XML 23 R13.htm IDEA: XBRL DOCUMENT v3.24.2.u1
FAIR VALUES OF FINANCIAL INSTRUMENTS
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUES OF FINANCIAL INSTRUMENTS
FAIR VALUES OF FINANCIAL INSTRUMENTS

The Corporation used fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The accounting guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  ASC 820 applies only when other guidance requires or permits assets or liabilities to be measured at fair value; it does not expand the use of fair value in any new circumstances.

As defined in ASC 820, fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants. It represents an exit price at the measurement date. Market participants are buyers and sellers, who are independent, knowledgeable, and willing and able to transact in the principal (or most advantageous) market for the asset or liability being measured. Current market conditions, including imbalances between supply and demand, are considered in determining fair value. The Corporation values its assets and liabilities in the principal market where it sells the particular asset or transfers the liability with the greatest volume and level of activity. In the absence of a principal market, the valuation is based on the most advantageous market for the asset or liability (i.e., the market where the asset could be sold or the liability transferred at a price that maximizes the amount to be received for the asset or minimizes the amount to be paid to transfer the liability).

Valuation inputs refer to the assumptions market participants would use in pricing a given asset or liability. Inputs can be observable or unobservable. Observable inputs are those assumptions which market participants would use in pricing the particular asset or liability. These inputs are based on market data and are obtained from a source independent of the Corporation. Unobservable inputs are assumptions based on the Corporation’s own information or estimate of assumptions used by market participants in pricing the asset or liability. Unobservable inputs are based on the best and most current information available on the measurement date. All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy which gives the highest ranking to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest ranking to unobservable inputs for which there is little or no market activity (Level 3). Fair values for assets or liabilities classified as Level 2 are based on one or a combination of the following factors: (i) quoted prices for similar assets; (ii) observable inputs for the asset or liability, such as interest rates or yield curves; or (iii) inputs derived principally from or corroborated by observable market data. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Corporation considers an input to be significant if it drives 10 percent or more of the total fair value of a particular asset or liability.
RECURRING MEASUREMENTS

Assets and liabilities are considered to be measured at fair value on a recurring basis if fair value is measured regularly (i.e., daily, weekly, monthly or quarterly). Recurring valuation occurs at a minimum on the measurement date. Assets and liabilities are considered to be measured at fair value on a nonrecurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the balance sheet. Generally, nonrecurring valuation is the result of the application of other accounting pronouncements which require assets or liabilities to be assessed for impairment and recorded at the lower of cost or fair value. The fair value of assets or liabilities transferred in or out of Level 3 is measured on the transfer date, with any additional changes in fair value subsequent to the transfer considered to be realized or unrealized gains or losses.

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the
accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment Securities

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury securities. Where significant observable inputs, other than Level 1 quoted prices, are available, securities are classified within Level 2 of the valuation hierarchy. Level 2 securities include U.S. Government-sponsored agency and mortgage-backed securities, state and municipal securities and corporate obligations securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include state and municipal securities, U.S. Government-sponsored mortgage-backed securities and corporate obligations securities. Level 3 fair value for securities was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

Third party vendors compile prices from various sources and may apply such techniques as matrix pricing to determine the value of identical or similar investment securities (Level 2). Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. Any investment security not valued based upon the methods above are considered Level 3.

Derivative Financial Agreements

See information regarding the Corporation’s derivative financial agreements in NOTE 4. DERIVATIVE FINANCIAL INSTRUMENTS of these Notes to Consolidated Condensed Financial Statements.

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2024, and December 31, 2023.

  Fair Value Measurements Using:
June 30, 2024Fair ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Available for sale securities:    
U.S. Government-sponsored agency securities$91,277 $— $91,277 $— 
State and municipal1,024,907 — 1,021,718 3,189 
U.S. Government-sponsored mortgage-backed securities490,654 — 490,650 4 
Corporate obligations12,055 — 12,024 31 
Derivative assets87,777 — 87,777 — 
Derivative liabilities87,236 — 87,236 — 


  Fair Value Measurements Using:
December 31, 2023Fair ValueQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Available for sale securities:    
U.S. Government-sponsored agency securities$95,307 $— $95,307 $— 
State and municipal1,065,171 — 1,061,896 3,275 
U.S. Government-sponsored mortgage-backed securities454,815 — 454,811 4 
Corporate obligations11,819 — 11,788 31 
Derivative assets79,379 — 79,379 — 
Derivative liabilities79,008 — 79,008 — 
Level 3 Reconciliation

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying
balance sheets using significant unobservable Level 3 inputs for the three and six months ended June 30, 2024 and 2023.
 Available for Sale Securities
Three Months EndedSix Months Ended
 June 30, 2024June 30, 2023June 30, 2024June 30, 2023
Balance at beginning of the period$3,247 $3,462 $3,310 $3,439 
Included in other comprehensive income(21)(111)11 3 
Principal payments(2)(3)(97)(94)
Ending balance $3,224 $3,348 $3,224 $3,348 


There were no gains or losses included in earnings that were attributable to the changes in unrealized gains or losses related to assets or
liabilities held at June 30, 2024 or December 31, 2023.

