Fair Value Measurements and Disclosure (Tables)

9 Months Ended

Sep. 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:



September 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:
Investment securities	81,651	81,651	3,787	77,864	—
Loans	561,270	549,285	—	—	549,285
Accrued interest receivable	10,522	10,522	—	10,522	—
Financial Liabilities:
Deposits:
Noninterest-bearing	333,156	333,156	333,156	—	—
NOW and money market	340,382	340,382	340,382	—	—
Savings	78,532	78,532	78,532	—	—
Time deposits	68,153	67,984	—	—	67,984
Total deposits	820,223	820,054	752,070	—	67,984
Junior subordinated debt	10,330	10,330	—	—	10,330
Accrued interest payable	72	72	—	72	—



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:
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 September 30, 2019 (in 000’s):



Description of Assets	September 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	$	31,166	$	—	$	31,166	$	—
U.S. Government collateralized mortgage obligations	46,698		—		46,698		—
Total AFS securities	$	77,864	$	—	$	77,864	$	—

Marketable equity securities (2)	3,787		3,787		—		—
Impaired loans (1):
Real estate mortgage	1,008		—		—		1,008
Total impaired loans	1,008		—		—		1,008
Total	$	82,659	$	3,787	$	77,864	$	1,008



Description of Liabilities	September 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)	$	10,330	—	—	$	10,330
Total	$	10,330	—	—	$	10,330

(1)Nonrecurring

(2)Recurring

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 presents quantitative information about Level 3 fair value measurements for the Company's assets measured at fair value on a non-recurring basis at September 30, 2019 and December 31, 2018 (in 000's).



September 30, 2019
Financial Instrument	Fair Value	Valuation Technique	Unobservable Input	Adjustment Percentage
Impaired Loans:
Real estate mortgage	$1,008	Fair Value of Collateral Method for Collateral Dependent Loans	Adjustment for difference between appraised value and net realizable value	1.04%



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%

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 September 30, 2019 and December 31, 2018:



September 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	4.51%	Junior Subordinated Debt	Discounted cash flow	Discount rate	5.86%

Significant unobservable inputs (level 3) on a recurring basis

he 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 nine months ended September 30, 2019 and 2018 (in 000’s):



	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018		Nine Months Ended September 30, 2019			Nine Months Ended September 30, 2018
Reconciliation of Liabilities:	Junior Subordinated Debt			Junior Subordinated Debt		Junior Subordinated Debt			Junior Subordinated Debt
Beginning balance	$	10,496		$	10,125	$	10,155		$	9,730
Gross (gain) loss included in earnings	(660		)	262		(1,571		)	923
Gross loss (gain) related to changes in instrument specific credit risk	502			15		1,748			(280		)
Change in accrued interest	(8		)	1		(2		)	30
Ending balance	$	10,330		$	10,403	$	10,330		$	10,403
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	$	(660	)	$	262	$	(1,571	)	$	923

- 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.

+ References + Details