Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2020

The Company is required to disclose fair values for its financial instruments. Fair values are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Also, it is the Company’s general practice and intention to hold most of its financial instruments to maturity and not to engage in trading or sales activities. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These fair values are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions can significantly affect the fair values.

Fair values have been determined by the Company using historical data and an estimation methodology suitable for each category of financial instruments. The Company’s fair values, methods, and assumptions are set forth below for the Company’s other financial instruments.

As certain assets and liabilities, such as deferred tax assets, premises and equipment, and many other operational elements of the Company, are not considered financial instruments but have value, this fair value of financial instruments would not represent the full market value of the Company.

The fair values of the Company’s financial instruments not recorded at fair value on a recurring or nonrecurring basis are as follows at June 30, 2020 and December 31, 2019:



	Carrying		Fair		Fair Value Measurements at June 30, 2020
(In Thousands)	Value		Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents (1)	$	215,174	$	215,174	$	215,174	$	—	$	—
Restricted investment in bank stock (1)	14,849		14,849		14,849		—		—
Loans held for sale (1)	5,146		5,146		5,146		—		—
Loans, net	1,336,370		1,351,981		—		—		1,351,981
Bank-owned life insurance (1)	29,368		29,368		29,368		—		—
Accrued interest receivable (1)	8,068		8,068		8,068		—		—

Financial liabilities:
Interest-bearing deposits	$	1,055,981	$	1,092,886	$	712,065	$	—	$	380,821
Noninterest-bearing deposits (1)	418,324		418,324		418,324		—		—
Short-term borrowings (1)	15,133		15,133		15,133		—		—
Long-term borrowings	171,885		178,332		—		—		178,332
Accrued interest payable (1)	1,530		1,530		1,530		—		—

(1) The financial instrument is carried at cost at June 30, 2020, which approximate the fair value of the instruments



	Carrying		Fair		Fair Value Measurements at December 31, 2019
(In Thousands)	Value		Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents (1)	$	48,589	$	48,589	$	48,589	$	—	$	—
Restricted investment in bank stock (1)	13,528		13,528		13,528		—		—
Loans held for sale (1)	4,232		4,232		4,232		—		—
Loans, net	1,343,650		1,346,395		—		—		1,346,395
Bank-owned life insurance (1)	29,253		29,253		29,253		—		—
Accrued interest receivable (1)	5,246		5,246		5,246		—		—

Financial liabilities:
Interest-bearing deposits	$	989,259	$	990,747	$	611,374	$	—	$	379,373
Noninterest-bearing deposits (1)	334,746		334,746		334,746		—		—
Short-term borrowings (1)	4,920		4,920		4,920		—		—
Long-term borrowings	161,920		163,931		—		—		163,931
Accrued interest payable (1)	1,671		1,671		1,671		—		—

(1) The financial instrument is carried at cost at December 31, 2019, which approximate the fair value of the instruments

The methods and assumptions used by the Company in estimating fair values of financial instruments at June 30, 2020 is in accordance with ASC Topic 825, Financial Instruments, as amended by ASU 2016-01 which requires public entities to use exit pricing in the calculation of the above tables.