Village Bank & Trust Financial Corp. - 10-Q filing on 2012-11-13

Fair Value (Tables)

9 Months Ended

Sep. 30, 2012

Fair value of assets and liabilities measured on a recurring and non-recurring basis

Assets and liabilities measured at fair value under Topic 820 on a recurring and non-recurring basis are summarized below for the indicated dates:

	Fair Value Measurement
	at September 30, 2012 Using
	(In thousands)
			Quoted Prices
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets - Recurring
US Government Agencies	$	16,954	$	4,978	$	11,976	$	-
MBS		2,161		-		2,161		-
Municipals		11,304		1,736		9,568		-
US Treasury		2,997
Residential loans held for sale		22,527		-		22,527		-
						-
Financial Assets - Non-Recurring
Impaired loans		64,894		-		55,007		9,887
Real estate owned		20,576		-		18,132		2,444

	Fair Value Measurement
	at December 31, 2011 Using
	(in thousands)
			Quoted Prices
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets - Recurring
US Government Agencies	$	2,001	$	-	$	2,001	$	-
MBS		20,803		2,849		17,954		-
Small Business Administration		7,359		7,359		-		-
Residential loans held for sale		16,168		-		16,168		-

Financial Assets - Non-Recurring
Impaired loans		64,655		-		51,868		12,787
Real estate owned		9,177		-		874		8,303

Level 3 fair value measurement, qualitative information

The following table presents qualitative information about level 3 fair value measurements for financial instruments measured at fair value at September 30, 2012:

					Range
	Fair Value		Valuation	Unobservable	(Weighted
	Estimate		Techniques	Input	Average)
	(In thousands)

Impaired Loans -Real Estate Secured	$	7,768	Appraisal (1) or Internal Valuation (2)	Appraisal Adjustments Liquidation Expenses (3)		10%-30	%
Impaired Loans - Non-Real Estate Secured	$	2,119	Appraisal (1) or Discounted Cash Flow	Appraisal Adjustments Liquidation Expenses (3)		10%-20	%
Real Estate Owned	$	2,444	Appraisal (1) or Internal Valuation (2)	Appraisal Adjustments Liquidation Expenses (3)		7%-30	%

(1) Fair Value is generally determined through independent appraisals of the underlying collateral, which generally
included various level 3 inputs which are not identifiable
(2) Internal valuations may be conducted to determine Fair Value for assets with nominal carrying balances
(3) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated
liquidation expenses

Changes in level 3 fair value

The following table presents the changes in the Level 3 fair value category for the nine months ended September 30, 2012.

	Impaired			Real Estate
	Loans			Owned			Total Assets
	(In thousands)

Balance at December 31, 2011	$	12,787		$	8,030		$	20,817
Total realized and unrealized gains (losses)
Included in earnings		-			(137	)		(137	)
Included in other comprehensive income		-			-			-
Net transfers in and/or out of Level 3		(2,900	)		(5,449	)		(8,349	)

Balance at September 30, 2012	$	9,887		$	2,444		$	12,331

	Impaired			Real Estate
	Loans			Owned			Total Assets
	(In thousands)

Balance at June 30, 2012	$	14,700		$	6,465		$	21,165
Total realized and unrealized gains (losses)
Included in earnings		-			(94	)		(94	)
Included in other comprehensive income		-			-			-
Net transfers in and/or out of Level 3		(4,813	)		(3,927	)		(8,740	)

Balance at September 30, 2012	$	9,887		$	2,444		$	12,331

Fair value - financial instruments summary

The following table presents the estimated fair value of our financial instruments at the indicated dates:

		September 30,				December 31,
		2012				2011
	Level in Fair
	Value	Carrying		Estimated		Carrying		Estimated
	Hierarchy	Value		Fair Value		Value		Fair Value

Financial assets
Cash	Level 1	$	26,064,313	$	26,064,313	$	55,557,541	$	55,557,541
Cash equivalents	Level 2		154,012		154,012		7,228,475		7,228,475
Investment securities available for sale	Level 1		6,713,476		6,713,476		10,207,805		10,207,805
Investment securities available for sale	Level 2		26,702,475		26,702,475		19,955,487		19,955,487
Federal Home Loan Bank stock	Level 2		2,166,900		2,166,900		2,647,000		2,647,000
Loans held for sale	Level 2		22,526,733		22,526,733		16,168,405		16,168,405
Loans	Level 2		298,176,828		290,131,297		353,186,646		353,349,981
Impaired loans	Level 2		55,007,435		55,007,435		51,867,625		51,867,625
Impaired loans	Level 3		9,886,725		9,886,725		12,787,473		12,787,473
Other real estate owned	Level 2		18,132,086		18,132,086		874,246		874,246
Other real estate owned	Level 3		2,443,878		2,443,878		8,302,921		8,302,921
Bank owned life insurance	Level 3		6,525,838		6,525,838		6,065,305		6,065,305
Accrued interest receivable	Level 2		1,800,872		1,800,872		2,046,524		2,046,524

Financial liabilities
Deposits	Level 2		435,142,137		436,603,601		485,521,052		487,915,609
FHLB borrowings	Level 2		28,000,000		28,484,102		37,750,000		37,963,672
Trust preferred securities	Level 2		8,764,000		8,764,000		8,764,000		8,764,000
Other borrowings	Level 2		5,351,393		5,351,393		5,778,661		5,778,661
Accrued interest payable	Level 2		816,390		816,390		592,283		592,283