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Fair Value Measurements
 12 Months Ended
Dec. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements FAIR VALUE MEASUREMENTS
In accordance with ASC 820 Fair Value Measurements, fair value is based upon the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  A fair value hierarchy is utilized to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The three levels of inputs used to measure fair value are as follows:

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
        
In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and our creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Our valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes our valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value is set forth below. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with our monthly and/or quarterly valuation process.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis include the following:

Debt Securities Available for Sale:  Debt Securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds.  Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Certain trust preferred securities classified as corporate debt securities are Level 3 due to limited market trades of these classes of securities.

Equity Investments: Equity investments are recorded at fair value on a recurring basis, with changes in fair value reported in net income. In December 2021, we invested as a limited partner in a hedge fund that primarily trades S&P 500 index options. The average duration of the option positions employed by the fund ranges 14 to 17 business days. Investors may withdraw funds at the end of any month with 30 calendar days prior written notice. As permitted by ASC 820, as a practical expedient, we estimate the fair value of this investment using the net asset value ("NAV") per share of the investment as of the reporting entity's measurement date. This investment is reflected on the accompanying consolidated balance sheet as Equity Investments at a fair value of $20.2 million.

Derivative Financial Instruments:  Derivative financial instruments are recorded at fair value on a recurring basis. Fair value measurement is based on pricing models run by a third-party, utilizing observable market-based inputs.  All future floating cash flows are projected and both floating and fixed cash flows are discounted to the valuation date.  As a result, we classify interest rate swaps as Level 2.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis.
 Balance atFair Value Measurements Using:
Dollars in thousandsDecember 31, 2021Level 1Level 2Level 3
Debt securities available for sale    
U.S. Government sponsored agencies$36,629 $— $36,629 $— 
Mortgage backed securities:    
Government sponsored agencies62,211 — 62,211 — 
Nongovernment sponsored entities26,586 — 26,586 — 
State and political subdivisions137,786 — 137,786 — 
Corporate debt securities30,278 — 30,278 — 
Asset-backed securities24,883 — 24,883 — 
Tax-exempt state and political subdivisions82,730 — 82,730 — 
Total debt securities available for sale$401,103 $— $401,103 $— 
Derivative financial assets    
Interest rate caps$11,187 $— $11,187 $— 
Derivative financial liabilities
Interest rate swaps$1,124 $— $1,124 $— 

 Balance atFair Value Measurements Using:
Dollars in thousandsDecember 31, 2020Level 1Level 2Level 3
Debt securities available for sale    
U.S. Government sponsored agencies$35,157 $— $35,157 $— 
Mortgage backed securities:    
Government sponsored agencies59,046 — 59,046 — 
Nongovernment sponsored entities16,687 — 16,687 — 
State and political subdivisions50,905 — 50,905 — 
Corporate debt securities26,427 — 26,427 — 
Asset-backed securities46,126 — 46,126 — 
Tax-exempt state and political subdivisions51,779 — 51,779 — 
Total debt securities available for sale$286,127 $— $286,127 $— 
Derivative financial assets    
Interest rate caps$6,653 $— $6,653 $— 
Derivative financial liabilities
Interest rate swaps$2,747 $— $2,747 $— 

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

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.  

Loans Held for Sale:  Loans held for sale are carried at the lower of cost or fair value.  The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics.  As such, we classify loans subject to nonrecurring fair value adjustments as Level 2.

Collateral Dependent Loans with an ACLL: In accordance with ASC 326 effective January 1, 2020, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the
collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice.

Prior to adoption of ASC 326, we did not record loans at fair value on a recurring basis. However, from time to time, a loan was considered impaired and an allowance for credit loss was established.  Loans for which it is probable that payment of interest and principal will not be made in accordance with the original contractual terms of the loan agreement were considered impaired.  Once a loan was identified as individually impaired, management measured impairment using one of several methods, including collateral value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the discounted cash flows or collateral value exceeded the recorded investments in such loans. These loans were carried at recorded loan investment and therefore are not included in the following tables of loans measured at fair value. Impaired loans internally graded as substandard or doubtful were evaluated using the fair value of collateral method.  All other impaired loans were measured for impairment using the discounted cash flows method. Impaired loans where an allowance is established based on the fair value of collateral were included in the fair value hierarchy. When the fair value of the collateral was based on an observable market price or a current appraised value, we recorded the impaired loan as nonrecurring Level 2. When a current appraised value was not available and there was no observable market price, we recorded the impaired loan as nonrecurring Level 3.  

