Fair Value Measurements and Fair Value of Financial Instruments | 12 Months Ended |
Dec. 31, 2013 |
Fair Value Measurements and Fair Value of Financial Instruments [Abstract] | ' |
FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS | ' |
Note 19 — Fair Value Measurements and Fair Value of Financial Instruments |
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Management uses its best judgment in estimating the fair value of the Corporation’s financial and non-financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial and non-financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial and non-financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end. |
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FASB ASC 820-10-05 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. |
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FASB ASC 820-10-65 provides additional guidance for estimating fair value in accordance with FASB ASC 820-10-05 when the volume and level of activity for the asset or liability have significantly decreased. This ASC also includes guidance on identifying circumstances that indicate a transaction is not orderly. |
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FASB ASC 820-10-05 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820-10-05 are as follows: |
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| · | Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | | | | | | | | | | | | | | |
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| · | Level 2: Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | | | | | | | | | | | | | | |
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| · | Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (for example, supported with little or no market activity). | | | | | | | | | | | | | | |
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An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. |
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The following information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Corporation’s assets measured at fair value on a recurring basis at December 31, 2013 and December 31, 2012: |
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Cash and Cash Equivalents |
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The carrying amounts for cash and cash equivalents approximate those assets’ fair value. |
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Securities Available-for-Sale |
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Where quoted prices are available in an active market, securities are classified with Level 1 of the valuation hierarchy. Level 1 inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of instruments, which would generally be classified within Level 2 of the valuation hierarchy, include municipal bonds and certain agency collateralized mortgage obligations. In certain cases where there is limited activity in the market for a particular instrument, assumptions must be made to determine their fair value and are classified as Level 3. Due to the inactive condition of the markets amidst the financial crisis, the Corporation treated certain securities as Level 3 securities in order to provide more appropriate valuations. For assets in an inactive market, the infrequent trades that do occur are not a true indication of fair value. When measuring fair value, the valuation techniques available under the market approach, income approach and/or cost approach are used. The Corporation’s evaluations are based on market data and the Corporation employs combinations of these approaches for its valuation methods depending on the asset class. |
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At December 31, 2012, the Corporation’s pooled trust preferred security, ALESCO VII, was classified as Level 3. Market pricing for the Level 3 securities varied widely from one pricing service to another based on the lack of trading. As such, these securities were considered to no longer have readily observable market data that was accurate to support a fair value as prescribed by FASB ASC 820-10-05. The fair value measurement objective remained the same in that the price received by the Corporation would result from an orderly transaction (an exit price notion) and that the observable transactions considered in fair value were not forced liquidations or distressed sales at the measurement date. |
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In regards to the pooled trust preferred security (“pooled TRUPS”), the Corporation was able to determine fair value of the TRUPS using a market approach validation technique based on Level 2 inputs that did not require significant adjustments. The Level 2 inputs included: |
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| (a) | Quoted prices in active markets for similar TRUPS with insignificant adjustments for differences between the TRUPS that the Corporation holds and similar TRUPS. | | | | | | | | | | | | | | |
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| (b) | Quoted prices in markets that are not active that represent current transactions for the same or similar TRUPS that do not require significant adjustment based on unobservable inputs. | | | | | | | | | | | | | | |
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Since June 30, 2008, the market for these TRUPS has become increasingly inactive. The inactivity was evidenced first by a significant widening of the bid-ask spread in the brokered markets in which these TRUPS trade and then by a significant decrease in the volume of trades relative to historical levels as well as other relevant factors. At December 31, 2013, the Corporation determined that the market for similar TRUPS had stabilized. That determination was made considering that there are more observable transactions for similar TRUPS, the prices for those transactions that have occurred are current and or represent fair value, and the observable prices for those transactions have stabilized over time, thus increasing the potential relevance of those observations. However, the Corporation’s one TRUPS at December 31, 2012 has been classified within Level 3 because the Corporation determined that significant adjustments using unobservable inputs are required to determine a true fair value at the measurement date. |
