FAIR VALUES

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

FAIR VALUES

NOTE 22 FAIR VALUES

The Company established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by this hierarchy are:

Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level 2: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are valued using other financial instruments, the parameters of which can be directly observed.

Level 3: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

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 are as follows:

Investment Securities Available for Sale - Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s available for sale securities, totaling $107.4 million and $48.4 million at December 31, 2021 and 2020, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service.

Loans - The Company does not record loans at fair value on a recurring basis. Real estate serves as collateral on a substantial majority of the Company’s loans. When a loan is considered impaired, a specific reserve may be established. Loans, which are deemed to be impaired and require a reserve, are primarily valued on a non-recurring basis at the fair value of the underlying real estate collateral. Where there is no observable market price, such fair values are obtained using independent appraisals, which management evaluates to determine whether or not the fair value of the collateral is further impaired below the appraised value and adjusts for estimated costs of disposition. The Company records impaired loans as nonrecurring Level 3 assets. The aggregate amount of impaired loans carried at fair value was $2.8 million and $4.0 million at December 31, 2021 and 2020, respectively.

Other Real Estate Owned –Other real estate owned is adjusted to fair value upon transfer of the loans, or former bank premises, to other real estate owned.  These assets are carried at the lower of their carrying value or fair value.  Fair value is based upon observable market prices, when available, reduced by estimated disposition costs, which the Company considers to be nonrecurring Level 2 inputs. When observable market prices are not available, management determines the fair value of the foreclosed asset using independent third-party appraisals, evaluated to determine whether or not the property is further impaired below the appraised value, and adjusts for estimated costs of disposition. The Company records foreclosed assets as nonrecurring Level 3. The aggregate carrying amounts of foreclosed assets were $1.4 million and $3.3 million at December 31, 2021 and 2020, respectively.

Assets and liabilities measured at fair value are as follows as of December 31, 2021 (for purpose of this table the impaired loans are shown net of the related allowance):

(Dollars are in thousands)		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available for sale investments
U.S. Treasuries	$	-	$	7,671	$
U.S. Government Agencies		-		9,089		-
Taxable municipals		-		22,980		-
Corporate bonds		-		2,019		-
Mortgage backed securities		-		65,599		-
(On a non-recurring basis) Other real estate owned		-		-		1,361
Impaired loans:
Real estate secured:
Commercial		-		-		414
Construction and land development		-		-		24
Residential 1-4 family		-		-		1,848
Multifamily		-		-		-
Farmland		-		-		517
Commercial		-		-		28
Agriculture		-		-		-
Consumer installment loans		-		-		2
All other loans		-		-		-
Total	$	-	$	107,358	$	4,194

Assets and liabilities measured at fair value are as follows as of December 31, 2020 (for purpose of this table the impaired loans are shown net of the related allowance):

(Dollars are in thousands)		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(On a recurring basis) Available for sale investments
U.S. Government Agencies	$	-	$	14,107	$	-
Taxable municipals		-		5,345		-
Corporate bonds		-		6,048		-
Mortgage backed securities		-		22,906		-
(On a non-recurring basis) Other real estate owned		-		-		3,334
Impaired loans:
Real estate secured:
Commercial		-		-		1,377
Construction and land development		-		-		99
Residential 1-4 family		-		-		1,927
Multifamily		-		-		-
Farmland		-		-		597
Commercial		-		-		25
Agriculture		-		-		-
Consumer installment loans		-		-		5
All other loans		-		-		-
Total	$	-	$	48,406	$	7,364

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of December 31, 2021 and 2020, the significant unobservable inputs used in the fair value measurements were as follows:

(Dollars in thousands)		Fair Value at December 31, 2021		Fair Value at December 31, 2020	Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Impaired Loans	$	2,667	$	4,030	Appraised Value/Discounted Cash Flows/Market Value of Note	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	0 – 18%
Other Real Estate Owned	$	1,361	$	3,334	Appraised Value/Comparable Sales/Other Estimates from Independent Sources	Discounts to reflect current market conditions and estimated costs to sell	0 – 18%

Fair Value of Financial Instruments 

The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis are as follows:

						Fair Value Measurements
(Dollars are in thousands)		Carrying Amount		Fair Value		Quoted market price in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
December 31, 2021
Financial Instruments – Assets
Net Loans	$	587,009	$	580,024	$	-	$	577,357	$	2,667
Financial Instruments – Liabilities
Time Deposits		196,285		198,353		-		198,353		-
Borrowed Funds		16,496		15,649		-		15,649		-
December 31, 2020
Financial Instruments – Assets
Net Loans	$	568,375	$	564,664	$	-	$	560,634	$	4,030
Financial Instruments – Liabilities
Time Deposits		234,449		237,768		-		237,768		-
Borrowed Funds		21,496		16,788		-		16,788		-

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, 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 can significantly affect the estimates.

Estimated fair values have been determined by the Company using historical data, as generally provided in the Company’s regulatory reports, and an estimation methodology suitable for each category of financial instruments. The Company’s fair value estimates, methods and assumptions are set forth below for the Company’s other financial instruments.

The carrying value of cash and due from banks, federal funds sold, interest-bearing deposits, deposits with no stated maturities and accrued interest approximates fair value and is excluded from the table above.

The methods utilized to measure the fair value of financial instruments represent an approximation of exit price; however, an actual exit price may differ.