FAIR VALUE MEASUREMENTS (FY)

6 Months Ended

12 Months Ended

Jun. 30, 2018

Dec. 31, 2017

(4)	Fair Value Measurements

The Company is required to disclose the estimated fair value of financial instruments, both assets and liabilities on and off the balance sheet, for which it is practicable to estimate fair value. These fair value estimates are made at each reporting date, based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price an asset could be sold at or the price a liability could be settled for. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, the Company has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The methodologies for financial assets and financial liabilities are discussed below:

Cash and Due from Banks, Interest-Earning Deposits with Banks and Certificates of Deposit with Banks

The carrying amounts for cash and due from banks, interest-earning deposits with banks and certificates of deposit with banks approximate fair value because of the short maturities of those instruments.

Investment and Equity Securities

Fair value for investment and equity securities equals the quoted market price if such information is available. If a quoted market price is not available in active markets for identical securities (level 1), fair value may be estimated using observable inputs such as quoted prices for similar securities, interest rates and yield curves, implied volatilities and credit spreads (level 2). Otherwise, unobservable inputs such as independent pricing models or other model-based valuation techniques such as present value of future cash flows, adjusted for the security’s credit rating on similar securities, prepayment assumptions and other factors such as credit loss assumptions (level 3). The fair value would be based on an exit price between market participants that may include adjustments for liquidity and credit.

Loans

The fair value of loans is estimated based on exit price. These cash flows include assumptions for prepayment estimates over each loan’s remaining life, considerations for the current interest rate environment compared to the weighted average rate of each portfolio and a credit risk component based on the historical and expected performance of each portfolio. The calculation also includes market liquidity and credit adjustments. These valuations are not comparable with the fair values disclosed for December 31, 2017 which were based on an entrance price basis.

Accrued Interest Receivable and Payable

The carrying amount is a reasonable estimate of fair value.

Deposits

The fair value of demand deposits, savings, money market and negotiable order of withdrawal (NOW) accounts is the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting expected cash flows using the rates currently offered for instruments of similar remaining maturities.

Capital Lease Obligation, Federal Home Loan Bank Advances and Long Term Subordinated Debt

The fair value of borrowings is based upon discounted expected cash flows using current rates at which borrowings of similar maturity could be obtained.

Financial Instruments with Off-Balance Sheet Risk

With regard to commitments to extend credit discussed in Note 9, the fair value amounts are not material.

The carrying amounts and estimated fair values of the Company’s financial instruments, none of which are held for trading purposes, are as follows at June 30, 2018 and December 31, 2017:

			Fair Value Measurements at June 30, 2018 using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Dollars in thousands	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
ASSETS
Cash and due from banks	$	13,804	$	13,804	$	-	$	-	$	13,804
Interest-earning deposits with banks		35,600		35,600		-		-		35,600
Certificates of deposit with banks		1,498		-		1,479		-		1,479
Federal Home Loan Bank stock		1,050		-		1,050		-		1,050
Investment securities available for sale		28,202		-		28,202		-		28,202
Equity securities		713		713		-		-		713
Net loans		370,182		-		-		361,857		361,857
Accrued interest receivable		1,140		-		1,140		-		1,140

LIABILITIES
Deposits	$	393,279	$	-	$	382,953	$	-	$	382,953
Capital lease obligation		174		-		174		-		174
Federal Home Loan Bank Advances		16,100		-		15,991		-		15,991
Long term subordinated debt		9,713		-		9,411		-		9,411
Accrued interest payable		360		-		360		-		360

			Fair Value Measurements at December 31, 2017 using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Dollars in thousands	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
ASSETS
Cash and due from banks	$	5,409	$	5,409	$	-	$	-	$	5,409
Interest-earning deposits with banks		3,647		3,647		-		-		3,647
Certificates of deposit with banks		1,498		-		1,519		-		1,519
Federal Home Loan Bank stock		1,341		-		1,341		-		1,341
Investment securities available for sale		31,112		626		30,486		-		31,112
Net loans		345,080		-		-		345,370		345,370
Accrued interest receivable		1,078		-		1,078		-		1,078

LIABILITIES
Deposits	$	340,653	$	-	$	330,672	$	-	$	330,672
Capital lease obligation		207		-		207		-		207
Federal Home Loan Bank Advances		23,600		-		23,495		-		23,495
Long term subordinated debt		9,676		-		9,619		-		9,619
Accrued interest payable		292		-		292		-		292

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

The Company groups assets and liabilities 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 based upon quoted prices for identical instruments traded in active markets.

