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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2021

NOTE 7 FAIR VALUE MEASUREMENTS

In accordance with fair value guidance, the Bank groups its financial assets and financial liabilities generally 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 or liabilities that the Bank 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 with 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 for the asset or liability.

Level 3 — Valuation is based on unobservable income 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.

NOTE 7 FAIR VALUE MEASUREMENTS (Continued)

Fair values of assets and liabilities measured on a recurring basis at June 30, 2021 and December 31, 2020 follows:


	Fair Value Measurements at Reporting Date Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets/Liabilities		Inputs		Inputs
(Dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2021
Available-for-sale securities	$	41,856	$	—	$	41,856	$	—
December 31, 2020
Available-for-sale securities	$	20,730	$	—	$	20,730	$	—

Fair values of assets and liabilities measured on a nonrecurring basis at June 30, 2021 and December 31, 2020 follows:


	Fair Value Measurements at Reporting Date Using
					Significant
			Quoted Prices		Other		Significant
			in Active Markets for		Observable		Unobservable
			Identical Assets/Liabilities		Inputs		Inputs
(Dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2021
Impaired loans	$	1,282	$	—	$	—	$	1,282
Foreclosed real estate		590		—		—		590
December 31, 2020
Impaired loans	$	1,365	$	—	$	—	$	1,365
Foreclosed real estate		415		—		—		415

For the six months ended June 30, 2021, impaired loans with a carrying amount of $1.8 million were written down to their fair value of $1.3 million, resulting in an impairment charge of $556,000, which was included in the allowance for loan losses. Foreclosed real estate with a carrying amount of $630,000 was written down to its fair value of $590,000, resulting in an impairment charge of $40,000 which was included in earnings for the six months ended June 30, 2021.

During the year ended December 31, 2020, impaired loans with a carrying amount of $2.0 million were written down to their fair value of $1.4 million, resulting in an impairment charge of $599,000, which was included in the allowance for loan losses. Foreclosed real estate with a carrying amount of $581,000 was written down to its fair value of $415,000, resulting in an impairment charge of $166,000, which was included in earnings for the year ended December 31, 2020.

The fair value of impaired loans and real estate owned is estimated using current appraised values less costs to sell.