Fair Value Measurements and Disclosures (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Measurements and Disclosures

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

	March 31, 2020
(dollars in thousands)	Total		Level 1	Level 2	Level 3
Assets
Securities available for sale:
U.S. asset backed securities	$	20,661	—	20,661	—
U.S. government agency mortgage-backed securities		8,132	—	8,132	—
U.S. government agency collateralized mortgage obligations		37,342	—	37,342	—
State and municipal securities		24,417	—	24,417	—
Investments in mutual funds		1,025	—	1,025	—
Mortgage loans held-for-sale		107,506	—	107,506	—
Mortgage loans held-for-investment		10,553	—	10,553	—
Interest rate lock commitments		4,021	—	—	4,021
Customer derivatives - Interest rate swaps		1,057	—	1,057	—
Total	$	214,714	—	210,693	4,021
Liabilities
Interest rate lock commitments		332	—	—	332
Forward commitments		2,424	—	2,424	—
Customer derivatives - Interest rate swaps		1,183	—	1,183	—
	$	3,939	—	3,607	332

	December 31, 2019
(dollars in thousands)	Total		Level 1	Level 2	Level 3
Assets
Securities available for sale:
U.S. asset backed securities	$	11,866	—	11,866	—
U.S. government agency mortgage-backed securities		5,497	—	5,497	—
U.S. government agency collateralized mortgage obligations		35,223	—	35,223	—
State and municipal securities		6,270	—	6,270	—
Investments in mutual funds		1,009	—	1,009	—
Mortgage loans held-for-sale		33,704	—	33,704	—
Mortgage loans held-for-investment		10,546	—	10,546	—
Interest rate lock commitments		504	—	—	504
Forward commitments		504	—	6	—
Customer derivatives - Interest rate swaps		382	—	382	—
Total	$	105,505	—	104,503	504
Liabilities
Interest rate lock commitments		157	—	—	157
Forward commitments		119	—	119	—
Customer derivatives - Interest rate swaps		431	—	431	—
	$	707	—	550	157

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

	March 31, 2020
(dollars in thousands)	Total		Level 1	Level 2	Level 3
Mortgage servicing rights	$	423	—	—	423
SBA loan servicing rights		469	—	—	469
Impaired loans (1)		962	—	—	962
Other real estate owned (2)		—	—	—	—
Total	$	1,854	—	—	1,854

	December 31, 2019
(dollars in thousands)	Total		Level 1	Level 2	Level 3
Mortgage servicing rights	$	446	—	—	446
SBA loan servicing rights		337	—	—	337
Impaired loans (1)		804	—	—	804
Other real estate owned (2)		120	—	—	120
Total	$	1,707	—	—	1,707

(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. The recorded investment in impaired loans noted above was $9.2 million and $7.3 million as of March 31, 2020 and December 21, 2019, respectively.

(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

		March 31, 2020			December 31, 2019
	Fair Value	Carrying			Carrying
(dollars in thousands)	Hierarchy Level	amount		Fair value	amount	Fair value
Financial assets:
Cash and cash equivalents	Level 1	$	37,522	37,522	39,371	39,371
Securities available-for-sale	Level 2		90,552	90,552	58,856	58,856
Securities held-to-maturity	Level 2		7,747	7,946	8,780	9,003
Equity investments	Level 2		1,025	1,025	1,009	1,009
Mortgage loans held-for-sale	Level 2		107,506	107,506	33,704	33,704
Loans receivable, net of the allowance for loan and lease losses	Level 3		999,910	1,035,010	944,651	973,057
Mortgage loans held-for-investment	Level 2		10,553	10,553	10,546	10,546
Interest rate lock commitments	Level 3		4,021	4,021	504	504
Forward commitments	Level 2		—	—	6	6
Restricted investment in bank stock	NA		8,347	NA	8,072	NA
Accrued interest receivable	Level 3		3,283	3,283	3,148	3,148
Customer derivatives - Interest rate swaps	Level 2		1,057	1,057	382	382
Financial liabilities:
Deposits	Level 2		993,753	1,116,400	851,168	880,400
Short-term borrowings	Level 2		129,707	129,707	123,676	123,678
Long-term debt	Level 2		5,023	5,100	3,123	3,123
Subordinated debentures	Level 2		40,885	39,080	40,962	40,962
Accrued interest payable	Level 2		1,578	1,578	1,088	1,088
Interest rate lock commitments	Level 3		332	332	157	157
Forward commitments	Level 2		2,424	2,424	119	119
Customer derivatives - Interest rate swaps	Level 2		1,183	1,183	431	431
		Notional			Notional
Off-balance sheet financial instruments:		amount		Fair value	amount	Fair value
Commitments to extend credit	Level 2	$	323,829	4,021	327,788	504
Letters of credit	Level 2		7,866	—	9,750	—

Schedule of level 3 inputs reconciliation

	Three Months Ended March 31,
	2020		2019
Balance at beginning of the period	$	504	310
Increase in value		3,517	19
Balance at end of the period	$	4,021	329

Schedule of measurement inputs

				Significant
	Fair Value			Unobservable	Range of		Weighted
	Level 3		Valuation Technique	Input	Inputs		Average
March 31, 2020	$	4,021	Market comparable pricing	Pull through	1 - 99	%	91.70	%
December 31, 2019		504	Market comparable pricing	Pull through	1 - 99		93.41