Transfers Between Levels

There were no transfers in or out of Level 3 during the three and six months ended June 30, 2024 and 2023.
Nonrecurring Measurements

Following is a description of valuation methodologies used for instruments measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy at June 30, 2024, and December 31, 2023.
  Fair Value Measurements Using
June 30, 2024Fair ValueQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant Unobservable
Inputs
(Level 3)
Collateral dependent loans$30,988 $— $— $30,988 


  Fair Value Measurements Using
December 31, 2023Fair ValueQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable
 Inputs
(Level 2)		Significant Unobservable
Inputs
(Level 3)
Collateral dependent loans$55,020 $— $— $55,020 


Collateral Dependent Loans

Determining fair value for collateral dependent loans requires obtaining a current independent appraisal of the collateral and applying a discount factor, which includes selling costs if applicable, to the value. The fair value of real estate is generally based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of, asset appraisals, accounts receivable aging reports, inventory listings and or customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.
Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at June 30, 2024 and December 31, 2023.

June 30, 2024Fair ValueValuation TechniqueUnobservable InputsRange (Weighted-Average)
State and municipal securities$3,189 Discounted cash flowMaturity/Call date
1 month to 6 years
   US Muni BQ curve
BBB
   Discount rate
3.7% - 4.6%
Weighted-average coupon
3.3%
Corporate obligations and U.S. Government-sponsored mortgage-backed securities$35 Discounted cash flowRisk free rate
3 month CME Term SOFR plus 26bps
   plus premium for illiquidity (basis points)
plus 200bps
Weighted-average coupon
0%
Collateral dependent loans$30,988 Collateral based measurementsDiscount to reflect current market conditions and ultimate collectability
0% - 25%
  Weighted-average discount by loan balance
21.8%

December 31, 2023Fair ValueValuation TechniqueUnobservable InputsRange (Weighted-Average)
State and municipal securities$3,275 Discounted cash flowMaturity/Call date
1 month to 15 years
   US Muni BQ curve
A- to BBB
   Discount rate
3.6% - 4.7%
Weighted-average coupon
3.3%
Corporate obligations and U.S. Government-sponsored mortgage-backed securities$35 Discounted cash flowRisk free rate
3 month CME Term
SOFR plus 26bps
   plus premium for illiquidity (basis points)
plus 200bps
Weighted-average coupon
0%
Collateral dependent loans$55,020 Collateral based measurementsDiscount to reflect current market conditions and ultimate collectability
0% - 10%
Weighted-average discount by loan balance
4.1%


The following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement and how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

State and Municipal Securities, Corporate Obligations and U.S. Government-sponsored Mortgage-Backed Securities

The significant unobservable inputs used in the fair value measurement of the Corporation's state and municipal securities, corporate obligations and U.S. Government-sponsored mortgage-backed securities are premiums for unrated securities and marketability discounts. Significant increases or decreases in either of those inputs in isolation would result in a significantly lower or higher fair value measurement. Generally, changes in either of those inputs will not affect the other input.
Fair Value of Financial Instruments

The following tables present estimated fair values of the Corporation’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2024 and December 31, 2023.

June 30, 2024
 Quoted Prices in Active Markets
for Identical
Assets		Significant
Other
Observable
Inputs		Significant Unobservable
Inputs
 Carrying Amount(Level 1)(Level 2)(Level 3)Total Fair Value
Assets:    
Cash and due from banks$105,372 $105,372 $— $— $105,372 
Interest-bearing deposits168,528 168,528 — — 168,528 
Investment securities available for sale1,618,893 — 1,615,669 3,224 1,618,893 
Investment securities held to maturity, net2,134,195 — 1,771,567 7,649 1,779,216 
Loans held for sale32,292 — 32,292 — 32,292 
Loans, net12,450,113 — — 12,121,987 12,121,987 
Federal Home Loan Bank stock41,738 — 41,738 — 41,738 
Derivative assets87,777 — 87,777 — 87,777 
Interest receivable97,546 — 97,546 — 97,546 
Liabilities:    
Deposits$14,569,070 $12,096,840 $2,460,291 $— 14,557,131 
Borrowings:  
Federal funds purchased147,229 — 147,229 — 147,229 
Securities sold under repurchase agreements100,451 — 100,451 — 100,451 
Federal Home Loan Bank advances832,703 — 822,958 — 822,958 
Subordinated debentures and other borrowings93,589 — 84,091 — 84,091 
Derivative liabilities87,236 — 87,236 — 87,236 
Interest payable18,554 — 18,554 — 18,554 

December 31, 2023
 Quoted Prices in Active Markets
for Identical
Assets		Significant
Other
Observable
Inputs		Significant Unobservable
Inputs
 Carrying Amount(Level 1)(Level 2)(Level 3)Total Fair Value
Assets:    
Cash and due from banks$112,649 $112,649 $— $— $112,649 
Interest-bearing deposits436,080 436,080 — — 436,080 
Investment securities available for sale1,627,112 — 1,623,802 3,310 1,627,112 
Investment securities held to maturity, net2,184,252 — 1,859,974 10,400 1,870,374 
Loans held for sale18,934 — 18,934 — 18,934 
Loans, net12,281,093 — — 11,958,301 11,958,301 
Federal Home Loan Bank stock41,769 — 41,769 — 41,769 
Derivative assets79,379 — 79,379 — 79,379 
Interest receivable97,664 — 97,664 — 97,664 
Liabilities:
Deposits$14,821,453 $12,482,295 $2,329,662 $— 14,811,957 
Borrowings:
Securities sold under repurchase agreements157,280 — 157,265 — 157,265 
Federal Home Loan Bank advances712,852 — 707,377 — 707,377 
Subordinated debentures and other borrowings158,644 — 149,995 — 149,995 
Derivative liabilities79,008 — 79,008 — 79,008 
Interest payable18,912 — 18,912 — 18,912