XML 43 R30.htm IDEA: XBRL DOCUMENT v3.6.0.2
Note 22 - Fair Value Measurements
12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
(22)
         
FAIR VALUE MEASUREMENTS
 
FASB ASC Topic
820
, Fair Value Measurements,
provides the framework for measuring fair value. That 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 (Level
1
measurements) and the lowest priority to unobservable inputs (Level
3
measurements). The
three
levels of the fair value hierarchy under FASB ASC Topic
820
are described as follows:
 
  Level
1:
Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets.  A quoted market price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
     
  Level
2:
Inputs to the valuation methodology include quoted market prices for similar assets or liabilities in active markets; quoted market prices for identical or similar assets or liabilities in markets that are not active; or inputs that are derived principally from or can be corroborated by observable market data by correlation or other means.
     
  Level
3:
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.  Level
3
assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
 
Fair value is based upon quoted market prices, where available. If quoted market prices are not available, fair value is based on internally developed models or obtained from independent
third
parties that primarily use, as inputs, observable market-based parameters or a matrix pricing model that employs the Bond Market Association’s standard calculations for cash flow and price/yield analysis and observable market-based parameters. Valuation adjustments
may
be made to ensure that financial instruments are recorded at fair value, or the lower of cost or fair value. These adjustments
may
include unobservable parameters. Any such valuation adjustments have been applied consistently over time. The Company’s valuation methodologies
may
produce a fair value calculation that
may
not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
 
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial and nonfinancial assets carried at fair value or the lower of cost or fair value.
 
The table below presents the balances of assets measured at fair value on a recurring and nonrecurring basis as of
December
31,
2016.
The Company had no liabilities measured at fair value as of
December
31,
2016.
 
    Carrying Value
    Level 1   Level 2   Level 3   Total
    (In thousands)
December 31, 2016:
               
                 
Assets Measured on a Recurring Basis                                
                                 
Securities available for sale:                                
Agency mortgage-backed securities   $
0
    $
108,237
    $
0
    $
108,237
 
Agency CMO    
0
     
16,028
     
0
     
16,028
 
Agency notes and bonds    
0
     
68,662
     
0
     
68,662
 
Municipal obligations    
0
     
62,843
     
0
     
62,843
 
Mutual funds    
74
     
0
     
0
     
74
 
Total securities available for sale   $
74
    $
255,770
    $
0
    $
255,844
 
                                 
Assets Measured on a Nonrecurring Basis                                
                                 
Impaired loans:                                
Residential real estate   $
0
    $
0
    $
2,060
    $
2,060
 
Commercial real estate    
0
     
0
     
1,217
     
1,217
 
Commercial business    
0
     
0
     
100
     
100
 
Home equity and second mortgage    
0
     
0
     
231
     
231
 
Other consumer    
0
     
0
     
14
     
14
 
Total impaired loans   $
0
    $
0
    $
3,622
    $
3,622
 
                                 
Loans held for sale   $
0
    $
4,507
    $
0
    $
4,507
 
                                 
Foreclosed real estate:                                
Residential real estate   $
0
    $
0
    $
226
    $
226
 
Commercial real estate    
0
     
0
     
4,448
     
4,448
 
Total foreclosed real estate   $
0
    $
0
    $
4,674
    $
4,674
 
 
The table below presents the balances of assets measured at fair value on a recurring and nonrecurring basis as of
December
31,
2015.
The Company had
no
liabilities measured at fair value as of
December
31,
2015.
 
    Carrying Value
    Level 1   Level 2   Level 3   Total
    (In thousands)
December 31, 2015:                                
                                 
Assets Measured on a Recurring Basis                                
                                 
Securities available for sale:                                
Agency mortgage-backed securities   $
0
    $
42,010
    $
0
    $
42,010
 
Agency CMO    
0
     
9,331
     
0
     
9,331
 
Agency notes and bonds    
0
     
84,453
     
0
     
84,453
 
Municipal obligations    
0
     
50,839
     
0
     
50,839
 
Mutual funds    
118
     
0
     
0
     
118
 
Total securities available for sale   $
118
    $
186,633
    $
0
    $
186,751
 
                                 
Assets Measured on a Nonrecurring Basis                                
                                 
Impaired loans:                                
Residential real estate   $
0
    $
0
    $
1,990
    $
1,990
 
