XML 61 R29.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2

Note 21 - Fair Value Measurements and Fair Values of Financial Instruments

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

2

1

.

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

The Corporation measures certain assets at fair value. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. FASB ASC topic

820,

“Fair Value Measurements and Disclosures” establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs used in determining valuations into

three

levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level

1

– Fair value is based on unadjusted quoted prices in active markets that are accessible to the Corporation for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available.

Level

2

– Fair value is based on significant inputs, other than Level

1

inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level

2

inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are

not

active for identical or similar assets and other observable inputs.

Level

3

– Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level

3

classification include option pricing models, discounted cash flows and other similar techniques.

The Corporation monitors and evaluates available data relating to fair value measurements on an ongoing basis and recognizes transfers among the levels of the fair value hierarchy as of the date of an event or change in circumstances that affects the valuation method chosen. Examples of such changes

may

include the market for a particular asset becoming active or inactive, changes in the availability of quoted prices, or changes in the availability of other market data.

At

December 31, 2019

and

2018,

assets measured at fair value and the valuation methods used are as follows:

						December 31, 201 9
		Quoted Prices				Other
		in Active				Observable				Unobservable				Total
		Markets				Inputs				Inputs				Fair
(In Thousands)		(Level 1)				(Level 2)				(Level 3)				Value
Recurring fair value measurements
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of U.S. Government agencies		$	0			$	17,000			$	0			$	17,000
Obligations of states and political subdivisions:
Tax-exempt			0				70,760				0				70,760
Taxable			0				36,303				0				36,303
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			0				59,210				0				59,210
Residential collateralized mortgage obligations			0				114,723				0				114,723
Commercial mortgage-backed securities			0				48,727				0				48,727
Total available-for-sale debt securities			0				346,723				0				346,723
Marketable equity security			979				0				0				979
Servicing rights			0				0				1,277				1,277
Total recurring fair value measurements		$	979			$	346,723			$	1,277			$	348,979
Nonrecurring fair value measurements
Impaired loans with a valuation allowance		$	0			$	0			$	3,375			$	3,375
Valuation allowance			0				0				(1,051	)			(1,051	)
Impaired loans, net			0				0				2,324				2,324
Foreclosed assets held for sale			0				0				2,886				2,886
Total nonrecurring fair value measurements		$	0			$	0			$	5,210			$	5,210

						December 31, 201 8
		Quoted Prices				Other
		in Active				Observable				Unobservable				Total
		Markets				Inputs				Inputs				Fair
(In Thousands)		(Level 1)				(Level 2)				(Level 3)				Value
Recurring fair value measurements
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of U.S. Government agencies		$	0			$	12,500			$	0			$	15,500
Obligations of states and political subdivisions:
Tax-exempt			0				83,952				0				83,952
Taxable			0				27,699				0				27,699
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			0				53,445				0				53,445
Residential collateralized mortgage obligations			0				145,912				0				145,912
Commercial mortgage-backed securities			0				39,765				0				39,765
Total available-for-sale debt securities			0				363,273				0				363,273
Marketable equity security			950				0				0				950
Servicing rights			0				0				1,404				1,404
Total recurring fair value measurements		$	950			$	363,273			$	1,404			$	365,627
Nonrecurring fair value measurements
Impaired loans with a valuation allowance		$	0			$	0			$	4,851			$	4,851
Valuation allowance			0				0				(1,605	)			(1,605	)
Impaired loans, net			0				0				3,246				3,246
Foreclosed assets held for sale			0				0				1,703				1,703
Total nonrecurring fair value measurements		$	0			$	0			$	4,949			$	4,949

Management’s evaluation and selection of valuation techniques and the unobservable inputs used in determining the fair values of assets valued using Level

3

methodologies include sensitive assumptions. Other market participants might use substantially different assumptions, which could result in calculations of fair values that would be substantially different than the amount calculated by management. The following table shows quantitative information regarding significant techniques and inputs used at

December 31, 2019

and

2018

for servicing rights assets measured using unobservable inputs (Level

3

methodologies) on a recurring basis:

		Fair Value at
		12/31/1 9			Valuation		Unobservable		Method or Value As of
Asset		(In Thousands)			Technique		Input(s)		12/31/1 9
Servicing rights		$	1,277		Discounted cash flow		Discount rate			12.50	%		Rate used through modeling period
							Loan prepayment speeds			183.00	%		Weighted-average PSA
							Servicing fees			0.25	%		of loan balances
										4.00	%		of payments are late
										5.00	%		late fees assessed
									$	1.94			Miscellaneous fees per account per month
							Servicing costs		$	6.00			Monthly servicing cost per account
									$	24.00			Additional monthly servicing cost per loan on loans more than 30 days delinquent
										1.50	%		of loans more than 30 days delinquent
										3.00	%		annual increase in servicing costs

		Fair Value at
		12/31/1 8			Valuation		Unobservable		Method or Value As of
Asset		(In Thousands)			Technique		Input(s)		12/31/1 8
Servicing rights		$	1,404		Discounted cash flow		Discount rate			12.50	%		Rate used through modeling period
							Loan prepayment speeds			114.00	%		Weighted-average PSA
							Servicing fees			0.25	%		of loan balances
										4.00	%		of payments are late
										5.00	%		late fees assessed
									$	1.94			Miscellaneous fees per account per month
							Servicing costs		$	6.00			Monthly servicing cost per account
									$	24.00			Additional monthly servicing cost per loan on loans more than 30 days delinquent
										1.50	%		of loans more than 30 days delinquent
										3.00	%		annual increase in servicing costs

The fair value of servicing rights is affected by expected future interest rates. Increases (decreases) in future expected interest rates tend to increase (decrease) the fair value of the Corporation’s servicing rights because of changes in expected prepayment behavior by the borrowers on the underlying loans.

