XML 34 R24.htm IDEA: XBRL DOCUMENT
v3.19.1

Fair Value Measurements | 3 Months Ended
--- | ---
Mar. 31, 2019
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements LCNB measures certain assets at fair value using various valuation techniques and assumptions, depending on the nature of the asset. Fair value is defined as the price that would be received from the sale of an asset in an orderly transaction between market participants at the measurement date. The inputs to the valuation techniques used to measure fair value are assigned to one of three broad levels:
• | Level 1 – quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date.
• | Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly. Level 2 inputs may include quoted prices for similar assets in active markets, quoted prices for identical assets or liabilities in markets that are not active, inputs other than quoted prices (such as interest rates or yield curves) that are observable for the asset or liability, and inputs that are derived from or corroborated by observable market data.
• | Level 3 – inputs that are unobservable for the asset or liability.
Equity Securities With a Readily Determinable Fair Value Equity securities with a readily determinable fair value are reported at fair value with changes in fair value reported in other operating income in the consolidated condensed statements of income. Fair values for trust preferred and equity securities are determined based on market quotations (level 1). LCNB has invested in two mutual funds that are traded in active markets and their fair values are based on market quotations (level 1). Investments in another two mutual funds are measured at fair value using net asset values ("NAV") and are considered level 1 because the NAVs are determined and published and are the basis for current transactions. One of the mutual funds measured at fair value using its NAV was sold during the first quarter 2019. Debt Securities, Available-for-Sale The majority of LCNB's financial debt securities are classified as available-for-sale. The securities are reported at fair value with unrealized holding gains and losses reported net of income taxes in accumulated other comprehensive income (loss). LCNB utilizes a pricing service for determining the fair values of its debt securities. Methods and significant assumptions used to estimate fair value are as follows:
• | Fair value for U.S. Treasury notes are determined based on market quotations (level 1).
• | Fair values for the other debt securities are calculated using the discounted cash flow method for each security. The discount rates for these cash flows are estimated by the pricing service using rates observed in the market (level 2). Cash flow streams are dependent on estimated prepayment speeds and the overall structure of the securities given existing market conditions.
Assets Recorded at Fair Value on a Nonrecurring Basis Assets that may be recorded at fair value on a nonrecurring basis include impaired loans, other real estate owned, and other repossessed assets. A loan is considered impaired when management believes it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. Impaired loans are carried at the present value of estimated future cash flows using the loan's existing rate or the fair value of collateral if the loan is collateral dependent, if this value is less than the loan balance. These inputs are considered to be level 3. Other real estate owned is adjusted to fair value, less costs to sell, upon transfer of the loan to foreclosed assets, usually based on an appraisal of the property. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Other repossessed assets are valued at estimated sales prices, less costs to sell. The inputs for real estate owned and other repossessed assets are considered to be level 3. The following table summarizes the valuation of LCNB's assets recorded at fair value by input levels as of March 31, 2019 and December 31, 2018 (in thousands):
|  |  | Fair Value Measurements at the End of the Reporting Period Using
|  |  | Fair Value Measurements |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
March 31, 2019 |  |  |  |  |  |  |  |
Recurring fair value measurements: |  |  |  |  |  |  |  |