Land    
0
     
0
     
24
     
24
 
Commercial real estate    
0
     
0
     
3,574
     
3,574
 
Commercial business    
0
     
0
     
67
     
67
 
Home equity and second mortgage    
0
     
0
     
125
     
125
 
Total impaired loans   $
0
    $
0
    $
5,780
    $
5,780
 
                                 
Loans held for sale   $
0
    $
3,081
    $
0
    $
3,081
 
                                 
Foreclosed real estate:                                
Residential real estate   $
0
    $
0
    $
557
    $
557
 
Land    
0
     
0
     
203
     
203
 
Commercial real estate    
0
     
0
     
4,130
     
4,130
 
Total foreclosed real estate   $
0
    $
0
    $
4,890
    $
4,890
 
 
Securities Available for Sale
.
Securities classified as available for sale are reported at fair value on a recurring basis. These securities are classified as Level
1
of the valuation hierarchy where quoted market prices from reputable
third
-party brokers are available in an active market. If quoted market prices are not available, the Company obtains fair value measurements from an independent pricing service. These securities are reported using Level
2
inputs and the fair value measurements consider observable data that
may
include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors. Changes in fair value of securities available for sale are recorded in other comprehensive income, net of income tax effect.
 
Impaired Loans
. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. The fair value of impaired loans is classified as Level
3
in the fair value hierarchy.
 
Impaired loans are measured at the present value of estimated future cash flows using the loan's effective interest rate or the fair value of collateral less estimated costs to sell if the loan is collateral dependent. At
December
31,
2016
and
2015,
all impaired loans were considered to be collateral dependent for the purpose of determining fair value. Collateral
may
be real estate and/or business assets, including equipment, inventory and/or accounts receivable. The fair value of the collateral is generally determined based on real estate appraisals or other independent evaluations by qualified professionals, which are then discounted to reflect management’s estimate of the fair value of the collateral given the current market conditions and the condition of the collateral.
 
At
December
31,
2016,
the significant unobservable inputs used in the fair value measurement of impaired loans included a discount from appraised value for estimates of changes in market conditions, the condition of the collateral, and estimated costs to sell the collateral ranging from
33%
to
65%,
with a weighted average discount of
39%.
At
December
31,
2015,
the significant unobservable inputs used in the fair value measurement of impaired loans included a discount from appraised value for estimates of changes in market conditions, the condition of the collateral, and estimated costs to sell the collateral ranging from
10%
to
59%,
with a weighted average discount of
16%.
 
The Company recognized provisions for loan losses of
$158,000
and
$154,000
for the years ended
December
31,
2016
and
2015,
respectively, for impaired loans.
 
Loans Held for Sale
. Loans held for sale are carried at the lower of cost or market value. The portfolio is comprised of residential real estate loans and fair value is based on specific prices of underlying contracts for sales to investors. These measurements are carried at Level
2
in the fair value hierarchy.
 
Foreclosed Real Estate
. Foreclosed real estate is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. The fair value of foreclosed real estate is classified as Level
3
in the fair value hierarchy.
 
Foreclosed real estate is reported at fair value less estimated costs to dispose of the property. The fair values are determined by real estate appraisals which are then discounted to reflect management’s estimate of the fair value of the property given current market conditions and the condition of the collateral.
 
At
December
31,
2016,
the significant unobservable inputs used in the fair value measurement of foreclosed real estate included a discount from appraised value for estimates of changes in market conditions, the condition of the collateral, and estimated costs to sell the property ranging from
10%
to
77%,
with a weighted average of
38%.
At
December
31,
2015,
the discount from appraised value ranged from
9%
to
43%,
with a weighted average of
30%.
 
The Company recognized charges of
$80,000
and
$100,000
to write down foreclosed real estate to fair value for the years ended
December
31,
2016
and
2015.
 
Transfers between Categories
. There have been no changes in the valuation techniques and related inputs used for assets measured at fair value on a recurring and nonrecurring basis during the years ended
December
31,
2016
and
2015.
There were no transfers in or out of the Company’s Level
3
financial assets for the years ended
December
31,
2016
and
2015.
In addition, there were no transfers into or out of Levels
1
and
2
of the fair value hierarchy during the years ended
December
31,
2016
and
2015.