Disclosures About Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2020

Disclosures About Fair Value of Assets and Liabilities [Abstract]

Disclosures About Fair Value of Assets and Liabilities

Note 8: Disclosures About Fair Value of Assets and Liabilities

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 measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assetsor 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 or liabilities

Level 3 Unobservable inputs supported by little or no market activity and significant to thefair value of the assets or liabilities

Recurring Measurements

There were no assets measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019.

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2020 and December 31, 2019 (dollars in thousands):

	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2020
Impaired loans (collateral- dependent)	$	4,654	$	-	$	-	$	4,654
December 31, 2019
Impaired loans (collateral- dependent)	$	1,783	$	-	$	-	$	1,783

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral-Dependent Impaired Loans, Net of Allowance for Loan Losses

The estimated fair value of collateral-dependent impaired loans is based on fair value, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers evaluation analysis as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Values of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by executive management and loan administration. Values are reviewed for accuracy and consistency by executive management and loan administration. The ultimate collateral values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

	Fair Value		Valuation Technique	Unobservable Inputs	Weighted- Average
June 30, 2020
Collateral-dependent impaired loans	$	4,654	Appraisals from comparable properties	Estimated cost to sell		3-5	%
December 31, 2019
Collateral-dependent impaired loans	$	1,783	Appraisals from comparable properties	Estimated cost to sell		3-5	%

The following tables presents estimated fair values of the Company’s financial instruments not recorded at fair value at June 30, 2020 and December 31, 2019 (dollars in thousands):

	Carrying Amount		Level 1		Fair Value Measurements				Total
					Level 2		Level 3
June 30, 2020
Financial Assets
Cash and due from banks	$	127,780	$	127,780	$	-	$	-	$	127,780
Interest-bearing time deposits in other banks	$	27,865	$	-	$	27,865	$	-	$	27,865
Loans, net of allowance	$	828,065	$	-	$	823,896	$	4,654	$	828,550
Mortgage loans held for sale	$	500	$	-	$	500	$	-	$	500
Nonmarketable equity securities	$	1,095	$	-	$	1,095	$	-	$	1,095
Interest receivable	$	5,267	$	-	$	5,267	$	-	$	5,267
Financial Liabilities
Deposits	$	894,231	$	-	$	892,882	$	-	$	892,882
Interest payable	$	423	$	-	$	423	$	-	$	423
December 31, 2019
Financial Assets
Cash and due from banks	$	117,128	$	117,128	$	-	$	-	$	117,128
Interest-bearing time deposits in other banks	$	30,147	$	-	$	30,147	$	-	$	30,147
Loans, net of allowance	$	699,458	$	-	$	698,672	$	1,809	$	700,481
Mortgage loans held for sale	$	1,031	$	-	$	1,031	$	-	$	1,031
Nonmarketable equity securities	$	1,100	$	-	$	1,100	$	-	$	1,100
Interest receivable	$	3,954	$	-	$	3,954	$	-	$	3,954
Financial Liabilities
Deposits	$	757,483	$	-	$	757,520	$	-	$	757,520
Interest payable	$	636	$	-	$	636	$	-	$	636

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying consolidated balance sheets at amounts other than fair value:

Cash and Due from Banks, Interest-Bearing Time Deposits in Other Banks, Nonmarketable Equity Securities, Interest Receivable and Interest Payable

The carrying amount approximates fair value.

Loans and Mortgage Loans Held for Sale

The fair value of loans is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations.

Deposits

Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Commitments to Extend Credit, Lines of Credit and Standby Letters of Credit

The fair values of unfunded commitments are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The fair values of standby letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. The estimated fair values of the Company’s commitments to extend credit, lines of credit and standby letters of credit were not material at June 30, 2020 or December 31, 2019.