Fair Value Measurements and Disclosure (Tables)

6 Months Ended

Jun. 30, 2019

The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized at the periods indicated:



June 30, 2019
(in 000's)	Carrying Amount		Estimated Fair Value		Quoted Prices In Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Financial Assets:
Cash and cash equivalents	$	309,460	$	309,460	$	309,460	$	—	$	—
Investment securities	63,632		59,863		3,769		59,863		—
Loans	564,358		552,173		—		—		552,173
Accrued interest receivable	10,314		10,314		—		10,314		—
Financial Liabilities:
Deposits:
Noninterest-bearing	304,172		304,172		304,172		—		—
NOW and money market	404,416		404,416		404,416		—		—
Savings	92,274		92,274		92,274		—		—
Time deposits	70,053		69,735		—		—		69,735
Total deposits	870,915		870,597		800,862		—		69,735
Junior subordinated debt	10,496		10,496		—		—		10,496
Accrued interest payable	77		77		—		77		—



December 31, 2018
(in 000's)	Carrying Amount		Estimated Fair Value		Quoted Prices In Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Financial Assets:
Cash and cash equivalents	$	220,337	$	220,337	$	220,337	$	—	$	—
Investment securities	70,085		70,085		3,659		66,426		—
Loans	579,419		566,195		—		—		566,195
Accrued interest receivable	8,341		8,341		—		8,341		—
Financial Liabilities:
Deposits:
Noninterest-bearing	292,720		292,720		292,720		—		—
NOW and money market	340,445		340,445		340,445		—		—
Savings	90,046		90,046		90,046		—		—
Time deposits	82,432		81,745		—		—		81,745
Total deposits	805,643		804,956		723,211		—		81,745
Junior subordinated debt	10,155		10,155		—		—		10,155
Accrued interest payable	57		57		—		57		—

Assets and liabilities measured at fair value on recurring and non-recurring basis

The following tables summarize the Company’s assets and liabilities that were measured at fair value on a recurring and non-recurring basis as of June 30, 2019 (in 000’s):



Description of Assets	June 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
AFS Securities (2):
U.S. Government agencies	$	33,380	$	—	$	33,380	$	—
U.S. Government collateralized mortgage obligations	26,483		—		26,483		—
Total AFS securities	$	59,863	$	—	$	59,863	$	—

Marketable equity securities (2)	3,769		3,769		—		—

Total	$	63,632	$	3,769	$	59,863	$	—



Description of Liabilities	June 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Junior subordinated debt (2)	$	10,496	—	—	$	10,496
Total	$	10,496	—	—	$	10,496

(1)Nonrecurring

(2)Recurring

There were no non-recurring fair value adjustments at June 30, 2019.

The following tables summarize the Company’s assets and liabilities that were measured at fair value on a recurring and non-recurring basis as of December 31, 2018 (in 000’s):



Description of Assets	December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
AFS Securities (2):
U.S. Government agencies	$	36,527	$	—	$	36,527	$	—
U.S. Government collateralized mortgage obligations	29,899		—		29,899		—
Total AFS securities	66,426		—		66,426		$	—

Marketable equity securities (2)	3,659		3,659		—		—
Impaired Loans (1):
Real estate mortgage	389		—		—		389
Total impaired loans	389		—		—		389
Total	$	70,474	$	3,659	$	66,426	$	389



Description of Liabilities	December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Junior subordinated debt (2)	$	10,155	$	—	$	—	$	10,155
Total	$	10,155	$	—	$	—	$	10,155

(1)Nonrecurring

(2)Recurring

Schedule of quantitative information about Level 3 fair value measurements

The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at June 30, 2019 and December 31, 2018:



June 30, 2019				December 31, 2018
Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average	Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average
Junior Subordinated Debt	Discounted cash flow	Discount rate	4.88%	Junior Subordinated Debt	Discounted cash flow	Discount rate	5.86%

The following table presents quantitative information about Level 3 fair value measurements for the Company's assets measured at fair value on a non-recurring basis at December 31, 2018 (in 000's). There were no assets measured at fair value on a non-recurring basis at June 30, 2019.



December 31, 2018
Financial Instrument	Fair Value	Valuation Technique	Unobservable Input	Adjustment Percentage
Impaired Loans:
Real estate mortgage	$389	Fair Value of Collateral Method for Collateral Dependent Loans	Adjustment for difference between appraised value and net realizable value	9.43%

Significant unobservable inputs (level 3) on a recurring basis

The following tables provide a reconciliation of assets and liabilities at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and six months ended June 30, 2019 and 2018 (in 000’s):



	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018		Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
Reconciliation of Liabilities:	Junior Subordinated Debt			Junior Subordinated Debt		Junior Subordinated Debt			Junior Subordinated Debt
Beginning balance	$	10,454		$	9,641	$	10,155		$	9,730
Gross (gain) loss included in earnings	(497		)	192		(911		)	661
Gross loss (gain) related to changes in instrument specific credit risk	542			272		1,247			(295		)
Change in accrued interest	(3		)	20		5			29
Ending balance	$	10,496		$	10,125	$	10,496		$	10,125
The amount of total (gain) loss for the period included in earnings attributable to the change in unrealized gains or losses relating to liabilities still held at the reporting date	$	(497	)	$	192	$	(911	)	$	661

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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