| Equity securities with a readily determinable fair value: |  |  |  |  |  |  |  |
| Equity securities |  | $ | 886 |  |  | 886 |  |  | — |  |  | — |
| Mutual funds |  | 43 |  |  | 43 |  |  | — |  |  | — |
| Mutual funds measured at net asset value |  | 1,256 |  |  | 1,256 |  |  | — |  |  | — |
| Debt securities, available-for-sale: |  |  |  |  |  |  |  |
| U.S. Treasury notes |  | 2,257 |  |  | 2,257 |  |  | — |  |  | — |
| U.S. Agency notes |  | 74,450 |  |  | — |  |  | 74,450 |  |  | — |
| U.S. Agency mortgage-backed securities |  | 54,566 |  |  | — |  |  | 54,566 |  |  | — |
| Municipal securities: |  |  |  |  |  |  |  |  |  |  |  |
| Non-taxable |  | 69,715 |  |  | — |  |  | 69,715 |  |  | — |
| Taxable |  | 16,680 |  |  | — |  |  | 16,680 |  |  | — |
| Total recurring fair value measurements |  | $ | 219,853 |  |  | 4,442 |  |  | 215,411 |  |  | — |
Nonrecurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |
| Impaired loans |  | $ | 1,083 |  |  | — |  |  | — |  |  | 1,083 |
| Other real estate owned and repossessed assets |  | 244 |  |  | — |  |  | — |  |  | 244 |
| Total nonrecurring fair value measurements |  | $ | 1,327 |  |  | — |  |  | — |  |  | 1,327 |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |
Recurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |  |
| Equity securities with a readily determinable fair value: |  |  |  |  |  |  |  |
| Equity securities |  | $ | 519 |  |  | 519 |  |  | — |  |  | — |
| Mutual funds |  | 39 |  |  | 39 |  |  | — |  |  | — |
| Mutual funds measured at net asset value |  | 1,520 |  |  | 1,520 |  |  | — |  |  | — |
| Debt securities, available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
| U.S. Treasury notes |  | 2,235 |  |  | 2,235 |  |  | — |  |  | — |
| U.S. Agency notes |  | 78,340 |  |  | — |  |  | 78,340 |  |  | — |
| U.S. Agency mortgage-backed securities |  | 55,610 |  |  | — |  |  | 55,610 |  |  | — |
| Municipal securities: |  |  |  |  |  |  |  |  |  |  |  |
| Non-taxable |  | 84,714 |  |  | — |  |  | 84,714 |  |  | — |
| Taxable |  | 17,522 |  |  | — |  |  | 17,522 |  |  | — |
| Total recurring fair value measurements |  | $ | 240,499 |  |  | 4,313 |  |  | 236,186 |  |  | — |
Nonrecurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |  |
| Impaired loans |  | $ | 1,039 |  |  | — |  |  | — |  |  | 1,039 |
| Other real estate owned and repossessed assets |  | 244 |  |  | — |  |  | — |  |  | 244 |
| Total nonrecurring fair value measurements |  | $ | 1,283 |  |  | — |  |  | — |  |  | 1,283 |
The following table presents quantitative information about unobservable inputs used in nonrecurring level 3 fair value measurements at March 31, 2019 and December 31, 2018 (dollars in thousands):
|  |  |  |  |  |  |  | Range
|  | Fair Value |  | Valuation Technique |  | Unobservable Inputs |  | High |  | Low |  | Weighted Average
March 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans |  | $ | 129 |  |  | Estimated sales price |  | Adjustments for comparable properties, discounts to reflect current market conditions |  | Not applicable
|  | 954 |  |  | Discounted cash flows |  | Discount rate |  | 8.25 | % |  | 4.50 | % |  | 6.87 | %
Other real estate owned |  | 244 |  |  | Estimated sales price |  | Adjustments for comparable properties, discounts to reflect current market conditions |  | Not applicable
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans |  | $ | 45 |  |  | Estimated sales price |  | Adjustments for comparable properties, discounts to reflect current market conditions |  | Not applicable
|  | 994 |  |  | Discounted cash flows |  | Discount rate |  | 8.25 | % |  | 4.50 | % |  | 6.86 | %
Other real estate owned |  | 244 |  |  | Estimated sales price |  | Adjustments for comparable properties, discounts to reflect current market conditions |  | Not applicable
Carrying amounts and estimated fair values of financial instruments as of March 31, 2019 and December 31, 2018 are as follows (in thousands):
|  |  |  | Fair Value Measurements at the End of the Reporting Period Using
|  | Carrying Amount |  | Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
March 31, 2019 |  |  |  |  |  |  |  |  |  |
FINANCIAL ASSETS: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 19,527 |  |  | 19,527 |  |  | 19,527 |  |  | — |  |  | — |
