pab bankshares, inc. - SNL Financial

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 26. FAIR VALUE (Continued)
Loan impairment is reported when full payment under the loan terms is not expected. Impaired loans are carried at the
present value of estimated future cash flows using the loan's existing rate, or the fair value of collateral if the loan is
collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is
deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to require an increase,
such increase is reported as a component of the provision for loan losses. Loan losses are charged against the allowance
when management believes the uncollectibility of a loan is confirmed. During 2009, certain impaired loans were partially
charged-off or re-evaluated for impairment resulting in a remaining balance for these loans, net of specific allowances, of
$80,723,630 as of December 31, 2009. When the fair value of the collateral is based on an observable market price or a
current appraised value, the Company records the loan impairment as nonrecurring Level 2. When an appraised value is
not available or management determines the fair value of the collateral is further impaired below the appraised value and
there is no observable market price, the Company records the loan impairment as nonrecurring Level 3.
Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets
are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised
values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is
based on an observable market price or a current appraised value, the Company records the foreclosed assets as
nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral
is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed
asset as nonrecurring Level 3.
The table below presents the Company’s assets and liabilities for which a nonrecurring change in fair value has been
recorded during the year ended December 31, 2009 and 2008, aggregated by the level in the fair value hierarchy within
which those measurements fall.
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Carrying value at December 31, 2009
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Total gains (losses)
for the Year Ended
December 31, 2009
Nonperforming loans $ - $ - $ 80,723,630 $ 80,723,630 $ -
Foreclosed assets - 20,313,388 71,803,735 92,117,123 (5,118,104)
Total fair value of assets on a
nonrecurring basis
$ - $ 20,313,388 $ 152,527,365 $172,840,753 $ (5,118,104)
Carrying value at December 31, 2008
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Impaired loans $ - $ - $ 56,444,926
Total
Total gains (losses)
for the Year Ended
December 31, 2008
$
56,444,926 $ -
Foreclosed assets - 6,251,652 19,017,249 25,268,901 (1,284,931)
Total fair value of assets on a
$
$
nonrecurring basis
$ - 6,251,652 $ 75,462,175 81,713,827 $ (1,284,931)
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