Level 2

Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3

Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

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, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in an active over-the-counter market. Level 2 securities include U.S. government agency securities, mortgage-backed securities issued by government-sponsored enterprises and municipal bonds. There have been no changes in valuation techniques for the quarter ended June 30, 2018. Valuation techniques are consistent with techniques used in prior periods.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured on a recurring basis.

	Total		Level 1		Level 2		Level 3
Dollars in thousands
June 30, 2018
U.S. Government and federal agency	$	10,827	$	-	$	10,827	$	-
Mortgage-backed securities*		17,089		-		17,089		-
Municipal securities		286		-		286		-
Equity securities		713		713		-		-
Total	$	28,915	$	713	$	28,202	$	-

December 31, 2017
U.S. Government and federal agency	$	11,276	$	-	$	11,276	$	-
Mortgage-backed securities*		18,915		-		18,915		-
Municipal securities		295		-		295		-
Equity securities		626		626		-		-
Total	$	31,112	$	626	$	30,486	$	-

*All of the Company’s mortgage-backed securities are issued either by the U.S. Government, which includes GNMA pools, or by government-sponsored enterprises such as FNMA and FHLMC.

The Company did not have any transfers of assets between Levels 1, 2 or 3 during the periods ended June 30, 2018 and December 31, 2017.

Impaired Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures it for impairment. The fair value of impaired loans is estimated using one of several methods, including collateral value, a loan’s observable market price and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value exceeds the recorded investments in such loans. At June 30, 2018, the discounted cash flows method was used in determining the fair value of nine loans totaling $1.8 million and the fair value of the collateral method was used in the other twenty-three loans totaling $2.5 million. At December 31, 2017, the discounted cash flows method was used in determining the fair value of nine loans totaling $1.9 million and the fair value of the collateral method was used in the other twenty-nine loans totaling $4.2 million. Impaired loans where an allowance is established based on the fair value of collateral and also when written down with the discounted cash flow method require classification in the fair value hierarchy. The fair value of the collateral for an impaired loan is classified as Level 3. Although appraisals of these properties are frequently based on comparable properties, they are not identical. Significant unobservable inputs will need to be used in assessing the value. When the discounted cash flows method is used, the Company records the impaired loan as nonrecurring Level 3. There have been no changes in valuation techniques for the period ended June 30, 2018. Valuation techniques are consistent with techniques used in prior periods.

The following table presents impaired loans that were re-measured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses based upon the fair value of the underlying collateral or discounted cash flows during the six months ended June 30, 2018 and 2017.

	June 30, 2018					June 30, 2017
Dollars in thousands	Level 2		Level 3			Level 2		Level 3
Carrying value of impaired loans before allocations	$	-	$	1,685			-	$	1,789
Specific valuation allowance allocations		-		(249	)		-		(247	)
Carrying value of impaired loans after allocations	$	-	$	1,436			-	$	1,542

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. The fair value of foreclosed assets are classified as Level 3. Although appraisals of these properties are frequently based on comparable properties, they are not identical. Significant unobservable inputs will need to be used in assessing the value.

The carrying value of foreclosed assets is periodically reviewed and written down to fair value. Any loss is included in earnings. For the three months ended June 30, 2018, there were no assets that were written down prior to foreclosure. For the six months ended June 30, 2018, foreclosed assets in the amount of $1,158,000 were written down by $180,000 to $978,000 prior to foreclosure. For the three and six months ended June 30, 2018, foreclosed assets with a carrying value of $978,000 were written down by $248,000 to $730,000 subsequent to foreclosure. For the three months ended June 30, 2017, foreclosed assets with a carrying value of $767,000 were written down by $184,000 to $583,000. For the six months ended June 30, 2017, foreclosed assets with a carrying value of $776,000 were written down by $193,000 to $583,000.

Assets measured at fair value on a nonrecurring basis are included in the table below.

	Total		Level 1		Level 2		Level 3
Dollars in thousands
June 30, 2018
Foreclosed assets	$	730	$	-	$	-	$	730
Impaired loans		1,436		-		-		1,436
Total	$	2,166	$	-	$	-	$	2,166

December 31, 2017
Foreclosed assets	$	324	$	-	$	-	$	324
Impaired loans		1,621		-		-		1,621
Total	$	1,945	$	-	$	-	$	1,945

Quantitative Information About Level 3 Fair Value Measurements:

	Fair Value		Valuation Technique	Unobservable Input	Range			Weighted Average
Dollars in thousands
June 30, 2018
Impaired loans	$	1,436	Discounted cash flows	Discount rate		4.75% - 8.50	%		7.08	%
Foreclosed assets		730	Discounted appraisals	Appraisal adjustments		8.00	%		8.00	%