Debt securities, held-to-maturity |  | 32,363 |  |  | 32,227 |  |  | — |  |  | — |  |  | 32,227 |
Federal Reserve Bank stock |  | 4,652 |  |  | 4,652 |  |  | 4,652 |  |  | — |  |  | — |
Federal Home Loan Bank stock |  | 4,845 |  |  | 4,845 |  |  | 4,845 |  |  | — |  |  | — |
Loans, net |  | 1,203,008 |  |  | 1,204,720 |  |  | — |  |  | — |  |  | 1,204,720 |
Accrued interest receivable |  | 5,302 |  |  | 5,302 |  |  | — |  |  | 5,302 |  |  | — |
FINANCIAL LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | 1,347,857 |  |  | 1,348,251 |  |  | 1,024,049 |  |  | 324,202 |  |  | — |
Long-term debt |  | 42,982 |  |  | 44,099 |  |  | — |  |  | 44,099 |  |  | — |
Accrued interest payable |  | 662 |  |  | 662 |  |  | — |  |  | 662 |  |  | — |
December 31, 2018 |  |  |  |  |  |  |  |  |  |
FINANCIAL ASSETS: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 20,040 |  |  | 20,040 |  |  | 20,040 |  |  | — |  |  | — |
Investment securities, held-to-maturity |  | 29,721 |  |  | 29,024 |  |  | — |  |  | — |  |  | 29,024 |
Federal Reserve Bank stock |  | 4,653 |  |  | 4,653 |  |  | 4,653 |  |  | — |  |  | — |
Federal Home Loan Bank stock |  | 4,845 |  |  | 4,845 |  |  | 4,845 |  |  | — |  |  | — |
Loans, net |  | 1,194,577 |  |  | 1,183,041 |  |  | — |  |  | — |  |  | 1,183,041 |
Accrued interest receivable |  | 4,317 |  |  | 4,317 |  |  | — |  |  | 4,317 |  |  | — |
FINANCIAL LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | 1,300,919 |  |  | 1,301,298 |  |  | 1,004,057 |  |  | 297,241 |  |  | — |
Short-term borrowings |  | 56,230 |  |  | 56,230 |  |  | 56,230 |  |  | — |  |  | — |
Long-term debt |  | 47,032 |  |  | 48,255 |  |  | — |  |  | 48,255 |  |  | — |
Accrued interest payable |  | 690 |  |  | 690 |  |  | — |  |  | 690 |  |  | — |
The fair values of off-balance-sheet financial instruments such as loan commitments and letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of such instruments were not material at March 31, 2019 and December 31, 2018. Fair values of financial instruments are based on various assumptions, including the discount rate and estimates of future cash flows. Therefore, the fair values presented may not represent amounts that could be realized in actual transactions. In addition, because the required disclosures exclude certain financial instruments and all nonfinancial instruments, any aggregation of the fair value amounts presented would not represent the underlying value of LCNB. The following methods and assumptions were used to estimate the fair value of certain financial instruments: Cash and cash equivalents The carrying amounts presented are deemed to approximate fair value. Equity securities without a readily determinable fair value Equity securities without a readily determinable fair value are measured at cost, less impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Investment securities, held-to-maturity Fair values for investment securities, held-to-maturity are based on quoted market prices for similar securities and/or discounted cash flow analysis or other methods. Federal Home Loan Bank stock and Federal Reserve Bank stock The carrying value of Federal Home Loan Bank and Federal Reserve Bank stock approximates fair value based on the respective redemptive provisions. Loans The estimated fair value of loans follows the guidance in ASU 2016-01, which prescribes an “exit price” approach in estimating and disclosing fair value of financial instruments. The fair value calculation discounts estimated future cash flows using rates that incorporated discounts for credit, liquidity, and marketability factors. Deposits The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities, which approximates market rates. Borrowings The carrying amounts of federal funds purchased, repurchase agreements, and U.S. Treasury demand note borrowings are deemed to approximate fair value of short-term borrowings. For long-term debt, fair values are estimated based on the discounted value of expected net cash flows using current interest rates. Accrued interest receivable and Accrued interest payable Carrying amount approximates fair value.

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