XML 27 R18.htm IDEA: XBRL DOCUMENT v2.3.0.15
Fair Value Measurements
9 Months Ended
Sep. 30, 2011
Fair Value Measurements [Abstract] 
Fair Value Measurements
(12)   Fair Value Measurements

Our Company uses fair value measurements to record fair value adjustments to certain financial and nonfinancial assets and liabilities. The FASB ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for the measurement of fair value, and enhances disclosures about fair value measurements. The standard applies whenever other standards require (permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, FASB clarified the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, the standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. As of the nine months ended September 30, 2011 and 2010, there were no transfers into or out of Level 2.

The fair value hierarchy is as follows:

Level 1 – Inputs are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 – Inputs are unobservable inputs for the asset or liability and significant to the fair value. These may be internally developed using our Company’s best information and assumptions that a market participant would consider.

ASC Topic 820 also provides guidance on determining fair value when the volume and level of activity for the asset or liability has significantly decreased and on identifying circumstances when a transaction may not be considered orderly.

Our Company is required to disclose assets and liabilities measured at fair value on a recurring basis separate from those measured at fair value on a nonrecurring basis. Nonfinancial assets measured at fair value on a nonrecurring basis would include foreclosed real estate, long-lived assets, and core deposit intangible assets, which are reviewed when circumstances or other events indicate that impairment may have occurred.

Valuation methods for instruments measured at fair value on a recurring basis

Following is a description of our Company’s valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis:

Available-for-sale securities

Available-for-sale securities are recorded at fair value on a recurring basis. Available-for-sale securities is the only balance sheet category our Company is required, in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), to carry at fair value on a recurring basis. Securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, our Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

 

                                 
          Fair Value Measurements Using  

Description

   Fair Value     Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)		     Other
Observable
Inputs
(Level 2)		     Significant
Unobservable
Inputs
(Level 3)		  

September 30, 2011

                                

U.S. treasury

   $ 2,057,657     $ —       $ 2,057,657     $ —    

Government sponsored enterprises

     56,173,402       —         56,173,402       —    

Asset-backed securities

     115,235,218       —         115,235,218       —    

Obligations of states and political subdivisions

     31,980,177       —         31,980,177       —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 205,446,454     $ —       $ 205,446,454     $ —    
   

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2010

                                

U.S. treasury

   $ 1,027,891     $ —       $ 1,027,891     $ —    

Government sponsored enterprises

     53,341,551       —         53,341,551       —    

Asset-backed securities

     90,176,241       —         90,176,241       —    

Obligations of states and political subdivisions

     34,431,867       —         34,431,867       —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 178,977,550     $ —       $ 178,977,550     $ —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Valuation methods for instruments measured at fair value on a nonrecurring basis

Following is a description of our Company’s valuation methodologies used for assets and liabilities recorded at fair value on a nonrecurring basis:

Impaired Loans

Our Company does not record loans at fair value on a recurring basis other than loans that are considered impaired. The net carrying value of impaired loans is generally based on fair values of the underlying collateral obtained through independent appraisals or internal evaluations, or by discounting the total expected future cash flows. Once the fair value of the collateral has been determined and any impairment amount calculated, a specific reserve allocation is made. Because many of these inputs are not observable, the measurements are classified as Level 3. As of September 30, 2011, our Company identified $26.1 million in impaired loans that had specific allowances for losses aggregating $3.9 million. Related to these loans, there was $6.5 million in charge-offs recorded during 2011.

Other Real Estate Owned and Repossessed Assets

Other real estate owned and repossessed assets consist of loan collateral which has been repossessed through foreclosure. This collateral is comprised of commercial and residential real estate and other non-real estate property, including autos, manufactured homes, and construction equipment. Other real estate owned assets are recorded as held for sale initially at the lower of the loan balance or fair value of the collateral less estimated selling costs. Our Company relies on external appraisals and assessment of property values by our internal staff. In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgment based on experience and expertise of internal specialists. Subsequent to foreclosure, valuations are updated periodically, and the assets may be written down to reflect a new cost basis. Because many of these inputs are not observable, the measurements are classified as Level 3.

 

                                         
           Fair Value Measurements Using        

Description

   Fair Value     Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)		     Other
Observable
Inputs
(Level 2)		     Significant
Unobservable
Inputs
(Level 3)		     Total Gains
(Losses)*		  

September 30, 2011

                                        

Impaired loans:

                                        

Commercial, financial, & agricultural

   $ 718,315     $ —       $ —       $ 718,315     $ (2,124,809 ) 

Real estate construction - residential

     —         —         —         —         (1,556,738 ) 

Real estate construction - commercial

     100,154       —         —         100,154       (279,088 ) 

Real estate mortgage - residential

     3,526,430       —         —         3,526,430       (1,419,218 ) 

Real estate mortgage - commercial

     17,896,823       —         —         17,896,823       (1,163,132 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

  $ 22,241,722     $ —       $ —       $ 22,241,722     $ (6,542,985 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Other real estate owned and repossessed assets

   $ 18,066,847     $ —       $ —       $ 18,066,847     $ (1,857,698 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2010

                                        

Impaired loans:

                                        

Commercial, financial, & agricultural

   $ 1,480,836     $ —       $ —       $ 1,480,836     $ (1,634,544 ) 

Real estate construction - residential

     263,870       —         —         263,870       (863,399 ) 

Real estate construction - commercial

     3,284,371       —         —         3,284,371       (4,496,156 ) 

Real estate mortgage - residential

     4,459,151       —         —         4,459,151       (3,971,927 ) 

Real estate mortgage - commercial

     14,368,132       —         —         14,368,132       (3,626,892 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

  $ 23,856,360     $ —       $ —       $ 23,856,360     $ (14,592,918 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Other real estate owned and repossessed assets

   $ 14,009,017     $ —       $ —       $ 14,009,017     $ (3,528,011 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

* Total gains (losses) reported for other real estate owned and repossessed assets includes charge offs and net losses taken during the periods reported.