When impaired loans were deemed required to be included in the fair value hierarchy, management immediately began the process of evaluating the estimated fair value of the underlying collateral to determine if a related specific allowance for credit losses or charge-off is necessary.  Current appraisals were ordered once a loan was deemed impaired if the existing appraisal was more than twelve months old, or more frequently if there was known deterioration in value. For recently identified impaired loans, a current appraisal may not have been available at the financial statement date. Until the current appraisal was obtained, the original appraised value was discounted, as appropriate, to compensate for the estimated depreciation in the value of the loan’s underlying collateral since the date of the original appraisal.  Such discounts were generally estimated based upon management’s knowledge of sales of similar collateral within the applicable market area and its knowledge of other real estate market-related data as well as general economic trends.  When a new appraisal was received (which was generally within 3 months of a loan being identified as impaired), management then re-evaluated the fair value of the collateral and adjusted any specific allocated allowance for credit losses on loans, as appropriate.  In addition, management also assigned a discount of 7–10% for the estimated costs to sell the collateral.

Property Held for Sale:  Property held for sale consists of real estate acquired in foreclosure or other settlement of loans. Foreclosed assets are initially recorded at fair value, less estimated selling costs, when acquired establishing a new cost basis. Such assets are carried on the balance sheet at the lower of the investment in the real estate or its fair value less estimated selling costs.  The fair value of foreclosed properties is determined on a nonrecurring basis generally utilizing current appraisals performed by an independent, licensed appraiser applying an income or market value approach using observable market data (Level 2).  Updated appraisals of foreclosed properties are generally obtained if the existing appraisal is more than 18 months old or more frequently if there is a known deterioration in value.  However, if a current appraisal is not available, the original appraised value is discounted, as appropriate, to compensate for the estimated depreciation in the value of the real estate since the date of its original appraisal.  Such discounts are generally estimated based upon management’s knowledge of sales of similar property within the applicable market area and its knowledge of other real estate market-related data as well as general economic trends (Level 3).  Upon foreclosure, any fair value adjustment is charged against the allowance for credit losses on loans.  Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest expense in the consolidated statements of income.

Assets measured at fair value on a nonrecurring basis are included in the tables below.
 Balance atFair Value Measurements Using:
Dollars in thousandsDecember 31, 2021Level 1Level 2Level 3
Residential mortgage loans held for sale$227 $— $227 $— 
Collateral-dependent loans with an ACLL    
Commercial real estate$2,417 $— $2,417 $— 
Construction and development693 — 693 — 
Residential real estate528 — 528 — 
Total collateral-dependent loans with an ACLL$3,638 $— $3,638 $— 
Property held for sale    
Commercial real estate$1,170 $— $1,170 $— 
Construction and development7,893 — 7,893 — 
Residential real estate27 — 27 — 
Total property held for sale$9,090 $— $9,090 $— 

 Balance atFair Value Measurements Using:
Dollars in thousandsDecember 31, 2020Level 1Level 2Level 3
Residential mortgage loans held for sale$1,998 $— $1,998 $— 
Collateral-dependent impaired loans
Commercial$8 — $8 $— 
Commercial real estate9,914 — 9,914 — 
Construction and development1,576 — 1,576 — 
Residential real estate597 — 597 — 
Total collateral-dependent impaired loans$12,095 $— $12,095 $— 
Property held for sale    
Commercial real estate$1,557 $— $1,557 $— 
Construction and development11,595 — 10,974 621 
Residential real estate476 — 476 — 
Total property held for sale$13,628 $— $13,007 $621 

ASC Topic 825, Financial Instruments, requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The estimated fair value approximates carrying value for cash and cash equivalents, accrued interest and the cash surrender value of life insurance policies and annuities. The methodologies for other financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis are discussed below:

Loans: The estimated fair value approximates carrying value for variable-rate loans that reprice frequently and with no significant change in credit risk. The fair value of fixed-rate loans and variable-rate loans which reprice on an infrequent basis is estimated by discounting future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality. An overall valuation adjustment is made for specific credit risks as well as general portfolio credit risk.