December 31, 2017
Impaired loans	$	101	Discounted appraisals	Appraisal adjustments		20.00 – 25.00	%		23.33	%
		1,520	Discounted cash flows	Discount rate		4.75 – 8.50	%		7.06	%

Foreclosed assets		324	Discounted appraisals	Appraisal adjustments		15.00	%		15.00	%

NOTE N - FAIR VALUE MEASUREMENTS

The Company is required to disclose the estimated fair value of financial instruments, both assets and liabilities on and off the balance sheet, for which it is practicable to estimate fair value. These fair value estimates are made at December 31 of each year, based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price an asset could be sold at or the price a liability could be settled for. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, the Company has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The methodologies for financial assets and financial liabilities are discussed below:

Cash and Due from Banks, Interest-Earning Deposits with Banks, Certificates of Deposit with Banks and Federal Funds Sold

The carrying amounts for cash and due from banks, interest-earning deposits with banks, certificates of deposit with banks and federal funds sold approximate fair value because of the short maturities of those instruments.

Investment Securities

Fair value for investment securities equals the quoted market price if such information is available. If a quoted market price is not available, fair value is estimated using independent pricing models or other model-based valuation techniques such as present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.

Loans

The fair value of loans is estimated based on discounted expected cash flows. These cash flows include assumptions for prepayment estimates over each loan’s remaining life, considerations for the current interest rate environment compared to the weighted average rate of each portfolio and a credit risk component based on the historical and expected performance of each portfolio. The calculation does not include an estimate for illiquidity in the market.

Accrued Interest

The carrying amount is a reasonable estimate of fair value.

Deposits

Capital Lease Obligation, Advances from the Federal Home Loan Bank and Long Term Subordinated Debt

The fair value of borrowings is based upon discounted expected cash flows using current rates at which borrowings of similar maturity could be obtained.

Financial Instruments with Off-Balance Sheet Risk

With regard to commitments to extend credit discussed in Note M, the fair value amounts are not material.

The carrying amounts and estimated fair values of the Company’s financial instruments, none of which are held for trading purposes, are as follows at December 31, 2017 and December 31 2016:

			Fair Value Measurements at December 31, 2017 using
Dollars in thousands	Carrying Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Fair Value
Dollars in thousands	Carrying Value		Level 1		Level 2		Level 3		Balance
ASSETS
Cash and due from banks	$	5,409	$	5,409	$	-	$	-	$	5,409
Interest earning deposits with banks		3,647		3,647		-		-		3,647
Certificate of deposits with banks		1,498		-		1,519		-		1,519
Federal Home Loan Bank Stock		1,341		-		1,341		-		1,341
Securities available for sale		31,112		626		30,486		-		31,112
Net loans		345,080		-		-		345,370		345,370
Accrued interest receivable		1,078		-		1,078		-		1,078

LIABILITIES
Deposits	$	340,653	$	-	$	330,672	$	-	$	330,672
Capital lease obligation		207		-		207		-		207
FHLB Advances		23,600		-		23,495		-		23,495
Long term subordinated debt		9,676		-		9,619		-		9,619
Accrued interest payable		292		-		292		-		292

			Fair Value Measurements at December 31, 2016 using
Dollars in thousands			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Fair Value
Dollars in thousands	Carrying Value		Level 1		Level 2		Level 3		Balance
ASSETS
Cash and due from banks	$	8,063	$	8,063	$	-	$	-	$	8,063
Interest earning deposits with banks		18,086		18,086		-		-		18,086
Certificate of deposits with banks		1,498		-		1,498		-		1,498
Federal Home Loan Bank Stock		942		-		942		-		942
Securities available for sale		27,063		1,112		25,201		750		27,063
Net loans		305,099		-		-		305,714		305,714
Accrued interest receivable		945		-		945		-		945

LIABILITIES
Deposits	$	318,665	$	-	$	311,464	$	-	$	311,464
Capital lease obligation		268		-		268		-		268
FHLB Advances		14,100		-		14,115		-		14,115
Long term subordinated debt		9,605		-		9,616		-		9,616
Accrued interest payable		287		-		287		-		287

Fair Value Hierarchy

Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques included use of option pricing models, discounted cash flow models and similar techniques. Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

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, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in an active over-the-counter market. Level 2 securities include U.S. government agency securities, mortgage-backed securities issued by government-sponsored entities and municipal bonds. Securities classified as Level 3 include a corporate debt security and a common stock in a less liquid market. The value of the corporate debt security is determined via the going rate of a similar debt security if it were to enter the market at period end. The derived market value requires significant management judgment and is further substantiated by discounted cash flow methodologies. There have been no changes in valuation techniques for the quarter ended December 31, 2017. Valuation techniques are consistent with techniques used in prior periods.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured on a recurring basis.