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The Corporation held one variable rate private label collateralized mortgage obligation (CMO), which was also evaluated for impairment. The Variable Rate Collateralized Mortgage Obligation was originally issued in 2006 and is 30 year Adjustable Rate Mortgage loan secured by a first lien, fully amortizing one-to-four residential mortgage loans. The tranche purchased was a Super Senior with an original credit rating of AAA/AA. The top five states geographic concentration comprised in the deal were California 18.2 percent, Arizona 10.5 percent, Virginia 6.1 percent, Florida 6.5 percent and Nevada 6.3 percent. No one state exceeded a 25 percent concentration. These states have been heavily impacted by the financial crises and as such have sustained heavy delinquencies affecting the credit rating of the security. Management applied aggressive default rates to identify if any credit impairment exists, as these bonds were downgraded to below investment grade. The Corporation recorded $24,000 in principal losses on the bond in 2013, and this security was sold at this book value in January 2013. |
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The Corporation determined that an income approach valuation technique (present value technique) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be equally or more representative of fair value than the market approach valuation technique used at the prior measurement dates. As a result, the Corporation used the discount rate adjustment technique to determine fair value. |
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The fair value as of December 31, 2013 was determined by discounting the expected cash flows over the life of the security. The discount rate was determined by deriving a discount rate when the markets were considered more active for this type of security. To this estimated discount rate, additions were made for more liquid markets and increased credit risk as well as assessing the risks in the security, such as default risk and severity risk. The securities continue to make scheduled cash flows and no material cash flow payment defaults have occurred to date. |
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Securities Held-to-Maturity |
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The fair value of the Corporation’s investment securities held-to-maturity was primarily measured using information from a third-party pricing service. Level 1 investment securities are comprised of debt securities issued by the U.S. Treasury as quoted prices were available, unadjusted, for identical securities in active markets. If quoted prices were not available, fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models. In cases where there may be limited or less transparent information provided by the Corporation’s third-party pricing service, fair value may be estimated by the use of secondary pricing services or through the use of non-binding third-party broker quotes. |
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Loans Held for Sale |
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Loans held for sale are required to be measured at the lower of cost or fair value. Under FASB ASC 820-10-05, market value is to represent fair value. Management obtains quotes or bids on all or part of these loans directly from the purchasing financial institutions. |
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Loans Receivable |
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The fair value of performing loans, except residential mortgages, is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risks inherent in the loan. The estimate of maturity is based on the historical experience of the Bank with prepayments for each loan classification, modified as required by an estimate of the effect of current economic and lending conditions. For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources adjusted to reflect differences in servicing and credit costs. |
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Restricted Stocks |
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The carrying amount of restricted investments in bank stocks, which includes stock of the Federal Home Loan Bank of New York, Federal Reserve Bank of New York and Atlantic Central Bankers Bank, approximates fair value, and considers the limited marketability of such securities. |
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Accrued Interest Receivable and Payable |
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The carrying value of accrued interest receivable and accrued interest payable approximates its fair value. |
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Deposits |
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The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings and interest-bearing checking accounts, and money market and checking accounts, is equal to the amount payable on demand as of December 31, 2013 and 2012. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. |
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Short-Term Borrowings |
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Short-term borrowings that mature within six months and securities sold under agreements to repurchase have fair values which approximate carrying value. |
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Long-Term Borrowings |
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Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. |
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Subordinated Debt |
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The fair value of subordinated debentures is estimated by discounting the estimated future cash flows, using market discount rates of financial instruments with similar characteristics, terms and remaining maturity. |
