Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2018

Assets Reported on Consolidated Balance Sheets on a Recurring Basis at their Fair Value

The following table presents the assets reported on the consolidated balance sheets, on a recurring basis, at their fair value as of June 30, 2018 and December 31, 2017 by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	(Amounts in thousands)
			Fair Value Measurements at June 30, 2018 Using
Description	June 30, 2018		Level 1		Level 2		Level 3
ASSETS
U.S. Government agencies and corporations	$	8,952	$	—	$	8,952	$	—
Obligations of states and political subdivisions		51,781		—		51,781		—
U.S. Government-sponsored mortgage-backed securities		59,458		—		59,458		—
U.S. Government-sponsored collateralized mortgage obligations		12,883		—		12,883		—
U.S. Government-guaranteed small business administration pools		8,464		—		8,464		—
Loans held for sale		2,524		2,524		—		—
Interest rate derivatives		503		—		503		—

LIABILITIES
Interest rate derivatives	$	503	$	—	$	503	$	—

	(Amounts in thousands)
			Fair Value Measurements at December 31, 2017 Using
Description	December 31, 2017		Level 1		Level 2		Level 3
ASSETS
U.S. Government agencies and corporations	$	3,205	$	—	$	3,205	$	—
Obligations of states and political subdivisions		72,116		—		72,116		—
U.S. Government-sponsored mortgage-backed securities		67,668		—		67,668		—
U.S. Government-sponsored collateralized mortgage obligations		6,302		—		6,302		—
U.S. Government-guaranteed small business administration pools		9,655		—		9,655		—
Trust preferred securities		895		—		—		895
Loans held for sale		2,780		2,780		—		—
Interest rate derivatives		185		—		185		—

LIABILITIES
Interest rate derivatives	$	185	$	—	$	185	$	—

Changes in the Level 3 Fair Value Category

The following tables present the changes in the Level 3 fair value category for the three and six months ended June 30, 2018 and 2017. The Company classifies financial instruments in Level 3 of the fair-value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly.

	(Amounts in thousands)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
	Trust preferred securities			Trust preferred securities			Trust preferred securities			Trust preferred securities
Beginning balance	$	1,090		$	827		$	895		$	825
Net realized/unrealized losses included in:
Noninterest income		—			—			—			—
Other comprehensive income (loss)		528			(10	)		723			(7	)
Discount accretion (premium amortization)		—			—			—			—
Sales		(1,618	)		—			(1,618	)		—
Purchases, issuance, and settlements		—			—			—			(1	)
Ending balance	$	—		$	817		$	—		$	817
Losses included in net income for the period relating to assets held at period end	$	—		$	—		$	—		$	—

Breakdown of Trust Preferred Securities

The following table details the breakdown of trust preferred securities for the periods indicated:

	(Dollar amounts in thousands)
	June 30, 2018		December 31, 2017
Total number of trust preferred securities		—		2
Par value	$	—	$	1,939

Number not considered OTTI		—		1
Par value	$	—	$	903

Number considered OTTI		—		1
Par value	$	—	$	1,036

Life-to-date impairment recognized in earnings	$	—	$	140
Life-to-date impairment recognized in other comprehensive income		—		723
Total life-to-date impairment	$	—	$	863

Trust Preferred Security with OTTI, its Credit Rating at Period End and Related Losses Recognized in Earnings

The following table details the one debt security with other-than-temporary impairment, its credit ratings at June 30, 2017 and the related losses recognized in earnings:

		(Amounts in thousands)
	Moody’s/Fitch Rating	Amount of OTTI related to credit loss at January 1, 2017		Additions in QTD March 31, 2017		Additions in QTD June 30, 2017		Amount of OTTI related to credit loss at June 30, 2017
Trapeza IX B-1	Caa2/CC	$	140	$	—	$	—	$	140
Total		$	140	$	—	$	—	$	140

Additional Information Related to the Company's Trust Preferred Securities

The following table provides additional information related to the Company’s trust preferred securities as of December 31, 2017 used to evaluate other-than-temporary impairments:

	(Amounts in thousands)
Deal	Class	Amortized Cost		Fair Value		Unrealized Gain/(Loss)			Moody’s/ Fitch Rating	Number of Issuers Currently Performing		Deferrals and Defaults as a % of Current Collateral			Excess Subordination as a % of Current Performing Collateral
PreTSL XXIII	C-2	$	758	$	336	$	(422	)	Ba1/CCC		90		20.9	%		7.12	%
Trapeza IX	B-1		860		559		(301	)	Caa2/CC		30	14				—
Total		$	1,618	$	895	$	(723	)

