ASC Topic defines fair value, establishes a framework for measuring fair value, and sets forth disclosures about fair value measurements. ASC Topic allows entities to choose to measure certain financial assets and liabilities at fair value. The Company has not elected the fair value option for any of its financial assets or liabilities.

 

ASC Topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This Topic describes levels of inputs that be used to measure fair value:

 

 

 

Following is a description of the valuation method used for instruments measured at fair value on a recurring basis. For this disclosure, the Company only has available for sale investment securities and money market mutual funds classified as cash equivalents that meet the requirement. The carrying value of the million in money market mutual funds is equivalent to its fair value and based on Level inputs.

 

Valued primarily by independent party pricing services under the market valuation approach that include, but are not limited to, the following inputs:

 

 

Fair value disclosures for available for sale investment securities as of and are as follows:

 

 

The Company is required to measure and disclose certain other assets at fair value on a nonrecurring basis in periods following their initial recognition. The Company’s disclosure about assets measured at fair value on a nonrecurring basis consists of impaired loans and OREO. The carrying value of these assets are adjusted to fair value on a nonrecurring basis through impairment charges further as described below.

 

Impairment charges on collateral-dependent loans are recorded by either an increase to the provision for loan losses and related allowance or by direct loan charge-offs. The fair value of collateral-dependent impaired loans with specific allocations of the allowance for loan losses is measured based on recent appraisals of the underlying collateral. These appraisals utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraisers take absorption rates into consideration and adjustments are routinely made in the appraisal process to identify differences between the comparable sales and income data available. Such adjustments consist mainly of estimated costs to sell that are not included in certain appraisals or to update appraised collateral values as a result of market declines of similar properties for which a newer appraisal is available. These adjustments can be significant and typically result in a Level classification of the inputs for determining fair value.

 

OREO includes properties acquired by the Company through, or in lieu of, actual loan foreclosures and is carried at fair value less estimated costs to sell. Fair value of OREO at acquisition is generally based on party appraisals of the property that includes comparable sales data and is considered as Level inputs. The carrying value of each OREO property is updated at least annually and more frequently when market conditions significantly impact the value of the property. If the carrying amount of the OREO exceeds fair value less estimated costs to sell, an impairment loss is recorded through noninterest expense.

 

The following table represents the carrying amount of assets measured at fair value on a nonrecurring basis and still held by the Company as of the dates indicated. The amounts in the table only represent assets whose carrying amount has been adjusted by impairment charges during the period in a manner as described above; therefore, these amounts will differ from the total amounts outstanding. With the exception of those calculated using the collateral valuation method, collateral-dependent impaired loan amounts in the tables below exclude restructured loans since they are measured based on present value techniques, which are outside the scope of the fair value reporting framework.

 

 

 

The following table presents impairment charges recorded in earnings on assets measured at fair value on a nonrecurring basis. 

 

 

The following table presents quantitative information about unobservable inputs for assets measured on a nonrecurring basis using Level measurements. As described above, the fair value of real estate securing collateral-dependent impaired loans and OREO are based on current party appraisals. It is often necessary, however, for the Company to discount the appraisal amounts supporting its impaired loans and OREO. These discounts relate primarily to marketing and other holding costs that are not included in certain appraisals or to update values as a result of market declines of similar properties for which newer appraisals are available. Discounts also result from contracts to sell properties entered into during the period. The range of discounts is presented in the table below for and The upper end of the range identified in the table related to OREO for each year is the result of write-downs on relatively small properties. The weighted average column represents a better indicator of the discounts applied to the appraisals.

 

 

 

The table that follows represents the estimated fair values of the Company’s financial instruments made in accordance with the requirements of ASC Topic

ASC Topic requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet

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for which it is practicable to estimate that value. The estimated fair value amounts have been determined by the Company using available market information and present value or other valuation techniques. These derived fair values are subjective in nature, involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. ASC Topic excludes certain financial instruments and all nonfinancial instruments from the disclosure requirements. Accordingly, the aggregate fair value amounts presented are not intended to represent the underlying value of the Company

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The following methods and assumptions were used to estimate the fair value of each class of financial instruments not presented elsewhere for which it is practicable to estimate that value.

 

 

 

 

 

The following table presents the estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at and Information for available for sale investment securities is presented within this footnote in greater detail above.