XML 20 R10.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Fair Value of Assets and Liabilities | 9 Months Ended
--- | ---
Sep. 30, 2018
Fair Value Disclosures [Abstract] |
Fair Value of Assets and Liabilities | Fair Value of Assets and Liabilities Fair Value Hierarchy and Fair Value Measurement We group our assets and liabilities that are measured at fair value in three levels within the fair value hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: Level 1: Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations for which all significant assumptions are observable or can be corroborated by observable market data. Level 3: Valuations are based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Values are determined using pricing models and discounted cash flow models and may include significant Management judgment and estimation. Transfers between levels of the fair value hierarchy are recognized through our monthly and/or quarterly valuation process in the reporting period during which the event or circumstances that caused the transfer occurred. No such transfers occurred during the first nine months of 2018 or 2017. The following table summarizes our assets and liabilities that were required to be recorded at fair value on a recurring basis.
(in thousands) Description of Financial Instruments | Carrying Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Measurement Categories: Changes in Fair Value Recorded In1
September 30, 2018 |  |  |  |  |  |  |  |
Securities available-for-sale: |  |  |  |  |
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government agencies | $ | 246,220 |  | $ | — |  | $ | 246,220 |  | $ | — |  | OCI
SBA-backed securities | 40,181 |  | — |  | 40,181 |  | — |  | OCI
Debentures of government sponsored agencies | 42,914 |  | — |  | 42,914 |  | — |  | OCI
Privately-issued collateralized mortgage obligations | 370 |  | — |  | 370 |  | — |  | OCI
Obligations of state and political subdivisions | 73,373 |  | — |  | 73,373 |  | — |  | OCI
Corporate bonds | 2,513 |  | — |  | 2,513 |  | — |  | OCI
Derivative financial assets (interest rate contracts) | 436 |  | — |  | 436 |  | — |  | NI
Derivative financial liabilities (interest rate contracts) | 163 |  | — |  | 163 |  | — |  | NI
December 31, 2017 |  |  |  |  |  |  |  |
Securities available-for-sale: |  |  |  |  |  |  |  |
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government agencies | $ | 188,061 |  | $ | — |  | $ | 188,061 |  | $ | — |  | OCI
SBA-backed securities | 25,982 |  | — |  | 25,817 |  | 165 |  | OCI
Debentures of government sponsored agencies | 12,938 |  | — |  | 12,938 |  | — |  | OCI
Privately-issued collateralized mortgage obligations | 1,431 |  | — |  | 1,431 |  | — |  | OCI
Obligations of state and political subdivisions | 97,491 |  | — |  | 97,491 |  | — |  | OCI
Corporate bonds | 6,564 |  | — |  | 6,564 |  | — |  | OCI
Derivative financial assets (interest rate contracts) | 74 |  | — |  | 74 |  | — |  | NI
Derivative financial liabilities (interest rate contracts) | 740 |  | — |  | 740 |  | — |  | NI
1 Other comprehensive income ("OCI") or net income ("NI"). Securities available-for-sale are recorded at fair value on a recurring basis. When available, quoted market prices (Level 1) are used to determine the fair value of securities available-for-sale. If quoted market prices are not available, we obtain pricing information from reputable third-party service providers, who may utilize valuation techniques that use current market-based or independently sourced parameters, such as bid/ask prices, dealer-quoted prices, interest rates, benchmark yield curves, prepayment speeds, probability of default, loss severity and credit spreads (Level 2). Level 2 securities include obligations of state and political subdivisions, U.S. agencies or government-sponsored agencies' debt securities, mortgage-backed securities, government agency-issued, privately-issued collateralized mortgage obligations, and corporate bonds. As of September 30, 2018 and December 31, 2017, there were no Level 1 securities. As of December 31, 2017, we had one Level 3 available-for-sale U.S. government agency obligation, which was paid off during the second quarter of 2018. Securities held-to-maturity may be written down to fair value (determined using the same techniques discussed above for securities available-for-sale) as a result of other-than-temporary impairment, and we did not record any write-downs during the nine months ended September 30, 2018 or September 30, 2017. On a recurring