FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2018

Summary of assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):



			Fair Value Measurement at June 30, 2018 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	15,450	$	—	$	15,450	$	—
Mortgage-backed securities, residential	198,640		—		198,640		—
Obligations of states and political subdivisions	47,029		—		47,029		—
Corporate bonds and notes	250		—		250		—
SBA loan pools	3,788		—		3,788		—
Total available for sale securities	$	265,157	$	—	$	265,157	$	—

Equity investments	$	1,277	$	1,277	$	—	$	—
Derivative assets	2,304		—		2,304		—

Financial Liabilities:
Derivative liabilities	$	2,322	$	—	$	2,304	$	18

There were no transfers between Level 1 and Level 2 during the three and six month periods ended June 30, 2018.



			Fair Value Measurement at December 31, 2017 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	15,491	$	—	$	15,491	$	—
Mortgage-backed securities, residential	219,909		—		219,909		—
Obligations of states and political subdivisions	53,132		—		53,132		—
Corporate bonds and notes	251		—		251		—
SBA loan pools	4,308		—		4,308		—
Total available for sale securities	$	293,091	$	—	$	293,091	$	—

Equity investments	$	1,192	$	1,192	$	—	$	—
Derivative assets	974		—		974		—

Financial Liabilities:
Derivative liabilities	$	1,049	$	—	$	974	$	75

Reconciliation of all assets measured at fair value

The table below presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three-month periods ended June 30, 2018 and June 30, 2017 (in thousands):



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	June 30, 2018		June 30, 2017		June 30, 2018			June 30, 2017
Balance of recurring Level 3 assets at April 1	$	—	$	251	$	(50	)	$	(65	)
Derivative instruments entered into	—		—		(1		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		33			(6		)
Included in other comprehensive income	—		1		—			—
Balance of recurring Level 3 assets at June 30	$	—	$	252	$	(18	)	$	(71	)

The table below presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six month periods ended June 30, 2018 and June 30, 2017 (in thousands):



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	June 30, 2018		June 30, 2017		June 30, 2018			June 30, 2017
Balance of recurring Level 3 assets at January 1	$	—	$	250	$	(75	)	$	(68	)
Derivative instruments entered into	—		—		(1		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		58			(3		)
Included in other comprehensive income	—		2		—			—
Transfers out of Level 3	—		—		—			—
Balance of recurring Level 3 assets at June 30	$	—	$	252	$	(18	)	$	(71	)

Reconciliation of liabilities measured at fair value



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	June 30, 2018		June 30, 2017		June 30, 2018			June 30, 2017
Balance of recurring Level 3 assets at April 1	$	—	$	251	$	(50	)	$	(65	)
Derivative instruments entered into	—		—		(1		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		33			(6		)
Included in other comprehensive income	—		1		—			—
Balance of recurring Level 3 assets at June 30	$	—	$	252	$	(18	)	$	(71	)



	Assets (Liabilities)
	Corporate Bonds and Notes				Derivative Liabilities
	June 30, 2018		June 30, 2017		June 30, 2018			June 30, 2017
Balance of recurring Level 3 assets at January 1	$	—	$	250	$	(75	)	$	(68	)
Derivative instruments entered into	—		—		(1		)	—
Total gains or losses for the period:
Included in earnings - other non-interest income	—		—		58			(3		)
Included in other comprehensive income	—		2		—			—
Transfers out of Level 3	—		—		—			—
Balance of recurring Level 3 assets at June 30	$	—	$	252	$	(18	)	$	(71	)

Nonrecurring fair value measurement, valuation techniques

The following table presents information related to Level 3 recurring fair value measurements at June 30, 2018 and December 31, 2017 (in thousands):



Description	Fair Value at June 30, 2018		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at June 30, 2018
Derivative liabilities	$	18	Historical trend	Credit default rate	6.76% - 6.76% [6.76%]



Description	Fair Value at December 31, 2017		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at December 31, 2017
Derivative liabilities	$	75	Historical trend	Credit default rate	5.67% - 5.67% [5.67%]

The following tables presents information related to Level 3 non-recurring fair value measurement at June 30, 2018 and December 31, 2017 (in thousands):



Description	Fair Value at June 30, 2018		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at June 30, 2018
Impaired loans:
Commercial and agricultural:
Commercial and industrial	$	12	Sales comparison	Discount to appraised value	0.00% - 0.00% [0.00%]
	$	12

