of Financial Instruments

The carrying amounts and fair values of PSB’s financial instruments consisted of the following at September 30, 2013:

	September 30, 2013
	Carrying		Estimated		Fair Value Hierarchy Level
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets ($000s):
Cash and cash equivalents	$	17,080	$	17,080	$	17,080	$	—	$	—
Securities		133,052		133,194		—		131,350		1,844
Bank certificates of deposit		2,481		2,528		—		—		2,528
Net loans receivable and loans held for sale		517,697		521,979		—		1,147		520,832
Accrued interest receivable		2,257		2,257		—		—		2,257
Mortgage servicing rights		1,662		1,662		—		—		1,662
Mortgage rate lock commitments		26		26		—		26		—
FHLB stock		3,594		3,594		—		—		3,594
Cash surrender value of life insurance		12,723		12,723		12,723		—		—
Interest rate swap agreements		361		361		—		361		—
Financial liabilities ($000s):
Deposits	$	554,239	$	533,077	$	—	$	—	$	533,077
FHLB advances		58,124		58,848		—		58,848		—
Other borrowings		20,353		22,472		—		14,489		6,788
Senior subordinated notes		4,000		3,471		—		—		3,471
Junior subordinated debentures		7,732		4,461		—		—		4,461
Interest rate swap agreements		846		846		—		846		—
Accrued interest payable		455		455		—		—		455

The carrying amounts and fair values of PSB’s financial instruments consisted of the following at December 31, 2012:

	December 31, 2012
	Carrying		Estimated		Fair Value Hierarchy Level
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets ($000s):
Cash and cash equivalents	$	48,847	$	48,847	$	48,847	$	—	$	—
Securities		145,209		147,751		—		145,795		1,956
Bank certificates of deposit		4,465		4,538		—		—		4,538
Net loans receivable and loans held for sale		478,875		484,925		—		1,212		483,713
Accrued interest receivable		2,157		2,157		—		—		2,157
Mortgage servicing rights		1,233		1,233		—		—		1,233
Mortgage rate lock commitments		91		91		—		91		—
FHLB stock		2,506		2,506		—		—		2,506
Cash surrender value of life insurance		11,813		11,813		11,813		—		—
Interest rate swap agreements		673		673		—		673		—
Financial liabilities ($000s):
Deposits	$	565,442	$	568,014	$	—	$	—	$	568,014
FHLB advances		50,124		51,590		—		51,590		—
Other borrowings		20,728		22,118		—		14,890		7,228
Senior subordinated notes		7,000		7,000		—		—		7,000
Junior subordinated debentures		7,732		4,911		—		—		4,911
Interest rate swap agreements		1,372		1,372		—		1,372		—
Accrued interest payable		697		697		—		—		697