Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2020

Assets Measured at Fair Value on Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of September 30, 2020 and December 31, 2019 (in thousands):

	Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2020
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	94,866	$	—	$	94,866	$	—
Obligations of states and political subdivisions		232,935		—		232,142		793
Mortgage-backed securities		399,300		—		399,300		—
Other securities		10,126		—		10,126		—
Total available-for-sale securities		737,227		—		736,434		793
Equity securities		185		185		—		—
Derivative assets: interest rate swaps		1,825		—		1,825		—
Total assets	$	739,237	$	185	$	738,259	$	793

Derivative liabilities: interest rate swaps	$	3,574	$	—	$	3,574	$	—

December 31, 2019
Available-for-sale securities:
U.S. Treasury securities and Obligations of U.S. government corporations and agencies	$	107,320	$	—	$	107,320	$	—
Obligations of states and political subdivisions		178,433		—		177,460		973
Mortgage-backed securities		396,126		—		396,126		—
Other securities		3,757		—		3,757		—
Total available-for-sale securities		685,636		—		684,663		973
Equity securities		412		219		193		—
Total assets	$	686,048	$	219	$	684,856	$	973

Derivative liabilities: interest rate swaps	$	325	$	—	$	325	$	—

Fair Value of Assets Measured on a Recurring Basis Using Significant Unobservable Inputs

The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2020 and 2019 is summarized as follows (in thousands):

	Obligation of State and Political Subdivisions
	Three months ended				Nine months ended
	September 30, 2020		September 30, 2019		September 30, 2020			September 30, 2019
Beginning balance	$	792	$	970	$	973		$	967
Transfers into Level 3		—		—		—			—
Transfers out of Level 3		—		—		—			—
Total gains or losses:
Included in net income		1		2		4			5
Included in other comprehensive income (loss)		—		—		—			—
Purchases, issuances, sales and settlements:
Purchases		—		—		—			—
Issuances		—		—		—			—
Sales		—		—		(184	)		—
Settlements		—		—		—			—
Ending balance	$	793	$	972	$	793		$	972
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—	$	—	$	—		$	—

Significant Assumptions Used in Valuation of Level 3 Financial Instruments

the following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans (collateral dependent)	$	9,713	Third party valuations	Discount to reflect realizable value	0% - 40%	(20%)
Foreclosed assets held for sale		9	Third party valuations	Discount to reflect realizable value less estimated selling costs	0% - 40%	(35%)
Mortgage servicing rights		661	Third party valuations	Discount to reflect realizable value	9.0% - 11.0%	(9.1%)

December 31, 2019	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans (collateral dependent)	$	12,727	Third party valuations	Discount to reflect realizable value	0% - 40%	(20%)
Foreclosed assets held for sale		935	Third party valuations	Discount to reflect realizable value less estimated selling costs	0% - 40%	(35%)
Mortgage servicing rights		1,444	Third party valuations	Discount to reflect realizable value	9.5% - 12.5%	(9.7%)

Summary of Estimated Fair Values of Company Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments at September 30, 2020 and December 31, 2019 in accordance with ASC 825 (in thousands):

	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
September 30, 2020
Financial Assets
Cash and due from banks	$	231,087	$	231,087	$	231,087	$	—	$	—
Federal funds sold		1,298		1,298		1,298		—		—
Certificates of deposit investments		2,695		2,695		—		2,695		—
Available-for-sale securities		737,227		737,227		—		736,434		793
Held-to-maturity securities		10,015		10,162		—		10,162		—
Equity securities		185		185		185		—		—
Loans held for sale		4,402		4,402		—		4,402		—
Loans net of allowance for loan losses		3,189,930		3,135,406		—		—		3,135,406
Interest receivable		20,228		20,228		—		20,228		—
Federal Reserve Bank stock		9,401		9,401		—		9,401		—
Federal Home Loan Bank stock		5,450		5,450		—		5,450		—
Financial Liabilities
Deposits	$	3,619,836	$	3,625,297	$	—	$	3,112,796	$	512,501
Securities sold under agreements to repurchase		170,345		170,349		—		170,349		—
Interest payable		1,838		1,838		—		1,838		—
Federal Home Loan Bank borrowings		93,954		97,174		—		97,174		—
Junior subordinated debentures		18,985		14,235		—		14,285		—

December 31, 2019
Financial Assets
Cash and due from banks	$	84,154	$	84,154	$	84,154	$	—	$	—
Federal funds sold		926		926		926		—		—
Certificates of deposit investments		4,625		4,625		—		4,625		—
Available-for-sale securities		685,636		685,636		—		684,856		780
Held-to-maturity securities		69,542		69,572		—		69,572		—
Equity securities		412		412		219		—		193
Loans held for sale		1,820		1,820		—		1,820		—
Loans net of allowance for loan losses		2,666,616		2,622,053		—		—		2,622,053
Interest receivable		15,577		15,577		—		15,577		—
Federal Reserve Bank stock		9,401		9,401		—		9,401		—
Federal Home Loan Bank stock		4,105		4,105		—		4,105		—
Financial Liabilities
Deposits	$	2,917,366	$	2,924,144	$	—	$	2,332,866	$	591,278
Securities sold under agreements to repurchase		208,109		208,016		—		208,016		—
Interest payable		2,261		2,261		—		2,261		—
Federal Home Loan Bank borrowings		113,895		114,510		—		114,510		—
Other borrowings		5,000		5,000		5,000		—		—
Junior subordinated debentures		18,858		15,596		—		15,596		—