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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2022
Fair Value Measurements |
Fair Value Measurements | Note 8— Fair Value Measurements Determination of Fair Value The Company determines the fair values of its financial instruments based on the fair value hierarchy established by Accounting Standards Codification (“ASC”) Topic 820 – Fair Value Measurement, which defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market and in an orderly transaction between market participants on the measurement date. The fair value measurements and disclosures topic specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. Fair Value Hierarchy In accordance with this guidance, the Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 - Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. Level 3 - Valuation is 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. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Assets Measured at Fair Value on a Recurring Basis In accordance with ASC Topic 820, the following describes the valuation techniques used by the Company to measure certain financial assets recorded at fair value on a recurring basis in the financial statements. Securities Available-for-sale and Equity Securities Securities available-for-sale and equity securities with readily determinable fair values are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data (Level 2). If the inputs used to provide the evaluation for certain securities are unobservable and/or there is little, if any, market activity then the security would fall to the lowest level of the hierarchy (Level 3). The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. The Company has contracted with a third party portfolio accounting service vendor for valuation of its portfolio of debt securities. The vendor’s primary source for security valuation is ICE Data Services, which evaluates securities based on market data. ICE Data Services utilizes evaluated pricing models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs. The vendor utilizes proprietary valuation matrices for valuing all municipals securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance and rating to incorporate additional spreads to the industry benchmark curves. The following tables summarize the fair value of assets measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | ​ | Fair Value Measurements at September 30, 2022 Using
​ | ​ | ​ | ​ | ​ | Quoted Prices in | ​ | ​ | ​ | ​ | Significant
​ | ​ | ​ | ​ | ​ | Active Markets for | ​ | Significant Other | ​ | Unobservable
​ | ​ | Balance as of | ​ | Identical Assets | ​ | Observable Inputs | ​ | Inputs
(Dollars in thousands) |  | September 30, 2022 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Securities available-for-sale: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
U.S. Treasuries | ​ | $ | 58,819 | ​ | $ | — | ​ | $ | 58,819 | ​ | $ | —
U.S. government and federal agencies | ​ |  | 34,456 | ​ |  | — | ​ |  | 34,456 | ​ |  | —
Corporate bonds | ​ |  | 2,692 | ​ |  | — | ​ |  | 2,692 | ​ |  | —
Collateralized mortgage obligations | ​ |  | 40,211 | ​ |  | — | ​ |  | 40,211 | ​ |  | —
Tax-exempt municipal | ​ |  | 4,373 | ​ |  | — | ​ |  | 4,373 | ​ |  | —
Taxable municipal | ​ |  | 578 | ​ |  | — | ​ |  | 578 | ​ |  | —
Mortgage-backed | ​ |  | 225,417 | ​ |  | — | ​ |  | 225,417 | ​ |  | —
Equity securities, at fair value | ​ |  | 1,913 | ​ |  | 1,913 | ​ |  | — | ​ |  | —
Total assets at fair value | ​ | $ | 368,459 | ​ | $ | 1,913 | ​ | $ | 366,546 | ​ | $ | —
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | ​ | Fair Value Measurements at December 31, 2021 Using
​ |  | ​ | ​ |  | Quoted Prices in |  | ​ | ​ |  | Significant
​ | ​ | ​ | ​ | ​ | Active Markets for | ​ | Significant Other | ​ | Unobservable
​ | ​ | Balance as of | ​ | Identical Assets | ​ | Observable Inputs | ​ | Inputs
(Dollars in thousands) | ​ | December 31, 2021 | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3)
Assets: | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​
Securities available-for-sale: | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
U.S. Treasuries | ​ | $ | 30,543 | ​ | $ | — | ​ | $ | 30,543 | ​ | $ | —
U.S. government and federal agencies | ​ | ​ | 34,537 | ​ |  | — | ​ |  | 34,537 | ​ |  | —
Corporate bonds | ​ |  | 1,031 | ​ |  | — | ​ |  | 1,031 | ​ |  | —
Collateralized mortgage obligations | ​ |  | 39,049 | ​ |  | — | ​ |  | 39,049 | ​ |  | —
Tax-exempt municipal | ​ |  | 5,262 | ​ |  | — | ​ |  | 5,262 | ​ |  | —
Taxable municipal | ​ |  | 1,685 | ​ |  | — | ​ |  | 1,685 | ​ |  | —
Mortgage-backed | ​ |  | 127,193 | ​ |  | — | ​ |  | 127,193 | ​ |  | —
Equity securities, at fair value | ​ |  | 1,869 | ​ |  | 1,869 | ​ |  | — | ​ |  | —
Total assets at fair value | ​ | $ | 241,169 | ​ | $ | 1,869 | ​ | $ | 239,300 | ​ | $ | —