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Off-Balance Sheet Financial Instruments |
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The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rate and the committed rates. |
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The fair value of financial standby letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties. |
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Assets and Liabilities Measured at Fair Value on a Recurring Basis |
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For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2013 and December 31, 2012 are as follows: |
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| | December 31, | | Fair Value Measurements at Reporting Date Using | | | | |
2013 | | | |
| | | | | Quoted Prices | | Significant | | Significant | | | | |
in Active | Other | Unobservable | | | |
Markets for | Observable | Inputs | | | |
Identical | Inputs | (Level 3) | | | |
Assets | (Level 2) | | | | |
(Level 1) | | | | | |
| | (Dollars in Thousands) | | | | |
Financial Instruments Measured at Fair Value on a Recurring Basis: | | | | | | | | | | | | | | | | |
U.S. treasury and agency securities | | $ | 13,519 | | $ | 13,519 | | $ | — | | $ | — | | | | |
Federal agency obligations | | | 19,941 | | | — | | | 19,941 | | | — | | | | |
Residential mortgage pass-through | | | 48,874 | | | — | | | 48,874 | | | — | | | | |
securities | | | |
Commercial mortgage pass- | | | 6,991 | | | — | | | 6,991 | | | — | | | | |
through securities | | | |
Obligations of U.S. states and | | | 31,460 | | | — | | | 31,460 | | | — | | | | |
political subdivision | | | |
Trust preferred securities | | | 19,403 | | | — | | | 19,403 | | | — | | | | |
Corporate bonds and notes | | | 158,630 | | | — | | | 158,630 | | | — | | | | |
Asset-backed securities | | | 15,979 | | | — | | | 15,979 | | | — | | | | |
Certificates of deposit | | | 2,262 | | | — | | | 2,262 | | | — | | | | |
Equity securities | | | 287 | | | 287 | | | — | | | — | | | | |
Other securities | | | 5,724 | | | 5,724 | | | — | | | — | | | | |
Securities available-for-sale | | $ | 323,070 | | $ | 19,530 | | $ | 303,540 | | $ | — | | | | |
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| | December 31, | | Fair Value Measurements at Reporting Date Using | | | | |
2012 | | | |
| | | | | Quoted Prices | | Significant | | Significant | | | | |
in Active | Other | Unobservable | | | |
Markets for | Observable | Inputs | | | |
Identical Assets | Inputs | (Level 3) | | | |
(Level 1) | (Level 2) | | | | |
| | (Dollars in Thousands) | | | | |
Financial Instruments Measured at Fair Value on a Recurring Basis: | | | | | | | | | | | | | | | | |
U.S. treasury and agency securities | | $ | 11,909 | | $ | 11,909 | | $ | — | | $ | — | | | | |
Federal agency obligations | | | 20,535 | | | — | | | 20,535 | | | — | | | | |
Residential mortgage pass- | | | 53,784 | | | — | | | 53,784 | | | — | | | | |
through securities | | | |
Commercial mortgage pass- | | | 9,969 | | | — | | | 9,969 | | | — | | | | |
through securities | | | |
Obligations of U.S. states and | | | 107,714 | | | 469 | | | 107,245 | | | — | | | | |
political subdivision | | | |
Trust preferred securities | | | 21,249 | | | — | | | 21,213 | | | 36 | | | | |
Corporate bonds and notes | | | 237,405 | | | — | | | 237,405 | | | — | | | | |
Collateralized mortgage | | | 2,120 | | | — | | | 2,120 | | | — | | | | |
obligations | | | |
Asset-backed securities | | | 19,742 | | | — | | | 19,742 | | | — | | | | |
Certificates of deposit | | | 2,865 | | | — | | | 2,865 | | | — | | | | |
Equity securities | | | 325 | | | 325 | | | — | | | — | | | | |
Other securities | | | 9,198 | | | 9,198 | | | — | | | — | | | | |
Securities available-for-sale | | $ | 496,815 | | $ | 21,901 | | $ | 474,878 | | $ | 36 | | | | |
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The fair values used by the Corporation are obtained from an independent pricing service and represent either quoted market prices for the identical securities (Level 1 inputs) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems (Level 2). The fair values of the federal agency obligations, obligations of states and political subdivision and corporate bonds and notes measured at fair value using Level 1 inputs at December 31, 2013 and 2012 represented the purchase price of the securities since they were acquired near year-end 2013 and 2012. |
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The following table presents the changes in securities available-for-sale with significant unobservable inputs (Level 3) for the year ended December 31, 2013 and December 31, 2012: |
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| | 2013 | | 2012 | | | | | | | | | | |
| | (Dollars in Thousands) | | | | | | | | | | |
Beginning balance, January 1, | | $ | 36 | | $ | 2,115 | | | | | | | | | | |
Transfers out of Level 3 | | | -260 | | | -2,120 | | | | | | | | | | |
Principal interest deferrals | | | 58 | | | 116 | | | | | | | | | | |
Principal paydown | | | — | | | -272 | | | | | | | | | | |
Total net losses included in net income | | | -628 | | | -68 | | | | | | | | | | |
Total net unrealized gains | | | 794 | | | 265 | | | | | | | | | | |
Ending balance, December 31, | | $ | — | | $ | 36 | | | | | | | | | | |
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Assets Measured at Fair Value on a Non-Recurring Basis |
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The Corporation may be required periodically to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or impairment write-downs of individual assets. The Corporation primarily utilized appraisal value less cost to sell and other unobservable market inputs to determine fair value of assets, and therefore, is classified as a Level 3 measurement. For assets measured at fair value on a non-recurring basis, the fair value measurements at December 31, 2013 and 2012 are as follows: |