Other Investments: The carrying value of other investments, consisting principally of Federal Home Loan Bank stock, is a reasonable estimate of fair value of this stock. This stock is non-transferable and can only be redeemed at its par value by FHLB.

Deposits: The estimated fair value approximates carrying value for demand deposits. The fair value of fixed-rate deposit liabilities with defined maturities is estimated by discounting future cash flows using the interest rates currently offered for deposits of similar remaining maturities. The estimated fair value of deposits does not take into account the value of our long-term relationships with depositors, commonly known as core deposit intangibles, which are separate intangible assets, and not considered financial instruments. Nonetheless, we would likely realize a core deposit premium if our deposit portfolio were sold in the principal market for such deposits.
Borrowed Funds: The estimated fair value approximates carrying value for short-term borrowings. The fair value of long-term fixed-rate borrowings is estimated using quoted market prices, if available, or by discounting future cash flows using current interest rates for similar financial instruments.

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of our financial instruments as of December 31, 2021 and December 31, 2020.
 At December 31,
2021Fair Value Measurements Using:
Dollars in thousandsCarrying
Value		Estimated
Fair
Value		Level 1Level 2Level 3
Financial assets  
Cash and cash equivalents$78,458 $78,458 $21,006 $57,452 $— 
Debt securities available for sale401,103 401,103 — 401,103 — 
Debt securities held to maturity98,060 101,242 — 101,242 — 
Equity investments20,202 20,202 — 20,202 — 
Other investments11,304 11,304 — 11,304 — 
Loans held for sale, net227 227 — 227 — 
Loans, net2,729,093 2,726,959 — 3,638 2,723,321 
Accrued interest receivable10,578 10,578 — 10,578 — 
Cash surrender value of life insurance policies and
  annuities		60,613 60,613 — 60,613 — 
Derivative financial assets11,187 11,187 — 11,187 — 
 $3,420,825 $3,421,873 $21,006 $677,546 $2,723,321 
Financial liabilities  
Deposits$2,943,089 $2,944,722 $— $2,944,722 $— 
Short-term borrowings140,146 140,146 — 140,146 — 
Long-term borrowings679 795 — 795 — 
Subordinated debentures102,891 103,623 — — 103,623 
Subordinated debentures owed to unconsolidated subsidiary trusts
19,589 19,589 — 19,589 — 
Accrued interest payable788 788 — 788 — 
Derivative financial liabilities1,124 1,124 — 1,124 — 
 $3,208,306 $3,210,787 $— $3,107,164 $103,623 
At December 31
 2020Fair Value Measurements Using:
Dollars in thousandsCarrying
Value		Estimated
Fair
Value		Level 1Level 2Level 3
Financial assets  
Cash and cash equivalents$99,787 $99,787 $19,522 $80,265 $— 
Debt securities available for sale286,127 286,127 — 286,127 — 
Debt securities held to maturity99,914 103,157 — 103,157 — 
Other investments14,185 14,185 — 14,185 — 
Loans held for sale, net1,998 1,998 — 1,998 — 
Loans, net2,379,907 2,384,275 — 12,095 2,372,180 
Accrued interest receivable11,989 11,989 — 11,989 — 
Cash surrender value of life insurance policies and
  annuities		59,438 59,438 — 59,438 — 
Derivative financial assets6,653 6,653 — 6,653 — 
 $2,959,998 $2,967,609 $19,522 $575,907 $2,372,180 
Financial liabilities  
Deposits$2,595,651 $2,597,326 $— $2,597,326 $— 
Short-term borrowings140,146 140,146 — 140,146 — 
Long-term borrowings699 866 — 866 — 
Subordinated debentures29,364 29,364 — 29,364 — 
Subordinated debentures owed to unconsolidated subsidiary trusts
19,589 19,589 — 19,589 — 
Accrued interest payable745 745 — 745 — 
Derivative financial liabilities2,747 2,747 — 2,747 — 
 $2,788,941 $2,790,783 $— $2,790,783 $—