​ Assets Measured at Fair Value on a Nonrecurring Basis Under certain circumstances, the Company makes adjustments to fair value for assets and liabilities although they are not measured at fair value on an ongoing basis. The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements: Impaired Loans Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreements will not be collected when due. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the Company’s collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal, of one year or less, conducted by an independent, licensed appraiser using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the property is more than one-year-old and not solely based on observable market comparables or management determines the fair value of the collateral is further impaired below the appraised value, then a Level 3 valuation is considered to measure the fair value. The value of business equipment is based upon an outside appraisal, of one year or less, if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income. The Company had no impaired loans with a recorded reserve as of September 30, 2022 or December 31, 2021. Other Real Estate Owned OREO is carried at the lower of cost or fair value less selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value using observable market data, the Company records the property as Level 2. When an appraised value using observable market data is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the property as Level 3 valuation. Any fair value adjustments are recorded in the period incurred and expensed against current earnings. The Company had no OREO as of September 30, 2022 or December 31, 2021. The following tables present the carrying value and estimated fair value, including the level within the fair value hierarchy, of the Company’s financial instruments as of September 30, 2022 and December 31, 2021. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | ​ | Fair Value Measurements at September 30, 2022 Using
​ |  | ​ | ​ |  | Quoted Prices in |  | ​ | ​ |  | ​ | ​ |  | ​ | ​
​ | ​ | ​ | ​ | ​ | Active Markets | ​ | ​ | ​ | ​ | Significant | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | for Identical | ​ | Significant Other | ​ | Unobservable | ​ | ​
​ | ​ | Carrying Value | ​ | Assets | ​ | Observable Inputs | ​ | Inputs | ​ | Fair Value as of
(Dollars in thousands) | ​ | as of September 30, 2022 | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3) | ​ | September 30, 2022
Assets: | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Cash and cash equivalents | ​ | $ | 74,756 | ​ | $ | 74,756 | ​ | $ | — | ​ | $ | — | ​ | $ | 74,756
Securities: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Available-for-sale | ​ |  | 366,546 | ​ |  | — | ​ |  | 366,546 | ​ |  | — | ​ |  | 366,546
Held-to-maturity | ​ |  | 100,598 | ​ |  | — | ​ |  | 81,765 | ​ |  | — | ​ |  | 81,765
Equity securities, at fair value | ​ |  | 1,913 | ​ |  | 1,913 | ​ |  | — | ​ |  | — | ​ |  | 1,913
Restricted securities, at cost | ​ | ​ | 4,421 | ​ | ​ | — | ​ | ​ | 4,421 | ​ | ​ | — | ​ | ​ | 4,421
Loans, net of unearned income | ​ |  | 1,705,082 | ​ |  | — | ​ |  | — | ​ |  | 1,631,043 | ​ |  | 1,631,043
Bank owned life insurance | ​ |  | 21,071 | ​ |  | — | ​ |  | 21,071 | ​ |  | — | ​ |  | 21,071
Accrued interest receivable | ​ |  | 4,744 | ​ |  | — | ​ |  | 4,744 | ​ |  | — | ​ |  | 4,744
Liabilities: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Deposits | ​ | $ | 2,063,341 | ​ | $ | — | ​ | $ | 2,057,563 | ​ | $ | — | ​ | $ | 2,057,563
Subordinated debt | ​ |  | 24,603 | ​ |  | — | ​ |  | — | ​ |  | 22,517 | ​ |  | 22,517
Accrued interest payable | ​ |  | 643 | ​ |  | — | ​ |  | 643 | ​ |  | — | ​ |  | 643
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | ​ | Fair Value Measurements at December 31, 2021 Using
​ |  | ​ | ​ |  | Quoted Prices in |  | ​ | ​ |  | ​ | ​ |  | ​ | ​
​ | ​ | ​ | ​ | ​ | Active Markets | ​ | ​ | ​ | ​ | Significant | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | for Identical | ​ | Significant Other | ​ | Unobservable | ​ | ​ | ​
​ | ​ | Carrying Value | ​ | Assets | ​ | Observable Inputs | ​ | Inputs | ​ | Fair Value as of
(Dollars in thousands) | ​ | as of December 31, 2021 | ​ | (Level 1) | ​ | (Level 2) | ​ | (Level 3) | ​ | December 31, 2021
Assets: | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Cash and cash equivalents | ​ | $ | 105,799 | ​ | $ | 105,799 | ​ | $ | — | ​ | $ | — | ​ | $ | 105,799
Securities: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Available-for-sale | ​ |  | 239,300 | ​ |  | — | ​ |  | 239,300 | ​ |  | — | ​ |  | 239,300
Held-to-maturity | ​ | ​ | 105,509 | ​ | ​ | — | ​ |  | 103,258 | ​ |  | — | ​ |  | 103,258
Equity securities, at fair value | ​ |  | 1,869 | ​ |  | 1,869 | ​ |  | — | ​ |  | — | ​ |  | 1,869
Restricted securities, at cost | ​ | ​ | 4,951 | ​ | ​ | — | ​ | ​ | 4,951 | ​ | ​ | — | ​ | ​ | 4,951
Loans, net of unearned income | ​ |  | 1,646,437 | ​ |  | — | ​ |  | — | ​ |  | 1,659,396 | ​ |  | 1,659,396
Bank owned life insurance | ​ |  | 20,998 | ​ |  | — | ​ |  | 20,998 | ​ |  | — | ​ |  | 20,998
Accrued interest receivable | ​ |  | 4,943 | ​ |  | — | ​ |  | 4,943 | ​ |  | — | ​ |  | 4,943
Liabilities: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Deposits | ​ | $ | 1,881,553 | ​ | $ | — | ​ | $ | 1,882,132 | ​ | $ | — | ​ | $ | 1,882,132
FHLB advances | ​ |  | 18,000 | ​ |  | — | ​ |  | 17,837 | ​ |  | — | ​ |  | 17,837
Subordinated debt | ​ |  | 24,728 | ​ |  | — | ​ |  | — | ​ |  | 25,325 | ​ |  | 25,325
Accrued interest payable | ​ |  | 843 | ​ |  | — | ​ |  | 843 | ​ |  | — | ​ |  | 843
​

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- 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=123874694&loc=d3e19207-110258 + Details
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