Fair Value Measurements

12 Months Ended

Dec. 31, 2019

The following tables present our assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at December 31, 2019 and 2018. There was one transfer between Level 1 and Level 2 for items measured at fair value on a recurring basis during the periods presented. The transfer is related to marketable equity securities with quoted prices in active markets that moved from level 2 to level 1.



	December 31, 2019
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Debt securities available-for-sale:
U.S. Treasury securities	$	—	$	10,040	$	—	$	10,040
Obligations of U.S. government corporations and agencies	—		157,697		—		157,697
Collateralized mortgage obligations of U.S. government corporations and agencies	—		189,348		—		189,348
Residential mortgage-backed securities of U.S. government corporations and agencies	—		22,418		—		22,418
Commercial mortgage-backed securities of U.S. government corporations and agencies	—		275,870		—		275,870
Corporate Bonds	—		7,627		—		7,627
Obligations of states and political subdivisions	—		116,133		—		116,133
Total Debt Securities Available-for-Sale	—		779,133		—		779,133
Marketable equity securities	5,078		72		—		5,150
Total Securities	5,078		779,205		—		784,283
Securities held in a Rabbi Trust	5,987		—		—		5,987
Derivative financial assets:
Interest rate swaps	—		25,647		—		25,647
Interest rate lock commitments	—		321		—		321
Forward sale contracts	—		1		—		1
Total Assets	$	11,065	$	805,174	$	—	$	816,239
LIABILITIES
Derivative financial liabilities:
Interest rate swaps	$	—	$	25,615	$	—	$	25,615
Total Liabilities	$	—	$	25,615	$	—	$	25,615



	December 31, 2018
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Debt securities available-for-sale:
U.S. Treasury securities	$	—	$	9,736	$	—	$	9,736
Obligations of U.S. government corporations and agencies	—		128,261		—		128,261
Collateralized mortgage obligations of U.S. government corporations and agencies	—		148,659		—		148,659
Residential mortgage-backed securities of U.S. government corporations and agencies	—		24,350		—		24,350
Commercial mortgage-backed securities of U.S. government corporations and agencies	—		246,784		—		246,784
Obligations of states and political subdivisions	—		122,266		—		122,266
Total Debt Securities Available-for-Sale	—		680,056		—		680,056
Marketable equity securities	—		4,816		—		4,816
Total Securities	—		684,872		—		684,872
Securities held in a Rabbi Trust	4,725		—		—		4,725
Derivative financial assets:
Interest rate swaps	—		5,504		—		5,504
Interest rate lock commitments	—		251		—		251
Forward sale contracts	—		55		—		55
Total Assets	$	4,725	$	690,682	$	—	$	695,407
LIABILITIES
Derivative financial liabilities:
Interest rate swaps	$	—	$	5,340	$	—	$	5,340
Total Liabilities	$	—	$	5,340	$	—	$	5,340

We classify financial instruments as Level 3 when valuation models are used because significant inputs are not observable in the market.

We may be required to measure certain assets and liabilities at fair value on a nonrecurring basis. Nonrecurring assets are recorded at the lower of cost or fair value in our financial statements. There were no liabilities measured at fair value on a nonrecurring basis at either December 31, 2019 or December 31, 2018.

The following table presents our assets that are measured at fair value on a nonrecurring basis by the fair value hierarchy level as of the dates presented:



	December 31, 2019								December 31, 2018
(dollars in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
ASSETS⁽¹⁾
Loans held for sale	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Impaired loans	—		—		38,697		38,697		—		—		21,441		21,441
Other real estate owned	—		—		3,231		3,231		—		—		2,826		2,826
Mortgage servicing rights	—		—		1,134		1,134		—		—		1,197		1,197
Total Assets	$	—	$	—	$	43,062	$	43,062	$	—	$	—	$	25,464	$	25,464

⁽¹⁾This table presents only the nonrecurring items that are recorded at fair value in our financial statements.

The carrying values and fair values of our financial instruments at December 31, 2019 and 2018 are presented in the following tables:



			Fair Value Measurements at December 31, 2019
(dollars in thousands)	Carrying Value⁽¹⁾		Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	197,823	$	197,823	$	197,823	$	—	$	—
Securities	784,283		784,283		5,078		779,205		—
Loans held for sale	5,256		5,256		—		—		5,256
Portfolio loans, net	7,074,928		6,940,875		—		—		6,940,875
Bank owned life insurance	80,473		80,473		—		80,473		—
FHLB and other restricted stock	22,977		22,977		—		—		22,977
Securities held in a Rabbi Trust	5,987		5,987		5,987		—		—
Mortgage servicing rights	4,662		4,650		—		—		4,650
Interest rate swaps	25,647		25,647		—		25,647		—
Interest rate lock commitments	321		321		—		321		—
Forward sale contracts - mortgage loans	1		1		—		1		—
LIABILITIES
Deposits	$	7,036,576	$	7,034,595	$	5,441,143	$	1,593,452	$	—
Securities sold under repurchase agreements	19,888		19,888		19,888		—		—
Short-term borrowings	281,319		281,319		281,319		—		—
Long-term borrowings	50,868		51,339		4,678		46,661		—
Junior subordinated debt securities	64,277		64,277		64,277		—		—
Interest rate swaps	25,615		25,615		—		25,615		—

⁽¹⁾As reported in the Consolidated Balance Sheets



			Fair Value Measurements at December 31, 2018
(dollars in thousands)	Carrying Value⁽¹⁾		Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	155,489	$	155,489	$	155,489	$	—	$	—
Securities	684,872		684,872		—		684,872		—
Loans held for sale	2,371		2,469		—		—		2,469
Portfolio loans, net	5,885,652		5,728,843		—		—		5,728,843
Bank owned life insurance	73,900		73,900		—		73,900		—
FHLB and other restricted stock	29,435		29,435		—		—		29,435
Securities held in a Rabbi Trust	4,725		4,725		4,725		—		—
Mortgage servicing rights	4,464		5,181		—		—		5,181
Interest rate swaps	5,504		5,504		—		5,504		—
Interest rate lock commitments	251		251		—		251		—
Forward sale contracts	55		55		—		55		—
LIABILITIES
Deposits	$	5,673,922	$	5,662,193	$	4,261,884	$	1,400,309	$	—
Securities sold under repurchase agreements	18,383		18,383		18,383		—		—
Short-term borrowings	470,000		470,000		470,000		—		—
Long-term borrowings	70,314		70,578		38,610		31,968
Junior subordinated debt securities	45,619		45,619		45,619		—		—
Interest rate swaps	5,340		5,340		—		5,340		—

⁽¹⁾As reported in the Consolidated Balance Sheets

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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