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Fair Value | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
Fair Value | Fair Value Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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. There are three levels of inputs that may be used to measure fair values: Level 1: Quoted prices (unadjusted) for 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; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument: Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For investment securities where quoted prices are not available, fair values are calculated based on market prices of similar investment securities (Level 2). For investment securities where quoted prices or market prices of similar investment securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Level 3 pricing is obtained from a third-party based upon similar trades that are not traded frequently without adjustment by the Company. At September 30, 2021, the Company held no Level 3 securities. Absent the credit rating, significant assumptions must be made such that the credit risk input becomes an unobservable input and thus these investment securities are reported by the Company in a Level 3 classification. Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). Individually Analyzed Loans: Fair values for collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances includes consideration of offers obtained to purchase properties prior to foreclosure. Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach. The cost method bases value in the cost to replace the current property. Value of market comparison approach evaluates the sales price of similar properties in the same market area. The income approach considers net operating income generated by the property and an investor's required return. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell. Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value. Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Company’s Risk Management Area reviews the assumptions and approaches utilized in the appraisal. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used which include: physical condition of comparable properties sold, net operating income generated by the property and investor rates of return. Other Real Estate: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate (ORE) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property utilizing similar techniques as discussed above for Impaired Loans, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, impairment loss is recognized. Loans Held-for-Sale: The fair values of loans held for sale are determined by using quoted prices for similar assets, adjusted for specific attributes of that loan resulting in a Level 2 classification. Assets and Liabilities Measured on a Recurring Basis Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:
|  | Fair Value Measurements at September 30, 2021 Using
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Assets: |  |  |  |  |  |  |  |
Obligations of State and Political Subdivisions |  | $ | — |  |  | $ | 833,453 |  |  | $ | — |  |  | $ | 833,453 |
MBS/CMO |  | — |  |  | 726,632 |  |  | — |  |  | 726,632 |
US Gov't Sponsored Entities & Agencies |  | — |  |  | 136,140 |  |  | — |  |  | 136,140 |
Total Securities |  | $ | — |  |  | $ | 1,696,225 |  |  | $ | — |  |  | $ | 1,696,225 |
Loans Held-for-Sale |  | $ | — |  |  | $ | 15,361 |  |  | $ | — |  |  | $ | 15,361 |
Derivative Assets |  | $ | — |  |  | $ | 5,741 |  |  | $ | — |  |  | $ | 5,741 |
Derivative Liabilities |  | $ | — |  |  | $ | 5,997 |  |  | $ | — |  |  | $ | 5,997 |
|  | Fair Value Measurements at December 31, 2020 Using
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Assets: |  |  |  |  |  |  |  |
Obligations of State and Political Subdivisions |  | $ | — |  |  | $ | 580,750 |  |  | $ | 497 |  |  | $ | 581,247 |
MBS/CMO |  | — |  |  | 548,307 |  |  | — |  |  | 548,307 |
US Gov't Sponsored Entities & Agencies |  | — |  |  | 88,298 |  |  | — |  |  | 88,298 |
Total Securities |  | $ | — |  |  | $ | 1,217,355 |  |  | $ | 497 |  |  | $ | 1,217,852 |
Loans Held-for-Sale |  | $ | — |  |  | $ | 16,904 |  |  | $ | — |  |  | $ | 16,904 |
Derivative Assets |  | $ | — |  |  | $ | 8,806 |  |  | $ | — |  |  | $ | 8,806 |