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Impaired Loans | | Valuation Techniques | | Range of Unobservable Inputs | | | | | | | | | | | | |
Residential | | Appraisals of collateral value | | Adjustment for age of comparable sales, generally a decline of 0-25% | | | | | | | | | | | | |
Commercial | | Discounted cash flow model | | Discount rate from 0% to 6% | | | | | | | | | | | | |
Commercial real estate | | Appraisals of collateral value | | Market capitalization rates between 8% to 12%. Market rental rates for similar properties | | | | | | | | | | | | |
Construction | | Appraisals of collateral value | | Adjustment for age comparable sales. Generally a decline of 5% to no change | | | | | | | | | | | | |
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Other Real Estate Owned | | | | | | | | | | | | | | | | |
Residential | | Appraisals of collateral value | | Adjustment for age of comparable sales, generally a decline of 0-25% and estimated selling costs of 6-8% | | | | | | | | | | | | |
Commercial | | Appraisals of collateral value | | Adjustment for age of comparable sales, generally a decline of 15% to no change and estimated selling costs of 6-8% | | | | | | | | | | | | |
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For assets measured at fair value on a non-recurring basis, the unobservable inputs used to derive fair value measurements at December 31, 2013 and December 31, 2012 were as follows: |
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| | December 31, | | Fair Value Measurements at Reporting Date Using | | | | |
2013 | | | |
| | | | | Quoted Prices | | Significant | | Significant | | | | |
in Active | Other | Unobservable | | | |
Markets for | Observable | Inputs | | | |
Identical | Inputs | (Level 3) | | | |
Assets | (Level 2) | | | | |
(Level 1) | | | | | |
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| | (Dollars in Thousands) | | | | |
Assets Measured at Fair Value | | | | | | | | | | | | | | | | |
on a Non-Recurring Basis: | | | |
Impaired loans | | $ | 4,601 | | $ | — | | $ | — | | $ | 4,601 | | | | |
Other real estate owned | | | 220 | | | — | | | — | | | 220 | | | | |
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| | December 31, | | Fair Value Measurements at Reporting Date Using | | | | |
2012 | | | |
| | | | | Quoted Prices | | Significant | | Significant | | | | |
in Active | Other | Unobservable | | | |
Markets for | Observable | Inputs | | | |
Identical | Inputs | (Level 3) | | | |
Assets | (Level 2) | | | | |
(Level 1) | | | | | |
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| | (Dollars in Thousands) | | | | |
Assets Measured at Fair Value | | | | | | | | | | | | | | | | |
on a Non-Recurring Basis: | | | |
Impaired loans | | $ | 4,790 | | $ | — | | $ | — | | $ | 4,790 | | | | |
Other real estate owned | | | 1,300 | | | — | | | — | | | 1,300 | | | | |
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The following methods and assumptions were used to estimate the fair values of the Corporation’s assets measured at fair value on a non-recurring basis at December 31, 2013 and 2012: |
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Impaired Loans. The value of an impaired loan is measured based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent. Smaller balance homogeneous loans that are collectively evaluated for impairment, such as residential mortgage loans and installment loans, are specifically excluded from the impaired loan portfolio. The Corporation’s impaired loans are primarily collateral dependent. Impaired loans are individually assessed to determine that each loan’s carrying value is not in excess of the fair value of the related collateral or the present value of the expected future cash flows. At December 31, 2013 and 2012, impaired loans with related valuation allowance totaled $5,016,000 and $5,435,000, respectively. The amount of related valuation allowances was $415,000 at December 31, 2013 and $645,000 at December 31, 2012. |
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Other Real Estate Owned. Certain assets such as OREO are measured at fair value less cost to sell. The Corporation believes that the fair value component in its valuation follows the provisions of FASB ASC 820-10-05. Fair value of OREO is determined by sales agreements or appraisals by qualified licensed appraisers approved and hired by the Corporation. Costs to sell associated with OREO are based on estimation per the terms and conditions of the sales agreements or appraisal. |
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Fair Value of Financial Instruments |
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FASB ASC 825-10 requires all entities to disclose the estimated fair value of their financial instrument assets and liabilities. For the Corporation, as for most financial institutions, the majority of its assets and liabilities are considered financial instruments as defined in FASB ASC 825-10. Many of the Corporation’s financial instruments, however, lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction. It is also the Corporation’s general practice and intent to hold its financial instruments to maturity and not to engage in trading or sales activities except for loans held-for-sale and investment securities available-for-sale. Therefore, significant estimations and assumptions, as well as present value calculations, were used by the Corporation for the purposes of this disclosure. |
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Investment Securities Held-to-Maturity. The fair value of the Corporation’s investment securities held-to-maturity was primarily measured using information from a third-party pricing service. If quoted prices were not available, fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models. In cases where there may be limited or less transparent information provided by the Corporation’s third-party pricing service, fair value may be estimated by the use of secondary pricing services or through the use of non-binding third-party broker quotes. |