basis, derivative financial instruments are recorded at fair value, which is based on the income approach using observable Level 2 market inputs, reflecting market expectations of future interest rates as of the measurement date. Standard valuation techniques are used to calculate the present value of the future expected cash flows assuming an orderly transaction. Valuation adjustments may be made to reflect both our own credit risk and the counterparties’ credit risk in determining the fair value of the derivatives. Level 2 inputs for the valuations are limited to observable market prices for London Interbank Offered Rate ("LIBOR") and Overnight Index Swap ("OIS") rates (for the very short term), quoted prices for LIBOR futures contracts, observable market prices for LIBOR and OIS swap rates, and one-month and three-month LIBOR basis spreads at commonly quoted intervals. Mid-market pricing of the inputs is used as a practical expedient in the fair value measurements. We project spot rates at reset days specified by each swap contract to determine future cash flows, then discount to present value using either LIBOR or OIS curves depending on whether the swap positions are fully collateralized as of the measurement date. When the value of any collateral placed with counterparties is less than the interest rate derivative liability, a credit valuation adjustment ("CVA") is applied to reflect the credit risk we pose to counterparties. We have used the spread between the Standard & Poor's BBB rated U.S. Bank Composite rate and LIBOR for the closest maturity term corresponding to the duration of the swaps to derive the CVA. A similar credit risk adjustment, correlated to the credit standing of the counterparty, is made when collateral posted by the counterparty does not fully cover their liability to us. For further discussion on our methodology in valuing our derivative financial instruments, refer to Note 9, Derivative Financial Instruments and Hedging Activities. Certain financial assets may be measured at fair value on a non-recurring basis. These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting or write-downs of individual assets, such as impaired loans that are collateral dependent and other real estate owned ("OREO"). As of September 30, 2018 and December 31, 2017, we did not carry any assets measured at fair value on a non-recurring basis.
Disclosures about Fair Value of Financial Instruments The following table summarizes fair value estimates for financial instruments as of September 30, 2018 and December 31, 2017, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note). The carrying amounts in the following table are recorded in the consolidated statements of condition under the indicated captions. Further, we have not disclosed the fair value of financial instruments specifically excluded from disclosure requirements such as bank-owned life insurance policies ("BOLI") and non-maturity deposit liabilities. Additionally, we hold shares of FHLB stock and Visa Inc. Class B common stock at cost. These shares are restricted from resale, except among member banks, and their values are discussed in Note 4, Investment Securities.
| September 30, 2018 |  | December 31, 2017
(in thousands) | Carrying Amounts |  | Fair Value |  | Fair Value Hierarchy |  | Carrying Amounts |  | Fair Value |  | Fair Value Hierarchy
Financial assets (recorded at amortized cost) |  |  |  |  |  |
Cash and cash equivalents | $ | 142,718 |  | $ | 142,718 |  | Level 1 |  | $ | 203,545 |  | $ | 203,545 |  | Level 1
Investment securities held-to-maturity | 164,222 |  | 158,106 |  | Level 2 |  | 151,032 |  | 151,032 |  | Level 2
Loans, net | 1,713,054 |  | 1,683,109 |  | Level 3 |  | 1,663,246 |  | 1,650,198 |  | Level 3
Interest receivable | 7,366 |  | 7,366 |  | Level 2 |  | 7,501 |  | 7,501 |  | Level 2
Financial liabilities (recorded at amortized cost) |  |  |  |  |  |  |  |
Time deposits | 126,140 |  | 124,796 |  | Level 2 |  | 160,116 |  | 159,540 |  | Level 2
Subordinated debentures | 5,831 |  | 7,505 |  | Level 3 |  | 5,739 |  | 5,118 |  | Level 3
Interest payable | 155 |  | 155 |  | Level 2 |  | 191 |  | 191 |  | Level 2
Commitments - The value of unrecognized financial instruments is estimated based on the fee income associated with the commitments which, in the absence of credit exposure, is considered to approximate their settlement value. The fair value of commitment fees was not material at September 30, 2018 or December 31, 2017.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration