FAIR VALUES OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2018

Financial Liabilities Fair Value Disclosure [Abstract]

Financial Instruments Disclosure [Text Block]

NOTE 7 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value hierarchy

The Company groups its assets measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted market prices in active exchange markets for identical assets and liabilities. Valuations are obtained from readily available pricing sources.

Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. Valuations are obtained from readily available pricing sources.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as those for which the determination of fair value requires significant management judgment or estimation.

Transfers between levels are recognized at the end of a reporting period, if applicable.

Determination of fair value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the assets and liabilities.

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017 are summarized below.

	Level 1		Level 2		Level 3		Total Fair Value
	(In thousands)
June 30, 2018
Assets
Securities available for sale	$	--	$	67,251	$	--	$	67,251
Forward loan sale commitments		--		6		--		6
Derivative loan commitments		--		6		--		6
Total assets	$	--	$	67,263	$	--	$	67,263
December 31, 2017
Assets
Securities available for sale	$	--	$	66,486	$	--	$	66,486

Fair value measurements for securities available for sale are obtained from a third-party pricing service and are not adjusted by management. All securities are measured at fair value in Level 2 based on valuation models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

The fair value of forward loan sale commitments and derivative loan commitments are based on fair values of the underlying mortgage loans, including servicing values as applicable. The fair value of derivative loan commitments also considers the probability of such commitments being exercised.

There were no liabilities measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017

Assets measured at fair value on a non-recurring basis

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market (“LOCOM”) accounting or write-downs of individual assets. Fair values for loans held for sale are based on commitments in effect from investors or prevailing market rates. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets.

	June 30, 2018						December 31, 2017
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	(In thousands)
Loans held for sale	$	--	$	--	$	596	$	--	$	--	$	--

There are no liabilities measured at fair value on a non-recurring basis at June 30, 2018 and December 31, 2017.

Summary of fair values of financial instruments

The estimated fair values and related carrying amounts of the Company’s financial instruments are outlined in the table below. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.

			Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(In thousands)
June 30, 2018
Financial assets:
Cash and cash equivalents	$	33,405	$	33,405	$	--	$	--	$	33,405
Certificates of deposit		100		100		--		--		100
Securities available for sale		67,251		--		67,251		--		67,251
FHLB stock		5,942		--		--		5,942		5,942
Loans held for sale		596		--		--		596		596
Loans, net		704,491		--		--		698,367		698,367
Accrued interest receivable		2,168		--		--		2,168		2,168
Forward loan sale commitments		6		--		--		6		6
Derivative loan commitments		6		--		--		6		6
Financial liabilities:
Deposits	$	643,186	$	--	$	--		641,663		641,663
Short-term borrowings		30,000		--		30,000		--		30,000
Long-term debt		82,682		--		82,220		--		82,220
Subordinated debt		9,817		--		--		9,644		9,644
Accrued interest payable		425		--		--		425		425
December 31, 2017
Financial assets:
Cash and cash equivalents	$	28,462	$	28,462	$	--	$	--	$	28,462
Certificates of deposit		100		100		--		--		100
Securities available for sale		66,486		--		66,486		--		66,486
FHLB stock		5,937		--		--		5,937		5,937
Loans, net		686,302		--		--		694,614		694,614
Accrued interest receivable		2,140		--		--		2,140		2,140
Financial liabilities:
Deposits	$	616,742		--		--		615,653		615,653
Short-term borrowings		38,000		--		38,000		--		38,000
Long-term debt		77,174		--		76,906		--		76,906
Subordinated debt		9,802		--		--		9,598		9,598
Accrued interest payable		286		--		--		286		286