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Loans. The fair value of the Corporation’s loans was estimated by discounting the expected future cash flows using the current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans were segregated by types such as commercial, residential and consumer loans. Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments. |
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Interest-Bearing Deposits. The fair values of the Corporation’s interest-bearing deposits were estimated using discounted cash flow analyses. The discounted rates used were based on rates currently offered for deposits with similar remaining maturities. The fair values of the Corporation’s interest-bearing deposits do not take into consideration the value of the Corporation’s long-term relationships with depositors, which may have significant value. |
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Term Borrowings and Subordinated Debentures. The fair value of the Corporation’s long-term borrowings and subordinated debentures were calculated using a discounted cash flow approach and applying discount rates currently offered based on weighted remaining maturities. |
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Accrued Interest Receivable/Payable. The carrying amounts of accrued interest approximate fair value resulting in a level 2 or level 3 classification based on the level of the asset or liability with which the accrual is associated. |
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The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Corporation’s financial instruments as of December 31, 2013 and December 31, 2012. |
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| | | | | | | | Fair Value Measurements | |
| | Carrying | | Fair | | Quoted | | Significant | | Significant | |
Amount | Value | Prices in | Other | Unobservable |
| | Active | Observable | Inputs |
| | Markets for | Inputs | (Level 3) |
| | Identical | (Level 2) | |
| | Assets | | |
| | (Level 1) | | |
| | (in thousands) | |
31-Dec-13 | | | | | | | | | | | | | | | | |
Financial assets | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 82,692 | | $ | 82,692 | | $ | 82,692 | | $ | — | | $ | — | |
Investment securities available-for-sale | | | 323,070 | | | 323,070 | | | 19,530 | | | 303,540 | | | — | |
Investment securities held-to-maturity | | | 215,286 | | | 210,958 | | | 27,037 | | | 164,940 | | | 18,981 | |
Restricted investment in bank stocks | | | 8,986 | | | 8,986 | | | — | | | 8,986 | | | — | |
Net loans | | | 950,610 | | | 948,606 | | | — | | | — | | | 948,606 | |
Accrued interest receivable | | | 6,802 | | | 6,802 | | | — | | | 4,136 | | | 2,666 | |
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Financial liabilities | | | | | | | | | | | | | | | | |
Non interest-bearing deposits | | | 227,370 | | | 227,370 | | | — | | | 227,370 | | | — | |
Interest-bearing deposits | | | 1,114,635 | | | 1,115,781 | | | — | | | 1,115,781 | | | — | |
Long-term borrowings | | | 146,000 | | | 157,440 | | | — | | | 157,440 | | | — | |
Subordinated debentures | | | 5,155 | | | 5,143 | | | — | | | 5,143 | | | — | |
Accrued interest payable | | | 963 | | | 963 | | | — | | | 963 | | | — | |
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31-Dec-12 | | | | | | | | | | | | | | | | |
Financial assets | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 104,134 | | $ | 104,134 | | $ | 104,134 | | $ | — | | $ | — | |
Interest bearing deposits with banks | | | 2,004 | | | 2,004 | | | 2,004 | | | — | | | — | |
Investment securities available-for-sale | | | 496,815 | | | 496,815 | | | 21,901 | | | 474,878 | | | 36 | |
Investment securities held-to-maturity | | | 58,064 | | | 62,431 | | | — | | | 53,247 | | | 9,184 | |
Restricted investment in bank stocks | | | 8,964 | | | 8,964 | | | — | | | 8,964 | | | — | |
Loans held for sale | | | 1,491 | | | 1,491 | | | 1,491 | | | — | | | — | |
Net loans | | | 879,435 | | | 897,030 | | | — | | | — | | | 897,030 | |
Accrued interest receivable | | | 6,849 | | | 6,849 | | | — | | | 4,465 | | | 2,384 | |
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Financial liabilities | | | | | | | | | | | | | | | | |
Non interest-bearing deposits | | | 215,071 | | | 215,071 | | | — | | | 215,071 | | | — | |
Interest-bearing deposits | | | 1,091,851 | | | 1,092,822 | | | — | | | 1,092,822 | | | — | |
Long-term borrowings | | | 146,000 | | | 162,992 | | | — | | | 162,992 | | | — | |
Subordinated debentures | | | 5,155 | | | 5,046 | | | — | | | 5,046 | | | — | |
Accrued interest payable | | | 874 | | | 874 | | | — | | | 874 | | | — | |
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The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. |
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Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values. |
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The Corporation’s remaining assets and liabilities, which are not considered financial instruments, have not been valued differently than has been customary with historical cost accounting. No disclosure of the relationship value of the Corporation’s core deposit base is required by FASB ASC 825-10. |
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Fair value estimates are based on existing balance sheet financial instruments, without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, there are certain significant assets and liabilities that are not considered financial assets or liabilities, such as the brokerage network, deferred taxes, premises and equipment, and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. |
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Management believes that reasonable comparability between financial institutions may not be likely, due to the wide range of permitted valuation techniques and numerous estimates which must be made, given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values. |
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