Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2016

Fair Value of Assets and Liabilities

Fair Value of Assets and Liabilities

Note 2. Fair Value of Assets and Liabilities

Recurring Basis

The following table provides a summary of the financial instruments the Company measures at fair value on a recurring basis as of June 30, 2016 and December 31, 2015:

	As of		Fair Value Measurements Using
	June 30,		Quoted Prices in		Significant Other		Significant
	2016		Active Markets for		Observable		Unobservable
	Assets At		Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
	(dollars in thousands)
Assets
Available for sale investments:
Obligations of U.S. government agencies	$	58,016	$	-	$	58,016	$	-
Mortgage backed securities
U.S government sponsored entities and agencies	240,838		-		240,838		-
Non-agency	26,749		-		26,749		-
State and municipal securities	111,544		-		111,544		-
Asset backed securities	9,730		-		9,730		-
Derivative financial instruments:
Interest rate swaps	1,503		-		1,503		-
Total assets measured on a recurring basis	$	448,380	$	-	$	448,380	$	-
Liabilities
Derivative financial instruments:
Interest rate swaps	$	1,503	$	-	$	1,503	$	-
Total liabilities measured on a recurring basis	$	1,503	$	-	$	1,503	$	-

	As of			Fair Value Measurements Using
	December 31,			Quoted Prices in		Significant Other		Significant
	2015			Active Markets for		Observable		Unobservable
	Assets At			Identical Assets		Inputs		Inputs
	Fair Value			(Level 1)		(Level 2)		(Level 3)
	(dollars in thousands)
Assets
Available for sale investments:
Obligations of U.S. government agencies	$		47,318	$	-	$	47,318	$	-
Mortgage backed securities
U.S government sponsored entities and agencies	245,235			-		245,235		-
Non-agency	34,317			-		34,317		-
State and municipal securities	108,406			-		108,406		-
Asset backed securities	15,627			-		15,627		-
Other investments	32			32		-		-
Derivative financial instruments:
Interest rate swaps	-			-		-		-
Total assets measured on a recurring basis	$	450,935		$	32	$	450,903	$	-
Liabilities
Derivative financial instruments:
Interest rate swaps	$		-	$	-	$	-	$	-
Total liabilities measured on a recurring basis	$		-	$	-	$	-	$	-

There were no transfers between levels of fair value measures during the six months ended June 30, 2016 and December 31, 2015 for assets measured at fair value on a recurring basis.  As of June 30, 2016 and December 31, 2015, there were no assets or liabilities classified as Level 3.

Non-recurring Basis

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis. These include assets and liabilities that are measured at the lower of cost or fair value, and that were recognized at fair value which was below cost. Certain impaired loans are recorded in the Company’s condensed consolidated financial statements using the discounted cash flow method versus the collateral method. The discounted cash flow method as prescribed by ASC 310 Receivables, is not a fair value measurement since the discount rate utilized is the loan’s effective interest rate, which is not considered a market rate for those loans. The discounted cash flow approach is used to measure impairment for certain impaired loans, because of the significant payment history and the global cash flow analysis performed on each borrower.

	As of		Fair Value Measurements Using
	June 30,		Quoted Prices in		Significant Other		Significant
	2016		Active Markets for		Observable		Unobservable		Year To
	Assets At		Identical Assets		Inputs		Inputs		Date Losses
	Fair Value		(Level 1)		(Level 2)		(Level 3)		(Recoveries)
	(dollars in thousands)
Assets
Other real estate owned	$	111	$	-	$	111	$	-	$	217
Total assets measured on a non-recurring basis	$	111	$	-	$	111	$	-	$	217

	As of		Fair Value Measurements Using
	December 31,		Quoted Prices in		Significant Other		Significant
	2015		Active Markets for		Observable		Unobservable		Year To
	Assets At		Identical Assets		Inputs		Inputs		Date Losses
	Fair Value		(Level 1)		(Level 2)		(Level 3)		(Recoveries)
	(dollars in thousands)
Assets
Other real estate owned	$	-	$	-	$	-	$	-	$	-
Total assets measured on a non-recurring basis	$	-	$	-	$	-	$	-	$	-

There were no transfers between levels of fair value measures during the six months ended June 30, 2016 for assets measured at fair value on a non-recurring basis.

Fair Value of Financial Instruments

The following table provides a summary of the estimated fair value of financial instruments at June 30, 2016 and December 31, 2015:

	As of		Fair Value Measurements Using
	June 30,		Quoted Prices in		Significant Other		Significant
	2016		Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)		Fair Value
	(dollars in thousands)
Assets
Cash and cash equivalents	$	56,042	$	56,042	$	-	$	-	$	56,042
Investment securities available for sale	446,877		-		446,877		-		446,877
Federal Home Loan Bank stock	7,853		-		-		-		N/A
Loans receivable, net	1,315,090		-		-		1,330,362		1,330,362
Loans held for sale	8,534		-		8,534		-		8,534
Interest rate swaps	1,503		-		1,503		-		1,503
Accrued interest receivable	6,540		-		2,503		4,037		6,540
Liabilities
Non-interest bearing deposits	546,520		546,520		-		-		546,520
Interest bearing deposits	1,060,569		-		1,060,804		-		1,060,804
Federal Home Loan Bank advances	120,503		-		122,657		-		122,657
Junior subordinated debentures	10,529		-		-		8,252		8,252
Interest rate swaps	1,503		-		1,503		-		1,503
Accrued interest payable	422		-		422		-		422

	As of		Fair Value Measurements Using
	December 31,		Quoted Prices in		Significant Other		Significant
	2015		Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)		Fair Value
	(dollars in thousands)
Assets
Cash and cash equivalents	$	69,923	$	69,923	$	-	$	-	$	69,923
Investment securities available for sale	450,935		32		450,903		-		450,935
Federal Home Loan Bank stock	7,853		-		-		-		N/A
Loans receivable, net	1,228,696		-		-		1,250,903		1,250,903
Loans held for sale	9,755		-		9,755		-		9,755
Interest rate swaps	-		-		-		-		-
Accrued interest receivable	6,256		-		2,589		3,667		6,256
Liabilities
Non-interest bearing deposits	514,559		514,559		-		-		514,559
Interest bearing deposits	1,050,402		-		1,051,731		-		1,051,731
Federal Home Loan Bank advances	103,521		-		104,718		-		104,718
Junior subordinated debentures	10,438		-		-		8,195		8,195
Interest rate swaps	-		-		-		-		-
Accrued interest payable	390		-		390		-		390

Information on off-balance sheet instruments as of June 30, 2016 and December 31, 2015 follows:

	June 30, 2016				December 31, 2015
	Notional		Cost to Cede		Notional		Cost to Cede
	Amount		or Assume		Amount		or Assume
	(dollars in thousands)
Off-balance sheet instruments, commitments to
extend credit and standby letters of credit	$	277,466	$	2,775	$	255,093	$	2,551