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Fair Values of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2020

The following table summarizes financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
June 30, 2020
Securities available-for-sale:
U.S. Government-sponsored enterprises obligations	$	1,011	$	—	$	1,011	$	—
U.S Government agency small business administration pools guaranteed by the SBA		2,681		—		2,681		—
Collateralized mortgage obligations issued by the FHLMC		787		—		787		—
Mortgage-backed securities		2,759		—		2,759		—
Municipal bonds		36,985		—		36,985		—
Other assets:
Mortgage servicing rights		329		—		—		329
Other liabilities:
Derivatives		164		—		164		—

	Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
December 31, 2019
Securities available-for-sale:
U.S. Government-sponsored enterprises obligations	$	8,997	$	—	$	8,997	$	—
U.S Government agency small business administration pools guaranteed by the SBA		2,740		—		2,740		—
Collateralized mortgage obligations issued by the FHLMC		980		—		980		—
Mortgage-backed securities		3,188		—		3,188		—
Municipal bonds		28,880		—		28,880		—
Other assets:
Mortgage servicing rights		397		—		—		397

Summary of Significant Unobservable Inputs used in Level 3 Assets Measured at Fair Value on Recurring Basis

For Level 3 assets measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, the significant unobservable inputs used in the fair value measurements were as follows:

	June 30, 2020						December 31, 2019
(Dollars in thousands)	Valuation Technique	Description	Range	Weighted Average⁽¹⁾	Fair Value		Weighted Average⁽¹⁾	Fair Value
Mortgage Servicing Rights	Discounted Cash Flow	Prepayment Rate	9.88% - 29.13%	18.57%	$	329	13.08%	$	397
		Discount Rate	9.00% - 9.00%	9.00%			9.50%
		Delinquency Rate	2.33% - 2.90%	2.47%			2.48%
		Default Rate	0.08% - 0.14%	0.12%			0.09%

(1)

Unobservable inputs for mortgage servicing rights were weighted by loan amount.

Fair Value Measurements, Nonrecurring

The following summarizes assets measured at fair value on a nonrecurring basis at June 30, 2020 and December 31, 2019:

	Fair Value Measurements at Reporting Date Using:
(Dollars in thousands)		Total		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
June 30, 2020
Impaired Loans		$	909	$	—	$	—	$	909

December 31, 2019
Impaired Loans		$	996	$	—	$	—	$	996

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques

The following is a summary of the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis at June 30, 2020 and December 31, 2019:

(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input
June 30, 2020
Impaired Loans	$	909	Market Approach Appraisal of Collateral	Selling Costs Provision

December 31, 2019
Impaired Loans	$	996	Market Approach Appraisal of Collateral	Selling Costs Provision

Fair Value Measurements, Recurring and Nonrecurring

The estimated fair values, and related carrying or notional amounts, of the Company’s financial instruments at June 30, 2020 and December 31, 2019 are as follows:

(Dollars in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
June 30, 2020
Financial Assets:
Cash and due from banks	$	30,625	$	30,625	$	30,625	$	—	$	—
Interest-bearing time deposits with other banks		2,488		2,488		—		2,488		—
Federal Home Loan Bank stock		2,776		2,776		—		2,776		—
Bank-owned life insurance		4,292		4,292		—		4,292		—
Loans, net		378,335		377,325		—		—		377,325
Accrued interest receivable		1,360		1,360		1,360		—		—
Financial Liabilities:
Deposits	$	330,625	$	331,080	$	272,576	$	58,504	$	—
Advances from Federal Home Loan Bank		51,312		52,897		—		52,897		—
Advances from Federal Reserve Bank		25,713		25,713				25,713
Mortgagors’ tax escrow		706		706		—		706		—
December 31, 2019
Financial Assets:
Cash and due from banks	$	4,009	$	4,009	$	4,009	$	—	$	—
Interest-bearing time deposits with other banks		2,735		2,735		—		2,735		—
Federal Home Loan Bank stock		2,971		2,971		—		2,971		—
Bank-owned life insurance		4,267		4,267		—		4,267		—
Loans, net		341,980		336,847		—		—		336,847
Accrued interest receivable		1,235		1,235		1,235		—		—
Financial Liabilities:
Deposits	$	281,616	$	281,707	$	220,596	$	61,111	$	—
Advances from Federal Home Loan Bank		66,219		66,060		—		66,060		—
Mortgagors’ tax escrow		586		586		—		586		—

Fair Value, Inputs, Level 3 [Member]

Summary of Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

For the six months ended June 30, 2020 and 2019, the changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:

(Dollars in thousands)	Mortgage Servicing Rights⁽¹⁾
Balance as of January 1, 2020	$	397
Included in net income		(68	)
Balance as of June 30, 2020	$	329
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of June 30, 2020	$	—
Balance as of January 1, 2019	$	479
Included in net income		(85	)
Balance as of June 30, 2019	$	394
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of June 30, 2019	$	—

(1)

Realized and unrealized gains and losses related to mortgage servicing rights are reported as a component of mortgage banking income in the Company’s consolidated statements of income.

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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