XML 42 R14.htm IDEA: XBRL DOCUMENT v3.3.0.814
Fair Value Measurements
 9 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]  
Fair Value Measurements

NOTE 6 – FAIR VALUE MEASUREMENTS

 

The following tables present information about the Bank’s assets and liabilities measured at fair value on a recurring basis and the valuation techniques used by the Bank to determine those fair values.

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Bank has the ability to access.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Bank’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

There were no liabilities measured at fair value as of September 30, 2015 or December 31, 2014. Disclosures concerning assets measured at fair value are as follows:

Assets Measured at Fair Value on a Recurring Basis

 

    Quoted Prices   Significant        
  in Active Other Significant  
  Markets for Identical Observable Unobservable  
(Dollars in thousands) Assets Inputs Inputs Balance at
  (Level 1) (Level 2) (Level 3) Date Indicated
Investment Securities, Available for            
    Sale – September 30, 2015            
U.S. Treasury notes and bonds  $—     $6,176   $—     $6,176 
U.S. Government and federal agency   —      55,600    —      55,600 
State and municipal   —      64,266    8,615    72,881 
Mortgage-backed   —      7,529    —      7,529 
Corporate   —      8,037    398    8,435 
Foreign debt   —      1,001    —      1,001 
Equity securities   912    —      1,500    2,412 
Asset backed securities   —      295    —      295 
     Total  $912   $142,904   $10,513   $154,329 
Investment Securities, Available for                    
Sale - December 31, 2014                    
U.S. Treasury notes and bonds  $—     $8,058   $—     $8,058 
U.S. Government and federal agency   —      44,503    —      44,503 
State and municipal   —      60,091    9,744    69,835 
Mortgage-backed   —      8,942    —      8,942 
Corporate   —      7,140    398    7,538 
Foreign debt   —      994    —      994 
Equity securities   775    —      1,500    2,275 
Asset backed securities   —      376    —      376 
     Total  $775   $130,104   $11,642   $142,521 

 

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis

(Dollars in thousands)      
   2015  2014
Investment Securities, Available for Sale      
Balance, January 1  $11,642   $11,328 
Total realized and unrealized gains included in income   —      (11)
Total unrealized gains (losses) included in other comprehensive income   946    (115)
Net purchases, sales, calls, and maturities   (2,075)   (84)
Net transfers into Level 3   —      74 
Balance, September 30  $10,513   $11,192 

 

Of the Level 3 assets that were held by the Bank at September 30, 2015, the net unrealized gain for the nine months ended September 30, 2015 was $946,000, which is recognized in other comprehensive income in the consolidated balance sheet. Purchases of level 3 securities during the first three quarters of 2015 and 2014 consisted of local municipal issues. During the first nine months of 2015, a $1.75 million Level 3 bond was purchased. There were no sales of Level 3 securities in the first nine months of 2015.

 

Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 investment securities and liabilities. As a result, the unrealized gains and losses for these assets and liabilities presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs.

Available for sale investment securities categorized as Level 3 assets primarily consist of bonds issued by local municipalities. The Bank estimates the fair value of these bonds based on the present value of expected future cash flows using management’s best estimate of key assumptions, including forecasted interest yield and payment rates, credit quality and a discount rate commensurate with the current market and other risks involved.

The Bank also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets are not normally measured at fair value, but can be subject to fair value adjustments in certain circumstances, such as impairment. Disclosures concerning assets measured at fair value on a non-recurring basis are as follows:

 

Assets Measured at Fair Value on a Non-recurring Basis

 

      Quoted Prices  Significant   
      in Active  Other  Significant
      Markets for Identical  Observable  Unobservable
(Dollars in thousands)  Balance at  Assets  Inputs  Inputs
   Dates Indicated  (Level 1)  (Level 2)  (Level 3)
Impaired Loans                    
September 30, 2015  $6,025   $—     $—     $6,025 
December 31, 2014  $6,885   $—     $—     $6,885 
                     
Other Real Estate                    
September 30, 2015  $132   $—     $—     $132 
December 31, 2014  $150   $—     $—     $150 

 

Impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Bank estimates the fair value of the loans based on the present value of expected future cash flows using management’s estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals). The changes in fair value consisted of charge-downs of impaired loans that were posted to the allowance for loan losses and write-downs of other real estate that were posted to a valuation account.