Carrying Amounts and Fair Values of the Company's Financial Instruments

The carrying amounts and fair values of the Company’s financial instruments are as follows:

	(Amounts in thousands)
	June 30, 2018
	Carrying Amount		Level 1		Level 2		Level 3		Fair Value
ASSETS:
Cash and cash equivalents	$	10,977	$	10,977	$	—	$	—	$	10,977
Investment securities available-for-sale		141,538		—		141,538		—		141,538
Loans held for sale		2,524		2,524		—		—		2,524
Loans		462,353		—		—		466,098		466,098
Bank-owned life insurance		15,550		15,550		—		—		15,550
Accrued interest receivable		2,137		2,137		—		—		2,137
Interest rate derivatives		503		—		503		—		503

LIABILITIES:
Demand, savings and money market deposits	$	439,229	$	439,229	$	—	$	—	$	439,229
Time deposits		118,594		—		—		119,579		119,579
Short term borrowings		1,609		1,609		—		—		1,609
Federal Home Loan Bank advances - short term		11,000		—		—		10,980		10,980
Federal Home Loan Bank advances - long term		16,000		—		—		15,799		15,799
Subordinated debt		5,155		—		—		4,723		4,723
Accrued interest payable		302		302		—		—		302
Interest rate derivatives		503		—		503		—		503

	(Amounts in thousands)
	December 31, 2017
	Carrying Amount		Level 1		Level 2		Level 3		Fair Value
ASSETS:
Cash and cash equivalents	$	19,125	$	19,125	$	—	$	—	$	19,125
Investment securities available-for-sale		159,841		—		158,946		895		159,841
Loans held for sale		2,780		2,780		—		—		2,780
Loans		482,912		—		—		486,230		486,230
Bank-owned life insurance		17,650		17,650		—		—		17,650
Accrued interest receivable		2,193		2,193		—		—		2,193
Interest rate derivatives		185		—		185		—		185

LIABILITIES:
Demand, savings and money market deposits	$	458,562	$	458,562	$	—	$	—	$	458,562
Time deposits		127,289		—		—		128,624		128,624
Short term borrowings		2,678		2,678		—		—		2,678
Federal Home Loan Bank advances - short term		32,000		—		—		31,982		31,982
Federal Home Loan Bank advances - long term		14,000		—		—		13,880		13,880
Subordinated debt		5,155		—		—		4,785		4,785
Accrued interest payable		325		325		—		—		325
Interest rate derivatives		185		—		185		—		185

Significant Unobservable Inputs for Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

The following table presents quantitative information about the Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis at December 31, 2017:

	(Amounts in thousands)
	Fair value at December 31, 2017		Valuation Technique	Significant Unobservable Input	Description of Inputs
Trust preferred securities	$	895	Discounted Cash Flow	Projected Prepayments	1) Trust preferred securities issued by banks subject to Dodd-Frank's phase-out of trust preferred securities from Tier 1 Capital. All fixed rate within one year; variable rate at increasing intervals depending on spread. 2) Trust preferred securities issued by healthy, well capitalized banks that have fixed rate coupons greater than 8%. 3) 1% annually for all other fixed rate issues and all variable rate issues. 4) Zero for collateral issued by REITs and 2% for insurance companies.

				Projected Defaults	1) All deferring issuers that do not meet the criteria for curing, as described below, are projected to default immediately. 2) Banks with high, near team default risk are identified using a CAMELS model and projected to default immediately. Healthy banks are projected to default at a rate of 2% annually for 2 years, and 0.36% annually thereafter. 3) Insurance and REIT defaults are projected according to the historical default rates exhibited by companies with the same credit ratings. Historical default rates are doubled in each of the first two years of the projection to account for current economic conditions. Unrated issuers are assumed to have CCC- ratings.

				Projected Cures	1) Deferring issuers that have definitive agreements to either be acquired or recapitalized.

				Projected Recoveries	1) Zero for insurance companies, REITs and insolvent banks, and 10% for projected bank deferrals lagged 2 years.

				Discount Rates	1) Ranging from ~9.10% to ~14.74%, depending on each bond's seniority and remaining subordination after projected losses.

Impaired loans		4,891	Cash Flow	Discount Rates	Range 4.50% to 5.38% Weighted average 4.88%