FAIR VALUE MEASUREMENTS

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.



	Balance at		Fair Value Measurements Using:
Dollars in thousands	September 30, 2018		Level 1		Level 2		Level 3
Securities available for sale
U.S. Government sponsored agencies	$	27,279	$	—	$	27,279	$	—
Mortgage backed securities:
Government sponsored agencies	72,942		—		72,942		—
Nongovernment sponsored entities	685		—		685		—
State and political subdivisions	18,774		—		18,774		—
Corporate debt securities	11,687		—		11,687		—
Asset-backed securities	21,792		—		21,792		—
Other equity securities	137		—		137		—
Tax-exempt state and political subdivisions	134,744		—		134,744		—
Total securities available for sale	$	288,040	$	—	$	288,040	$	—

Derivative financial assets
Interest rate swaps	$	1,063	$	—	$	1,063	$	—

Derivative financial liabilities
Interest rate swaps	$	284	$	—	$	284	$	—



	Balance at		Fair Value Measurements Using:
Dollars in thousands	December 31, 2017		Level 1		Level 2		Level 3
Securities available for sale
U.S. Government sponsored agencies	$	31,613	$	—	$	31,613	$	—
Mortgage backed securities:
Government sponsored agencies	121,321		—		121,321		—
Nongovernment sponsored entities	2,077		—		2,077		—
State and political subdivisions	17,677		—		17,677		—
Corporate debt securities	16,245		—		16,245		—
Other equity securities	137		—		137		—
Tax-exempt state and political subdivisions	139,653		—		139,653		—
Total securities available for sale	$	328,723	$	—	$	328,723	$	—

Derivative financial assets
Interest rate swaps	$	312	$	—	$	312	$	—

Derivative financial liabilities
Interest rate swaps	$	2,057	$	—	$	2,057	$	—

We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below.



	Balance at		Fair Value Measurements Using:
Dollars in thousands	September 30, 2018		Level 1		Level 2		Level 3
Residential mortgage loans held for sale	$	348	$	—	$	348	$	—

Collateral-dependent impaired loans
Commercial	$	57	$	—	$	8	$	49
Commercial real estate	437		$	—	437		—
Construction and development	297		$	—	297		—
Residential real estate	721		—		721		—
Total collateral-dependent impaired loans	$	1,512	$	—	$	1,463	$	49

Property held for sale
Commercial real estate	$	1,677	$	—	$	1,677	$	—
Construction and development	16,526		—		16,526		—
Residential real estate	403		—		403		—
Total property held for sale	$	18,606	$	—	$	18,606	$	—



	Balance at		Fair Value Measurements Using:
Dollars in thousands	December 31, 2017		Level 1		Level 2		Level 3
Residential mortgage loans held for sale	$	—	$	—	$	—	$	—

Collateral-dependent impaired loans
Commercial real estate	$	518	$	—	$	518	$	—
Construction and development	940		—		940		—
Residential real estate	203		—		203		—
Total collateral-dependent impaired loans	$	1,661	$	—	$	1,661	$	—

Property held for sale
Commercial real estate	$	1,493	$	—	$	1,493	$	—
Construction and development	16,177		—		16,177		—
Residential real estate	322		—		322		—
Total property held for sale	$	17,992	$	—	$	17,992	$	—

The carrying values and estimated fair values of our financial instruments are summarized below:



	September 30, 2018				Fair Value Measurements Using:
Dollars in thousands	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	53,834	$	53,834	$	—	$	53,834	$	—
Securities available for sale	288,040		288,040		—		288,040		—
Other investments	14,232		14,232		—		14,232		—
Loans held for sale, net	348		348		—		348		—
Loans, net	1,632,747		1,610,856		—		1,463		1,609,393
Accrued interest receivable	8,630		8,630		—		8,630		—
Derivative financial assets	1,063		1,063		—		1,063		—
	$	1,998,894	$	1,977,003	$	—	$	367,610	$	1,609,393
Financial liabilities
Deposits	$	1,651,064	$	1,648,845	$	—	$	1,648,845	$	—
Short-term borrowings	238,403		238,403		—		238,403		—
Long-term borrowings	739		834		—		834		—
Subordinated debentures owed to unconsolidated subsidiary trusts	19,589		19,589		—		19,589		—
Accrued interest payable	1,068		1,068		—		1,068		—
Derivative financial liabilities	284		284		—		284		—
	$	1,911,147	$	1,909,023	$	—	$	1,909,023	$	—



	December 31, 2017				Fair Value Measurements Using:
Dollars in thousands	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	52,631	$	52,631	$	—	$	52,631	$	—
Securities available for sale	328,723		328,723		—		328,723		—
Other investments	14,934		14,934		—		14,934		—
Loans held for sale, net	—		—		—		—		—
Loans, net	1,593,744		1,592,821		—		1,661		1,591,160
Accrued interest receivable	8,329		8,329		—		8,329		—
Derivative financial assets	312		312		—		312		—
	$	1,998,673	$	1,997,750	$	—	$	406,590	$	1,591,160
Financial liabilities
Deposits	$	1,600,601	$	1,620,033	$	—	$	1,620,033	$	—
Short-term borrowings	250,499		250,499		—		250,499		—
Long-term borrowings	45,751		46,530		—		46,530		—
Subordinated debentures owed to unconsolidated subsidiary trusts	19,589		19,589		—		19,589		—
Accrued interest payable	987		987		—		987		—
Derivative financial liabilities	2,057		2,057		—		2,057		—
	$	1,919,484	$	1,939,695	$	—	$	1,939,695	$	—