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Fair Value (Tables)

9 Months Ended

Sep. 30, 2020

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:


(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2020
Securities available for sale:
U.S. government sponsored entities and agencies	$	27,199	$	—	$	27,199	$	—
State and political subdivision	117,550		—		115,838		1,712
Mortgage-backed securities: residential	19,492		—		19,492		—
Mortgage-backed securities: commercial	8,655		—		8,655		—
Collateralized mortgage obligations: residential	14,333		—		14,333		—
Collateralized mortgage obligations: commercial	33,003		—		33,003		—
U.S. Treasury	1,003		—		1,003		—
SBA	18,808		—		18,808		—
Asset backed securities	9,954		—		9,954		—
Corporate bonds	3,530		—		3,530		—
Total securities available for sale	253,527		—		251,815		1,712
Loans held for sale	60,635		—		60,635		—
Loans measured at fair value:
Residential real estate	5,080		—		—		5,080
Derivative assets:
Customer-initiated derivatives	14,422		—		14,422		—
Forward contracts related to mortgage loans to be delivered for sale	117		—		117		—
Interest rate lock commitments	2,068		—		2,068		—
Total assets at fair value	$	335,849	$	—	$	329,057	$	6,792
Derivative liabilities:
Customer-initiated derivatives	14,422		—		14,422		—
Forward contracts related to mortgage loans to be delivered for sale	441		—		441		—
Interest rate lock commitments	4		—		4		—
Total liabilities at fair value	$	14,867	$	—	$	14,867	$	—


(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2019
Securities available for sale:

State and political subdivision	$	93,747	$	—	$	93,747	$	—
Mortgage-backed securities: residential	10,565		—		10,565		—
Mortgage-backed securities: commercial	8,779		—		8,779		—
Collateralized mortgage obligations: residential	8,529		—		8,529		—
Collateralized mortgage obligations: commercial	23,181		—		23,181		—
U.S. Treasury	1,999		—		1,999		—
SBA	21,984		—		21,984		—
Asset backed securities	10,084		—		10,084		—
Corporate bonds	2,037		—		2,037		—
Total securities available for sale	$	180,905	$	—	$	180,905	$	—
Loans held for sale	13,889		—		13,889		—
Loans measured at fair value:
Residential real estate	4,063		—		—		4,063
Derivative assets:
Customer-initiated derivatives	4,684		—		4,684		—
Forward contracts related to mortgage loans to be delivered for sale	34		—		34		—
Interest rate lock commitments	256		—		256		—
Total assets at fair value	$	203,831	$	—	$	199,768	$	4,063
Derivative liabilities:
Customer-initiated derivatives	4,684		—		4,684		—
Forward contracts related to mortgage loans to be delivered for sale	33		—		33		—
Total liabilities at fair value	$	4,717	$	—	$	4,717	$	—

Level 3 Rollforward

The following table summarizes the changes in Level 3 assets measured at fair value on a recurring basis.



	For the three months ended September 30,				For the nine months ended September 30,
(Dollars in thousands)	2020		2019		2020		2019
Loans held for investment
Beginning balance	$	4,056	$	5,624	$	4,063	$	4,571
Transfers from loans held for sale	1,468		466		2,284		1,895
Gains (losses):
Recorded in "Mortgage banking activities"	65		(9)		62		151
Repayments	(509)		(1,191)		(1,329)		(1,727)
Ending balance	$	5,080	$	4,890	$	5,080	$	4,890

Information for Loans Held for Sale Carried at Fair Value

As of September 30, 2020 and December 31, 2019, the aggregate fair value, contractual balance (including accrued interest), and gain or loss for loans held for sale carried at fair value was as follows:


(Dollars in thousands)	September 30, 2020		December 31, 2019
Aggregate fair value	$	60,635	$	13,889
Contractual balance	59,055		13,510
Unrealized gain	1,580		379

The total amount of gains as a result of changes in fair value of loans held for sale included in "Mortgage banking activities" for three and nine months ended September 30, 2020 and 2019 were as follows:


	For the three months ended September 30,				For the nine months ended September 30,
(Dollars in thousands)	2020		2019		2020		2019
Change in fair value	$	556	$	(98)	$	1,201	$	352

Assets Measured at Fair Value on a Non-recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below:


(Dollars in thousands)	Total		Significant Unobservable Inputs (Level 3)
September 30, 2020
Impaired loans:
Residential real estate	$	1,305	$	1,305

Commercial and industrial	761		761
Mortgage servicing rights	2,567		2,567






Total	$	4,633	$	4,633
December 31, 2019
Impaired loans:
Commercial real estate	$	265	$	265
Commercial and industrial	261		261
Mortgage servicing rights	87		87
Other real estate owned	921		921
Total	$	1,534	$	1,534

Inputs for Assets Measured at Fair Value on a Nonrecurring Basis

The table below presents quantitative information about the significant unobservable inputs for assets measured at fair value on a nonrecurring basis at September 30, 2020 and December 31, 2019:


(Dollars in thousands)	Fair value at September 30, 2020		Valuation Technique(s)	Significant Unobservable Input(s)	Discount % Range/Amount
Impaired loans	$	2,066	Discounted appraisals; estimated net realizable value of collateral	Collateral discounts	10.00-80.00%
Mortgage servicing rights	2,567		Discounted cash flow	Prepayment speed	9.40	%
				Discount rate	7.75	%


(Dollars in thousands)	Fair value at December 31, 2019		Valuation Technique(s)	Significant Unobservable Input(s)	Discount % Range/Amount
Impaired loans	$	526	Discounted appraisals; estimated net realizable value of collateral	Collateral discounts	10.00-50.00%
Mortgage servicing rights	87		Discounted cash flow	Prepayment speed	13.42	%
				Discount rate	8.50	%
Other real estate owned	921		Appraisal of property	Discounted appraisal value	18.00-36.00%

Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments, excluding those previously presented unless otherwise noted, at September 30, 2020 and December 31, 2019 are noted in the table below.


			Estimated Fair Value
(Dollars in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 30, 2020
Financial assets:
Cash and cash equivalents	$	176,486	$	31,080	$	145,406	$	—	$	176,486
Other investments	14,398		N/A		N/A		N/A		N/A
Net loans	1,822,634		—		—		1,863,805		1,863,805
Accrued interest receivable	8,541		—		1,966		6,575		8,541
Financial liabilities:
Deposits	1,943,435		—		2,008,494		—		2,008,494
Borrowings	216,809		—		224,511		—		224,511
Subordinated notes	44,555		—		44,795		—		44,795
Accrued interest payable	2,265		—		2,265		—		2,265
December 31, 2019
Financial assets:
Cash and cash equivalents	$	103,930	$	19,990	$	83,940	$	—	$	103,930
Other investments	11,475		N/A		N/A		N/A		N/A
Net loans	1,214,935		—		—		1,203,639		1,203,639
Accrued interest receivable	4,403		—		1,236		3,167		4,403
Financial liabilities:
Deposits	1,135,428		—		1,138,202		—		1,138,202
Borrowings	212,225		—		212,125		—		212,125
Subordinated notes	44,440		—		47,100		—		47,100
Accrued interest payable	1,574		—		1,574		—		1,574

- 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