	Total		Level 1		Level 2		Level 3
Dollars in thousands
December 31, 2017
U.S. Government and federal agency	$	11,276	$	-	$	11,276	$	-
Mortgage-backed securities *		18,915		-		18,915		-
Municipal securities		295		-		295		-
Equity securities		626		626		-		-
Total	$	31,112	$	626	$	30,486	$	-

December 31, 2016
U.S. Government and federal agency	$	6,543	$	-	$	6,543	$	-
Mortgage-backed securities *		18,658		-		18,658		-
Corporate debt securities		750		-		-		750
Equity securities		1,112		1,112		-		-
Total	$	27,063	$	1,112	$	25,201	$	750

*All of the Company’s mortgage-backed securities are issued either by the U.S. Government, which includes GNMA pools, or by government-sponsored agencies such as FNMA and FHLMC.

The Company did not have any transfers between Levels 1, 2, or 3 during the years ended December 31, 2017 or 2016.

The tables below present the changes during the years ended December 31, 2017 and December 31, 2016 in the amount of Level 3 assets measured on a recurring basis.

	December 31, 2017			December 31, 2016
Dollars in thousands
Balance, beginning of year	$	750		$	750
Called securities		(750	)		-
Balance, end of year	$	-		$	750

Impaired Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures it for impairment. The fair value of impaired loans is estimated using one of several methods, including collateral value, a loan’s observable market price and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value exceeds the recorded investments in such loans. At December 31, 2017, the discounted cash flows method was used in determining the fair value of nine loans totaling $1.9 million and the fair value of the collateral method was used in the other twenty-nine loans totaling $4.2 million. At December 31, 2016, the discounted cash flows method was used in determining the fair value of ten loans totaling $3.3 million and the fair value of the collateral method was used in the other thirty-three loans totaling $3.8 million. Impaired loans where an allowance is established based on the fair value of collateral and also when written down with the discounted cash flow method require classification in the fair value hierarchy. The fair value of the collateral for an impaired loan is classified as Level 3. Although appraisals of these properties are frequently based on comparable properties, they are not identical. Significant unobservable assumptions will need to be used in assessing the value. When the discounted cash flows method is used, the Company records the impaired loan as nonrecurring Level 3. There have been no changes in valuation techniques for the year ended December 31, 2017. Valuation techniques are consistent with techniques used in prior periods.

	December 31, 2017					December 31, 2016
Dollars in thousands	Level 2		Level 3			Level 2		Level 3
Carrying value of impaired loans before allocations	$	-	$	1,768		$	-	$	2,829
Specific valuation allowance allocations		-		(248	)		-		(914	)
Carrying value of impaired loans after allocations	$	-	$	1,520		$	-	$	1,915

Foreclosed Assets

Other real estate owned (“OREO”) is adjusted to fair value upon transfer of the loans to OREO. Subsequently, OREO is carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. The fair value of OREO is classified as Level 3. Although appraisals of these properties are frequently based on comparable properties, they are not identical. Significant unobservable assumptions will need to be used in assessing the value.

The carrying value of foreclosed assets is periodically reviewed and written down to fair value. Any loss is included in earnings. For the year ended December 31, 2017, there were not any re-measurements of foreclosed assets subsequent to foreclosure. For the year ended December 31, 2016, foreclosed assets with a carrying value of $974,000 were written down by $268,000 to $706,000.

Assets measured at fair value on a nonrecurring basis are included in the table below.

	Total		Level 1		Level 2		Level 3
Dollars in thousands
December 31, 2017
Foreclosed assets	$	324	$	-	$	-	$	324
Impaired loans		1,621		-		-		1,621
Total	$	1,945	$	-	$	-	$	1,945

December 31, 2016
Foreclosed assets	$	1,011	$	-	$	-	$	1,011
Impaired loans		1,915		-		-		1,915
Total	$	2,926	$	-	$	-	$	2,926

Quantitative Information About Level 3 Fair Value Measurements:

	Fair Value		Valuation Technique	Unobservable Input	Range			Weighted Average
Dollars in thousands
December 31, 2017
Impaired loans	$	101	Discounted appraisals	Appraisal adjustments		20.00 – 25.00	%		23.33	%
		1,520	Discounted cash flows	Discount rate		4.75 – 8.50	%		7.06	%

Foreclosed assets		324	Discounted appraisals	Appraisal adjustments		15.00	%		15.00	%

December 31, 2016
Impaired loans	$	1,915	Discounted cash flows	Discount rate		4.25 – 6.50	%		5.89	%
Foreclosed assets		1,011	Discounted appraisals	Appraisal adjustments		15.11 – 60.47	%		30.75	%

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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