FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2020

FAIR VALUE

Schedule of fair value assets and liabilities measured on recurring basis

The following presents assets and liabilities measured on a recurring basis at September 30, 2020 and December 31, 2019 (in thousands):

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
September 30, 2020	(Level 1)		(Level 2)		(Level 3)		Balance
Investment securities available-for-sale:
U.S. Treasury debt	$	256	$	—	$	—	$	256
Corporate bonds		—		2,048		—		2,048
GNMA mortgage-backed securities - residential		—		29,788		—		29,788
FNMA mortgage-backed securities - residential		—		2,716		—		2,716
Corporate CMO and MBS		—		5,846		—		5,846
Total securities available-for-sale	$	256	$	40,398	$	—	$	40,654
Equity securities	$	732	$	—	$	—	$	732
Guarantee asset	$	—	$	—	$	245	$	245
IRLC and FSC, net	$	—	$	—	$	11,622	$	11,622
Guarantee liability	$	—	$	—	$	153	$	153

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
December 31, 2019	(Level 1)		(Level 2)		(Level 3)		Balance
Investment securities available-for-sale:
U.S. Treasury debt	$	254	$	—	$	—	$	254
GNMA mortgage-backed securities - residential		—		45,312		—		45,312
FNMA mortgage-backed securities - residential		—		2,917		—		2,917
Corporate CMO and MBS		—		10,420		—		10,420
Total securities available-for-sale	$	254	$	58,649	$	—	$	58,903
Equity securities	$	713	$	—	$	—	$	713
IRLC and FSC, net	$	—	$	—	$	1,184	$	1,184

Summary of assets and liability for level 3 instruments measured at fair value on recurring basis

The following presents a reconciliation for level 3 instruments measured at fair value on a recurring basis (in thousands):

Three Months Ended September 30, 2020	Guarantee Asset		IRLC and FSC, Net		Guarantee Liability
Beginning balance	$	222	$	7,482	$	191
Gains (losses) in net income, net		39		1,066		(38)
Other settlements, net(1)		(16)		3,074		—
Ending balance	$	245	$	11,622	$	153

______________________________________

⁽¹⁾ Other settlements for IRLC and FSC includes the settlement of FSC and the transfer of the fair value of loan purchase or IRLC at the time loans are originated.

Nine Months Ended September 30, 2020	Guarantee Asset		IRLC and FSC, Net		Guarantee Liability
Beginning balance	$	—	$	1,184	$	—
Sales		245		—		244
Gains (losses) in net income, net		55		1,713		(91)
Other settlements, net(1)		(55)		8,725		—
Ending balance	$	245	$	11,622	$	153

______________________________________

⁽¹⁾ Other settlements for IRLC and FSC includes the settlement of FSC and the transfer of the fair value of loan purchase or IRLC at the time loans are originated.

Summary of assets measured at fair value on nonrecurring basis

The following presents assets measured on a nonrecurring basis as of September 30, 2020 and December 31, 2019 (in thousands):

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
September 30, 2020	(Level 1)		(Level 2)		(Level 3)		Balance
Other real estate owned:
Commercial properties	$	—	$	—	$	558	$	558
Total impaired loans(1):
Commercial and Industrial	$	—	$	—	$	1,998	$	1,998

______________________________________

⁽¹⁾ An immaterial Cash, Securities and Other loan was fully reserved for using a specific allowance at September 30, 2020.

	Quoted
	Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Reported
December 31, 2019	(Level 1)		(Level 2)		(Level 3)		Balance
Other real estate owned:
Commercial properties	$	—	$	—	$	658	$	658
Total impaired loans:
Commercial and Industrial	$	—	$	—	$	3,579	$	3,579

Summary of assets and liabilities measured at fair value on a recurring or nonrecurring, the significant unobservable inputs

The following presents quantitative information about the significant unobservable inputs used in the fair value measurement of recurring and nonrecurring non-financial instruments categorized within Level 3 of the fair value hierarchy as of September 30, 2020 and December 31, 2019 (dollars in thousands):

	Quantitative Information about Level 3 Fair Value Measurements at September 30, 2020
			Valuation		Significant		Range
	Fair Value		Technique		Unobservable Input		(Weighted Average)
Other real estate owned:
Commercial properties		558		Sales contract		Commission, cost to sell, closing costs		3% - 10% (7%)
Total impaired loans(1):
Commercial and Industrial		1,998		Sales comparison, Market approach - guideline transaction method		Management discount for asset/property type		17% - 20% (20%)

______________________________________

⁽¹⁾ An immaterial Cash, Securities and Other loan was fully reserved for using a specific allowance at September 30, 2020.

	Quantitative Information about Level 3 Fair Value Measurements at December 31, 2019
			Valuation		Significant		Range
	Fair Value		Technique		Unobservable Input		(Weighted Average)
Other real estate owned:
Commercial properties	$	658		Appraisal value		Discount rate		50% (50%)
						Commission and cost to sell		1% - 10% (7%)
Total impaired loans:
Commercial and Industrial	$	3,579		Sales comparison, Market approach - guideline transaction method		Management discount for asset/property type		0% - 50% (23%)

Summary of carrying amounts and estimated fair values of financial instruments

The following presents carrying amounts and estimated fair values for financial instruments as of September 30, 2020 and December 31, 2019 (in thousands):

	Carrying		Fair Value Measurements Using:
September 30, 2020	Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	250,358	$	250,358	$	—	$	—
Securities available-for-sale		40,654		256		40,398		—
Loans, net		1,494,231		—		—		1,493,863
Mortgage loans held for sale		89,872		—		89,872		—
Accrued interest receivable		6,730		—		6,730		—
Equity securities		732		732		—		—
IRLC and FSC, net		11,622		—		—		11,622
Guarantee asset		245		—		—		245
Liabilities:
Deposits		1,563,672		—		1,565,555		—
Borrowings:
FHLB Topeka Borrowings – fixed rate		18,000		—		18,070		—
Federal Reserve Borrowings – fixed rate		204,075		—		204,075		—
Subordinated notes – fixed-to-floating rate		14,447		—		—		14,997
Accrued interest payable		347		—		347		—

Guarantee liability $ 153 $ — $ — $ 153

	Carrying		Fair Value Measurements Using:
December 31, 2019	Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	78,638	$	78,638	$	—	$	—
Securities available-for-sale		58,903		254		58,649		—
Loans, net		990,132		—		—		974,142
Mortgage loans held for sale		48,312		—		48,312		—
Accrued interest receivable		3,048		—		3,048		—
Equity securities		713		713		—		—
IRLC and FSC, net		1,184		—		—		1,184
Liabilities:
Deposits		1,086,784		—		1,089,261		—
Borrowings:
FHLB Topeka Borrowings – fixed rate		10,000		—		10,003		—
Subordinated notes – fixed-to-floating rate		6,560		—		—		6,004
Accrued interest payable	$	299	$	—	$	299	$	—