FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

3. FAIR VALUE MEASUREMENTS

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis as of December 31, 2020 and December 31, 2019. They indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In 2018, the Company adopted the provisions of Accounting Standard Update 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 requires the Company to use the exit price notion when measuring the fair value of financial instruments. The Company used the exit price notion for valuing financial instruments in 2019 and 2020. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

3. FAIR VALUE MEASUREMENTS (Continued)

Estimated fair values are disclosed for financial instruments for which it is practicable to estimate fair value. These estimates are made at a specific point in time based on relevant market data and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates.

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows (dollars in thousands):

	Carrying		Fair Value Measurements Using:
December 31, 2020	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	14,030	$	14,030	$	—	$	—	$	14,030
Interest-bearing deposits in banks		28,479		26,733		1,746		—		28,479
Available-for-sale Securities		306,966		—		306,966		—		306,966
Held-to-maturity securities		12		—		13		—		13
Loans, net		471,853		—		—		474,400		474,400
Accrued interest receivable		3,733		—		1,428		2,305		3,733
Financial liabilities:
Deposits:
Noninterest-bearing	$	330,095	$	330,095	$	—	$	—	$	330,095
Savings		87,315		87,315		—		—		87,315
Money market		175,541		175,541		—		—		175,541
NOW accounts		82,045		82,045		—		—		82,045
Time Deposits		69,181		—		69,511		—		69,511
Short-term borrowings		7,000		7,000		—		—		7,000
Long-term borrowings		13,787		—		13,967		—		13,967
Accrued interest payable		42		3		39		—		42
	Carrying		Fair Value Measurements Using:
December 31, 2019	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	15,258	$	15,258	$	—	$	—	$	15,258
Interest-bearing deposits in banks		2,552		806		1,746		—		2,552
Available-for-sale Securities		261,965		—		261,965		—		261,965
Held-to-maturity securities		248		—		266		—		266
Loans, net		393,802		—		—		396,089		396,089
Accrued interest receivable		1,929		—		780		1,149		1,929
Financial liabilities:
Deposits:
Noninterest-bearing	$	227,055	$	227,055	$	—	$	—	$	227,055
Savings		75,820		75,820		—		—		75,820
Money market		158,319		158,319		—		—		158,319
NOW accounts		69,834		69,834		—		—		69,834
Time Deposits		73,809		—		73,924		—		73,924
Short-term borrowings		9,000		9,000		—		—		9,000
Long-term borrowings		10,500		—		10,717		—		10,717
Accrued interest payable		120		—		120		—		120

AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

3. FAIR VALUE MEASUREMENTS (Continued)

Because no established market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. 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 fair values presented.

Assets and liabilities measured at fair value on a recurring and non-recurring basis are presented in the following table:

(Dollars in thousands)			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs		Total Gains
December 31, 2020	Fair Value		(Level 1)		(Level 2)		(Level 3)		(Losses)
Assets and liabilities measured on a recurring basis:
Available-for-sale securities:
U.S. Government Agencies and Sponsored Agencies	$	283,833	$	—	$	283,833	$	—	$	—
Corporate Debt Securities		6,832		—		6,832		—		—
Obligations of states and political subdivisions		16,301		—		16,301		—		—
Total recurring	$	306,966	$	—	$	306,966	$	—	$	—
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs		Total Gains
December 31, 2020	Fair Value		(Level 1)		(Level 2)		(Level 3)		(Losses)
Assets and liabilities measured on a nonrecurring basis:
Other real estate owned:
Land	$	800	$	—	$	—	$	800	$	(46	)
Total nonrecurring	$	800	$	—	$	—	$	800	$	(46	)

AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

3. FAIR VALUE MEASUREMENTS (Continued)

(Dollars in thousands)			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs		Total Gains
December 31, 2019	Fair Value		(Level 1)		(Level 2)		(Level 3)		(Losses)
Assets and liabilities measured on a recurring basis:
Available-for-sale securities:
U.S. Government Agencies and Sponsored Agencies	$	241,887	$	—	$	241,887	$	—	$	—
Corporate Debt Securities		6,631		—		6,631		—		—
Obligations of states and political subdivisions		13,447		—		13,477		—		—
Total recurring	$	261,965	$	—	$	261,965	$	—	$	—
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs		Total Gains
December 31, 2019	Fair Value		(Level 1)		(Level 2)		(Level 3)		(Losses)
Assets and liabilities measured on a nonrecurring basis:
Other Assets:
Repossessed asset	$	517	$	—	$	—	$	517	$	—
Other real estate owned:
Land		846		—		—		846		(111	)
Total nonrecurring	$	1,363	$	—	$	—	$	1,363	$	(111	)

U.S. Government Agencies and Sponsored Agencies consist predominately of residential mortgage-backed securities.

The following methods were used to estimate the fair value of each class of financial instrument above:

Available-for-sale securities – Fair values for investment securities are based on quoted market prices, if available, and are considered Level 1, or evaluated using pricing models that vary by asset class and incorporate available trade, bid and other market information and are considered Level 2. Pricing applications apply available information, as applicable, through processes such as benchmark curves, benchmarking to like securities, sector groupings and matrix pricing.

Impaired loans – The fair value of collateral dependent impaired loans adjusted for specific allocations of the allowance for loan losses is generally based on recent real estate appraisals and/or evaluations. These appraisals and/or evaluations may utilize a single valuation approach or a combination of approaches including comparable sales, cost and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income and other available data. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for all Level 3 nonrecurring impaired loans is the sales comparison approach less a reserve for past dues taxes and selling costs ranging from 8% to 10%.

AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

3. FAIR VALUE MEASUREMENTS (Continued)

Other assets and real estate owned – Other assets can contain non-real estate property obtained by repossession of collateral in the case of a loan default and are measured at fair value, less costs to sell. Certain commercial and residential real estate properties classified as OREO are measured at fair value, less costs to sell. Fair values are based on recent appraisals and/or evaluations. These appraisals and/or evaluations may use a single valuation approach or a combination of approaches including comparable sales, cost and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income and other available data. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for all Level 3 nonrecurring other assets and OREO is the sales comparison approach less selling costs ranging from 8% to 10%.