Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments [Abstract]

The following table presents the carrying values and estimated fair values of the Company’s financial instruments at September 30, 2012 and December 31, 2011:


	September 30, 2012
	Carrying				Fair Value Measurements Using
(Dollars in thousands)	Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	66,667	$	66,667	$	66,667	$	—	$	—
Investment securities		284,963		284,963		125,654		157,379		1,930
FHLB stock		4,150		4,150		—		4,150		—
Accrued interest receivable		4,928		4,928		—		4,928		—
Net loans		505,549		502,415		—		—		502,415
Loans held for sale		2,379		2,379		—		2,379		—
Liabilities
Demand, noninterest bearing deposits	$	152,495	$	152,495	$	—	$	152,495	$	—
Demand, interest-bearing deposits		288,829		288,829		—		288,829		—
Savings deposits		59,016		59,016		—		59,016		—
Time deposits		279,073		284,706		—		284,706		—
Accrued interest payable		510		510		—		510		—
Short-term borrowing		41,827		41,827		—		41,827		—
Long-term borrowing		16,000		16,714		—		16,714		—


	December 31, 2011
	Carrying				Fair Value Measurements Using
(Dollars in thousands)	Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	24,731	$	24,731	$	24,731	$	—	$	—
Investment securities		339,450		339,450		151,714		186,094		1,642
FHLB stock		3,456		3,456		—		3,456		—
Accrued interest receivable		5,308		5,308		—		5,308		—
Net loans		484,450		482,851		—		—		482,851
Loans held for sale		2,866		2,866		—		2,866		—
Liabilities
Demand, noninterest bearing deposits	$	135,732	$	135,732	$	—	$	135,732	$	—
Demand, interest-bearing deposits		270,119		270,119		—		270,119		—
Savings deposits		55,517		55,517		—		55,517		—
Time deposits		336,277		343,374		—		343,374		—
Accrued interest payable		519		519		—		519		—
Short-term borrowing		11,679		11,679		—		11,679		—
Long-term borrowing		25,500		26,296		—		26,296		—

Assets recorded at fair value on a recurring and nonrecurring basis

Assets recorded at fair value on a recurring basis


September 30, 2012	Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
*Investment Securities Available-for-Sale*
Obligations of states and political subdivisions	$	25,770	$	—	$	25,770	$	—
Mortgage-backed securities		104,725		—		104,725		—
SBA-backed securities		127,241		125,654		1,587		—
Corporate bonds		27,227		—		25,297		1,930

Total Securities		284,963		125,654		157,379		1,930
Interest rate lock commitments		136		—		—		136

Total assets at fair value	$	285,099	$	125,654	$	157,379	$	2,066


December 31, 2011	Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
*Investment Securities Available-for-Sale*
Government-sponsored enterprises and FFCB bonds	$	1,032	$	—	$	1,032	$	—
Obligations of states and political subdivisions		28,718		6,752		21,966		—
Mortgage-backed securities		132,292		—		132,292		—
SBA-backed securities		146,637		144,962		1,675		—
Corporate bonds		30,771		—		29,129		1,642

Total Securities		339,450		151,714		186,094		1,642
Interest rate lock commitments		76		—		—		76

Total assets at fair value	$	339,526	$	151,714	$	186,094	$	1,718

Assets recorded at fair value on a nonrecurring basis


September 30, 2012	Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
*Impaired Loans*
Real estate—construction and land development	$	5,230	$	—	$	—	$	5,230
Real estate—secured by residential properties		5,962		—		—		5,962
Real estate—secured by nonfarm nonresidential properties		8,926		—		—		8,926
Commercial and industrial		4		—		—		4

Total impaired loans		20,122		—		—		20,122
*Real estate and repossessions acquired in settlement of loans*
Total real estate and repossessions acquired in settlement of loans		7,118		—		—		7,118

Total assets at fair value	$	27,240	$	—	$	—	$	27,240


December 31, 2011	Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
*Impaired Loans*
Real estate—construction and land development	$	9,169	$	—	$	—	$	9,169
Real estate—secured by residential properties		3,893		—		—		3,893
Real estate—secured by nonfarm nonresidential properties		8,805		—		—		8,805
Commercial and industrial		196		—		—		196

Total impaired loans		22,063		—		—		22,063
*Real estate and repossessions acquired in settlement of loans*
Real estate and repossessions acquired in settlement of loans		6,573		—		—		6,573

Total assets at fair value	$	28,636	$	—	$	—	$	28,636

Reconciliation for all assets and liabilities measured at fair value on a recurring basis

The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and nine month periods of 2012 and 2011.


	Corporate Bonds			Interest Rate Lock Commitments			Total
	(Dollars in thousands)
Balance, December 31, 2011	$	1,642		$	76		$	1,718
Total gains or losses (realized/unrealized):
Included in earnings		—			55			55
Included in other comprehensive income		196			—			196
Purchases, issuances, and settlements		—			—			—
Transfers in to/out of Level 3		—			—			—

Balance, June 30, 2012	$	1,838		$	131		$	1,969

Total gains or losses (realized/unrealized):
Included in earnings		—			5			5
Included in other comprehensive income		92			—			92
Purchases, issuances, and settlements		—			—			—
Transfers in to/out of Level 3		—			—			—

Balance, September 30, 2012	$	1,930		$	136		$	2,066


	Corporate Bonds			Interest Rate Lock Commitments			Total
	(Dollars in thousands)
Balance, December 31, 2010	$	1,716		$	101		$	1,817
Total gains or losses (realized/unrealized):
Included in earnings		—			(31	)		(31	)
Included in other comprehensive income		(225	)		—			(225	)
Purchases, issuances, and settlements		—			—			—
Transfers in to/out of Level 3		—			—			—

Balance, June 30, 2011	$	1,491		$	70		$	1,561

Total gains or losses (realized/unrealized):
Included in earnings		—			26			26
Included in other comprehensive income		97			—			97
Purchases, issuances, and settlements		1,500			—			1,500
Transfers in to/out of Level 3		—			—			—

Balance, September 30, 2011	$	3,088		$	96		$	3,184

Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of September 30, 2012, the significant unobservable inputs used in the fair value measurements were as follows:

Level 3 Assets with Significant Unobservable Inputs

Fair
Value
At 9/30/2012

Valuation
Technique

Significant
Unobservable
Inputs

Significant
Unobservable
Input Value

Corporate Bonds

1,030

Fundamental Analysis
Pricing Model

Spread

+500 BBB
Bank Paper

Yield

8.50

Corporate Bonds

900

Fundamental Analysis
Pricing Model

Spread

+600 LIBOR
Index

Yield

6.33

Interest Rate Lock Commitments

136

Pricing Model

Weighted average Closing Ratio

Impaired Loans

20,122

Discounted

appraisals ⁽¹⁾

Appraisal adjustments⁽²⁾

6% to 93

OREO

7,118

Discounted

appraisals ⁽¹⁾

Appraisal adjustments⁽²⁾

5% to 70

(1)	Fair value is generally based on appraisals of the underlying collateral but is also based on discounted cash flows for some loans.

(2)	Appraisals may be adjusted by management for customized discounting criteria, estimated sales costs, and proprietary qualitative adjustments.

- Definition

Tabular disclosure related to assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a recurring and/or nonrecurring basis in periods after initial recognition. Disclosures include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3) as well as transfers between levels 1 and 2.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 6

-Footnote 4

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

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Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 33

-Subparagraph a, b

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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ECB BANCORP INC 10-Q