Following is a reconciliation of activity for Level

3

assets (servicing rights) measured at fair value on a recurring basis:

(In Thousands)		Years Ended December 31,
		2019				2018
Balance, beginning of period		$	1,404			$	1,299
Issuances of servicing rights			204				188
Unrealized losses included in earnings			(331	)			(83	)
Balance, end of period		$	1,277			$	1,404

Loans are classified as impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Foreclosed assets held for sale consist of real estate acquired by foreclosure. For impaired commercial loans secured by real estate and foreclosed assets held for sale, estimated fair values are determined primarily using values from

third

-party appraisals. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

At

December 31, 2019

and

2018,

quantitative information regarding significant techniques and inputs used for nonrecurring fair value measurements using unobservable inputs (Level

3

methodologies) are as follows:

(In Thousands, Except																	Weighted-
Percentages)						Valuation											Average
		Balance at				Allowance at				Fair Value at			Valuation		Unobservable		Discount at
		12/31/19				12/31/19				12/31/19			Technique		Inputs		12/31/19
Asset
Impaired loans:
Residential mortgage loans - first and junior liens		$	732			$	176			$	556		Sales comparison		Discount to appraised value			30	%
Commercial:
Commercial and industrial			106				89				17		Sales comparison		Discount to appraised value			69	%
Commercial and industrial			798				60				738		Liquidation of accounts receivable		Discount to borrower's financial statement value			15	%
Commercial construction and land			1,261				678				583		Sales comparison		Discount to appraised value			47	%
Loans secured by farmland			478				48				430		Sales comparison		Discount to appraised value			46	%
Total impaired loans		$	3,375			$	1,051			$	2,324
Foreclosed assets held for sale - real estate:
Residential (1-4 family)		$	292			$	0			$	292		Sales comparison		Discount to appraised value			46	%
Land			70				0				70		Sales comparison		Discount to appraised value			53	%
Commercial real estate			2,524				0				2,524		Sales comparison		Discount to appraised value			39	%
Total foreclosed assets held for sale		$	2,886			$	0			$	2,886

(In Thousands, Except																	Weighted-
Percentages)						Valuation											Average
		Balance at				Allowance at				Fair Value at			Valuation		Unobservable		Discount at
		12/31/18				12/31/18				12/31/18			Technique		Inputs		12/31/18
Asset
Impaired loans:
Residential mortgage loans - first liens		$	509			$	116			$	393		Sales comparison		Discount to appraised value			26	%
Commercial:
Commercial loans secured by real estate			2,515				781				1,734		Sales comparison		Discount to appraised value			16	%
Commercial and industrial			75				75				0		Sales comparison		Discount to appraised value			100	%
Commercial and industrial			1,265				584				681		Sales comparison		Discount to borrower's financial statement value			36	%
Loans secured by farmland			487				49				438		Sales comparison		Discount to appraised value			56	%
Total impaired loans		$	4,851			$	1,605			$	3,246
Foreclosed assets held for sale - real estate:
Residential (1-4 family)		$	64			$	0			$	64		Sales comparison		Discount to appraised value			68	%
Land			110				0				110		Sales comparison		Discount to appraised value			61	%
Commercial real estate			1,529				0				1,529		Sales comparison		Discount to appraised value			20	%
Total foreclosed assets held for sale		$	1,703			$	0			$	1,703

Certain of the Corporation’s financial instruments are

not

measured at fair value in the consolidated financial statements. In cases where quoted market prices are

not

available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates

may

not

be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Therefore, the aggregate fair value amounts presented

may

not

represent the underlying fair value of the Corporation.

The estimated fair values, and related carrying amounts, of the Corporation’s financial instruments that are

not

recorded at fair value are as follows:

(In Thousands)	Valuation		December 31, 201 9								December 31, 201 8
	Method(s)		Carrying				Fair				Carrying				Fair
	Used		Amount				Value				Amount				Value
Financial assets:
Cash and cash equivalents	Level 1		$	31,122			$	31,122			$	32,827			$	32,827
Certificates of deposit	Level 2			4,080				4,227				4,660				4,634
Restricted equity securities (included in Other Assets)	Level 2			10,321				10,321				5,712				5,712
Loans, net	Level 3			1,172,386				1,181,000				818,254				825,809
Accrued interest receivable	Level 2			5,001				5,001				3,968				3,968
Financial liabilities:
Deposits with no stated maturity	Level 2			877,965				877,965				804,207				804,207
Time deposits	Level 2			374,695				376,738				229,565				229,751
Short-term borrowings	Level 2			86,220				86,166				12,853				12,617
Long-term borrowings	Level 2			52,127				52,040				35,915				35,902
Accrued interest payable	Level 2			311				311				142				142

X

- References

No definition available.

+ Details

Name:	us-gaap_DisclosureTextBlockAbstract
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://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258

+ Details

Name:	us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix:	us-gaap_
Data Type:	nonnum:textBlockItemType
Balance Type:	na
Period Type:	duration