Fair Value Measurements

9 Months Ended

Sep. 30, 2020

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, 2020		Level 1		Level 2		Level 3
Securities available for sale
U.S. Government sponsored agencies	$	36,766	$	—	$	36,766	$	—
Mortgage backed securities:
Government sponsored agencies	62,351		—		62,351		—
Nongovernment sponsored entities	15,190		—		15,190		—
State and political subdivisions	52,300		—		52,300		—
Corporate debt securities	25,956		—		25,956		—
Asset-backed securities	46,035		—		46,035		—

Tax-exempt state and political subdivisions	59,391		—		59,391		—
Total securities available for sale	$	297,989	$	—	$	297,989	$	—

Derivative financial assets
Interest rate cap	$	4,611	$	—	$	4,611	$	—

Derivative financial liabilities
Interest rate swaps	$	3,067	$	—	$	3,067	$	—


	Balance at		Fair Value Measurements Using:
Dollars in thousands	December 31, 2019		Level 1		Level 2		Level 3
Securities available for sale
U.S. Government sponsored agencies	$	20,864	$	—	$	20,864	$	—
Mortgage backed securities:
Government sponsored agencies	70,975		—		70,975		—
Nongovernment sponsored entities	10,229		—		10,229		—
State and political subdivisions	49,973		—		49,973		—
Corporate debt securities	18,200		—		18,200		—
Asset-backed securities	33,014		—		33,014		—

Tax-exempt state and political subdivisions	73,100		—		73,100		—
Total securities available for sale	$	276,355	$	—	$	276,355	$	—




Derivative financial liabilities
Interest rate swaps	$	988	$	—	$	988	$	—

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, 2020		Level 1		Level 2		Level 3
Residential mortgage loans held for sale	$	2,538	$	—	$	2,538	$	—

Collateral-dependent loans with an ACLL
Commercial	$	8	$	—	$	8	$	—
Commercial real estate	7,954		—		7,954		—
Construction and development	355		—		355		—
Residential real estate	90		—		90		—

Total collateral-dependent loans with an ACLL	$	8,407	$	—	$	8,407	$	—

Property held for sale

Commercial real estate	$	1,125	$	—	$	1,125	$	—
Construction and development	14,049		—		13,428		621
Residential real estate	500		—		500		—
Total property held for sale	$	15,674	$	—	$	15,053	$	621

Collateral dependent loans with an ACLL were categorized as impaired loans with specific reserves prior to the adoption of ASC 326.


	Balance at		Fair Value Measurements Using:
Dollars in thousands	December 31, 2019		Level 1		Level 2		Level 3
Residential mortgage loans held for sale	$	1,319	$	—	$	1,319	$	—

Collateral-dependent impaired loans
Commercial	$	4,831	$	—	$	4,831	$	—
Commercial real estate	1,863		—		1,863		—
Construction and development	425		—		425		—
Residential real estate	692		—		566		126

Total collateral-dependent impaired loans	$	7,811	$	—	$	7,685	$	126

Property held for sale

Commercial real estate	$	1,304	$	—	$	1,304	$	—
Construction and development	12,182		—		12,182		—
Residential real estate	705		—		705		—
Total property held for sale	$	14,191	$	—	$	14,191	$	—

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


	September 30, 2020				Fair Value Measurements Using:
Dollars in thousands	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	108,986	$	108,986	$	—	$	108,986	$	—
Securities available for sale	297,989		297,989		—		297,989		—
Securities held to maturity	91,600		92,786		—		92,786		—
Other investments	10,766		10,766		—		10,766		—
Loans held for sale, net	2,538		2,538		—		2,538		—
Loans, net	2,222,450		2,228,148		—		8,407		2,219,741
Accrued interest receivable	10,978		10,978		—		10,978		—
Derivative financial assets	4,611		4,611		—		4,611		—
Cash surrender value of life insurance policies and annuities	57,029		57,029		—		57,029		—
	$	2,806,947	$	2,813,831	$	—	$	594,090	$	2,219,741
Financial liabilities
Deposits	$	2,451,891	$	2,456,247	$	—	$	2,456,247	$	—
Short-term borrowings	140,145		140,145		—		140,145		—
Long-term borrowings	703		882		—		882		—
Subordinated debentures	29,336		29,336		—		29,336		—
Subordinated debentures owed to unconsolidated subsidiary trusts	19,589		19,589		—		19,589		—
Accrued interest payable	898		898		—		898		—
Derivative financial liabilities	3,067		3,067		—		3,067		—
	$	2,645,629	$	2,650,164	$	—	$	2,650,164	$	—


	December 31, 2019				Fair Value Measurements Using:
Dollars in thousands	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	61,888	$	61,888	$	—	$	61,888	$	—
Securities available for sale	276,355		276,355		—		276,355		—
Other investments	12,972		12,972		—		12,972		—
Loans held for sale, net	1,319		1,319		—		1,319		—
Loans, net	1,900,425		1,901,020		—		7,685		1,893,335
Accrued interest receivable	8,439		8,439		—		8,439		—
Cash surrender value of life insurance policies	43,603		43,603		—		43,603		—

	$	2,305,001	$	2,305,596	$	—	$	412,261	$	1,893,335
Financial liabilities
Deposits	$	1,913,237	$	1,918,610	$	—	$	1,918,610	$	—
Short-term borrowings	199,345		199,345		—		199,345		—
Long-term borrowings	717		854		—		854		—

Subordinated debentures owed to unconsolidated subsidiary trusts	19,589		19,589		—		19,589		—
Accrued interest payable	1,234		1,234		—		1,234		—
Derivative financial liabilities	988		988		—		988		—
	$	2,135,110	$	2,140,620	$	—	$	2,140,620	$	—

- 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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