OREO:
Commercial mortgages:
Commercial mortgages	$	534	Sales comparison	Discount to appraised value	10.00% - 22.95% [19.98%]
Residential mortgages	204		Sales comparison	Discount to appraised value	17.28% - 39.78% [20.44%]
Consumer loans:
Home equity lines and loans	148		Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
	$	886



Description	Fair Value at December 31, 2017		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at December 31, 2017
Impaired loans:
Commercial and agricultural:
Commercial and industrial	$	96	Sales comparison	Discount to appraised value	0.00% - 36.07% [33.02%]
Commercial mortgages:
Commercial mortgages	411		Sales comparison	Discount to appraised value	10.00% - 89.98% [51.35%]
	$	507

OREO:
Commercial mortgages:
Commercial mortgages	$	1,483	Sales comparison	Discount to appraised value	10.00% - 22.95% [19.75%]
Residential mortgages	382		Sales comparison	Discount to appraised value	17.28% - 27.97% [20.77%]
Consumer loans:
Home equity lines and loans	75		Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
	$	1,940

Summary of assets and liabilities measured at fair value on a non-recurring basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below (in thousands):



			Fair Value Measurement at June 30, 2018 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
Impaired Loans:
Commercial and agricultural:
Commercial and industrial	$	12	$	—	$	—	$	12	$	—
Total impaired loans	$	12	$	—	$	—	$	12	$	—
Other real estate owned:
Commercial mortgages:
Commercial mortgages	$	534	$	—	$	—	$	534	$	—
Residential mortgages	204		—		—		204		—
Consumer loans:
Home equity lines and loans	148		—		—		148		—
Total other real estate owned, net	$	886	$	—	$	—	$	886	$	—



			Fair Value Measurement at December 31, 2017 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
Impaired Loans:
Commercial and agricultural:
Commercial and industrial	$	96	$	—	$	—	$	96	$	(70	)
Commercial mortgages:
Commercial mortgages	411		—		—		411		(105		)
Total impaired loans	$	507	$	—	$	—	$	507	$	(175	)
Other real estate owned:
Commercial mortgages:
Commercial mortgages	$	1,483	$	—	$	—	$	1,483	$	(43	)
Residential mortgages	382		—		—		382		—
Consumer loans:
Home equity lines and loans	75		—		—		75		—
Total other real estate owned, net	$	1,940	$	—	$	—	$	1,940	$	(43	)

Carrying value and estimated fair value of financial instruments

The carrying amounts and estimated fair values of other financial instruments, at June 30, 2018 and December 31, 2017, are as follows (in thousands):



	June 30, 2018
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	30,837	$	30,837	$	—	$	—	$	30,837
Interest-bearing deposits in other financial institutions	3,978		3,978		—		—		3,978
Equity investments	1,277		1,277		—		—		1,277
Securities available for sale	265,157		—		265,157		—		265,157
Securities held to maturity	3,806		—		2,309		1,481		3,790
FHLBNY and FRBNY stock	5,816		—		—		—		N/A
Loans, net and loans held for sale	1,315,483		—		—		1,296,697		1,296,697
Accrued interest receivable	4,404		1		737		3,666		4,404
Derivative assets	2,304		—		2,304		—		2,304

Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,332,815	$	1,332,815	$	—	$	—	$	1,332,815
Time deposits	146,094		—		146,315		—		146,315
FHLBNY overnight advances	58,950		—		58,949		—		58,949
Accrued interest payable	115		21		94		—		115
Derivative liabilities	2,322		—		2,304		18		2,322

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.



	December 31, 2017
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	27,966	$	27,966	$	—	$	—	$	27,966
Interest-bearing deposits in other financial institutions	2,763		2,763		—		—		2,763
Equity investments	1,192		1,192		—		—		1,192
Securities available for sale	293,091		—		293,091		—		293,091
Securities held to maturity	3,781		—		1,830		1,946		3,776
FHLBNY and FRBNY stock	5,784		—		—		—		N/A
Loans, net	1,291,205		—		—		1,289,584		1,289,584
Loans held for sale	542		—		542		—		542
Accrued interest receivable	4,642		1		867		3,774		4,642
Derivative assets	974		—		974		—		974

Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,349,084	$	1,349,084	$	—	$	—	$	1,349,084
Time deposits	118,362		—		118,598		—		118,598
Securities sold under agreements to repurchase	10,000		—		10,058		—		10,058
FHLBNY overnight advances	57,700		—		57,700		—		57,700
FHLBNY term advances	2,000		—		2,001		—		2,001
Accrued interest payable	148		24		124		—		148
Derivative liabilities	1,049		—		974		75		1,049