Fair Value Measurements and Disclosures (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Measurements and Disclosures

Schedule of financial assets measured at fair value on a recurring basis

	September 30, 2019
(dollars in thousands)	Total		Level 1	Level 2	Level 3
Securities available for sale:
U.S. government agency mortgage-backed securities	$	12,900	—	12,900	—
U.S. government agency collateralized mortgage obligations		29,961	—	29,961	—
Investments in mutual funds and other equity securities		9,896	—	9,896	—
Mortgage loans held-for-sale		48,615	—	48,615	—
Mortgage loans held-for-investment		11,278	—	11,278	—
Mortgage servicing rights		314	—	—	314
SBA loan servicing rights		321	—	—	321
Interest rate lock commitments		283	—	—	283
Customer derivatives - Interest rate swaps		500	—	500	—
Total	$	114,068	—	113,150	918

	December 31, 2018
(dollars in thousands)	Total		Level 1	Level 2	Level 3
Securities available for sale:
U.S. government agency mortgage-backed securities	$	23,866	—	23,866	—
U.S. government agency collateralized mortgage obligations		14,664	—	14,664	—
State and municipal securities		10,919	—	10,919	—
Investments in mutual funds and other equity securities		979	—	979	—
Mortgage loans held-for-sale		37,695	—	37,695	—
Mortgage loans held-for-investment		11,422	—	11,422	—
Mortgage servicing rights		213	—	—	213
Interest rate lock commitments		310	—	—	310
Customer derivatives - Interest rate swaps		141	—	141	—
Total	$	100,209	—	99,686	523

Schedule of financial assets measured at fair value on non-recurring basis

	September 30, 2019
(dollars in thousands)	Total		Level 1	Level 2	Level 3
Impaired loans (1)	$	5,965	—	—	5,965
Other real estate owned (2)		120	—	—	120
Total	$	6,085	—	—	6,085

	December 31, 2018
(dollars in thousands)	Total		Level 1	Level 2	Level 3
Impaired loans (1)	$	5,799	—	—	5,799
Other real estate owned (2)		—	—	—	—
Total	$	5,799	—	—	5,799

(1) Impaired loans are those in which the Corporation has measured impairment generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds.  These assets are included as Level 3 fair values, based upon the lowest level of input is significant to the fair value measurements.

(2) Real estate properties acquired through, or in lieu of, foreclosure are to be sold and are carried at fair value less estimated cost to sell. Fair value is based upon independent market prices or appraised value of the property. These assets are included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement. Appraised values may be discounted based on management’s expertise, historical knowledge, changes in market conditions from the time of valuation and/or estimated costs to sell.

Schedule of estimated fair values of financial instruments

		September 30, 2019			December 31, 2018
	Fair Value	Carrying			Carrying
(dollars in thousands)	Hierarchy Level	amount		Fair value	amount	Fair value
Financial assets:
Cash and cash equivalents	Level 1	$	40,532	40,532	23,952	23,952
Securities available-for-sale	Level 2		52,757	52,757	50,428	50,428
Securities held-to-maturity	Level 2		8,814	9,028	12,741	12,655
Mortgage loans held-for-sale	Level 2		48,615	48,615	37,695	37,695
Loans receivable, net	Level 3		935,858	933,285	818,631	820,512
Mortgage loans held-for-investment	Level 2		11,278	11,278	11,422	11,422
Interest rate lock commitments	Level 3		283	283	310	310
Forward commitments	Level 2		30	30	—	—
Restricted investment in bank stock	Level 3		8,237	8,237	7,002	7,002
Mortgage servicing rights	Level 3		314	314	232	213
SBA loan servicing rights	Level 3		321	321	—	—
Accrued interest receivable	Level 3		3,155	3,155	2,889	2,889
Customer derivatives - Interest rate swaps	Level 2		500	500	141	141
Financial liabilities:
Deposits	Level 2		858,461	896,000	752,130	744,300
Short-term borrowings	Level 2		128,466	128,467	114,300	114,300
Long-term debt	Level 2		3,123	3,123	6,238	6,240
Subordinated debentures	Level 2		9,176	9,792	9,239	9,396
Accrued interest payable	Level 2		669	669	305	305
Interest rate lock commitments	Level 3		81	81	40	40
Forward commitments	Level 2		105	105	176	176
Customer derivatives - Interest rate swaps	Level 2		568	568	161	161
		Notional			Notional
Off-balance sheet financial instruments:		amount		Fair value	amount	Fair value
Commitments to extend credit	Level 2	$	327,788	283	290,614	310
Letters of credit	Level 2		9,750	—	5,158	—

Schedule of level 3 inputs reconciliation

	Three Months Ended September 30,			Nine Months Ended September 30,
	2019		2018	2019		2018
Balance at beginning of the period	$	375	586	$	310	344
(Decrease) increase in value		(92)	(80)		(27)	162
Balance at end of the period	$	283	506	$	283	506

Schedule of measurement inputs

				Significant
Valuation Techniques for Level 3 interest rate lock	Fair Value			Unobservable	Range of		Weighted
commitments as of September 30, 2019	Level 3		Valuation Technique	Input	Inputs		Average
Interest rate lock commitments	$	283	Market comparable pricing	Pull through	1 - 99	%	91.70	%