Derivative Liabilities |  | $ | — |  |  | $ | 9,353 |  |  | $ | — |  |  | $ | 9,353 |
As of September 30, 2021 and December 31, 2020, the aggregate fair value, contractual balance (including accrued interest), and gain or loss on Loans Held-for-Sale was as follows:
|  | September 30, 2021 |  | December 31, 2020
Aggregate Fair Value |  | $ | 15,361 |  |  | $ | 16,904 |
Contractual Balance |  | 14,994 |  |  | 16,378 |
Gain (Loss) |  | 367 |  |  | 526 |
The total amount of gains and losses from changes in fair value included in earnings for the three and nine months ended September 30, 2021 were $(79) and $(159), respectively. The total amount of gains and losses from changes in fair value included in earnings for the three and nine months ended September 30, 2020 were $233 and $330, respectively. The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2021 and 2020:
|  | Obligations of State and Political Subdivisions
|  | 2021 |  | 2020
Balance of Recurring Level 3 Assets at July 1 |  | $ | — |  |  | $ | 2,495 |
Total Losses Included in Other Comprehensive Income |  | — |  |  | (3) |
Maturities / Calls |  | — |  |  | (1,995) |
Purchases |  | — |  |  | — |
Balance of Recurring Level 3 Assets at September 30 |  | $ | — |  |  | $ | 497 |
|  | Obligations of State and Political Subdivisions
|  | 2021 |  | 2020
Balance of Recurring Level 3 Assets at January 1 |  | $ | 497 |  |  | $ | 4,021 |
Total Losses Included in Other Comprehensive Income |  | (2) |  |  | (26) |
Maturities / Calls |  | (495) |  |  | (3,498) |
Purchases |  | — |  |  | — |
Balance of Recurring Level 3 Assets at September 30 |  | $ | — |  |  | $ | 497 |
Of the total gain/loss included in earnings for the three months ended September 30, 2021 and 2020, $0 and $(3) was attributable to other changes in fair value, respectively. Of the total gain/loss included in earnings for the nine months ended September 30, 2021 and 2020, $(2) and $(26) was attributable to other changes in fair value, respectively. Assets and Liabilities Measured on a Non-Recurring Basis Assets and liabilities measured at fair value on a non-recurring basis are summarized below:
|  | Fair Value Measurements at September 30, 2021 Using
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Assets: |  |  |  |  |  |  |  |
Individually Analyzed Loans |  |  |  |  |  |  |  |
Commercial and Industrial Loans |  | $ | — |  |  | $ | — |  |  | $ | 8,710 |  |  | $ | 8,710 |
Commercial Real Estate Loans |  | $ | — |  |  | $ | — |  |  | $ | 2,148 |  |  | $ | 2,148 |
Agricultural Loans |  | $ | — |  |  | $ | — |  |  | $ | 79 |  |  | $ | 79 |
Consumer Loans |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Home Equity Loans |  | $ | — |  |  | $ | — |  |  | $ | 345 |  |  | $ | 345 |
Residential Mortgage Loans |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | Fair Value Measurements at December 31, 2020 Using
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Assets: |  |  |  |  |  |  |  |
Individually Analyzed Loans |  |  |  |  |  |  |  |
Commercial and Industrial Loans |  | $ | — |  |  | $ | — |  |  | $ | 4,985 |  |  | $ | 4,985 |
Commercial Real Estate Loans |  | $ | — |  |  | $ | — |  |  | $ | 8,893 |  |  | $ | 8,893 |
Agricultural Loans |  | $ | — |  |  | $ | — |  |  | $ | 551 |  |  | $ | 551 |
Consumer Loans |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Home Equity Loans |  | $ | — |  |  | $ | — |  |  | $ | 369 |  |  | $ | 369 |
Residential Mortgage Loans |  | $ | — |  |  | $ | — |  |  | $ | 75 |  |  | $ | 75 |
The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2021 and December 31, 2020:
September 30, 2021 |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input(s) |  | Range (Weighted Average)
Individual Analyzed Loans - Commercial and Industrial Loans |  | $ | 8,710 |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 30%-100% (55%)
Individual Analyzed Loans - Commercial Real Estate Loans |  | $ | 2,148 |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 9%-100% (25%)
Individual Analyzed Loans - Agricultural Loans |  | $ | 79 |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 30%-96% (90%)
Individual Analyzed Loans - Consumer Loans |  | $ | — |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | —%—% (—%)
Individual Analyzed Loans - Home Equity Loans |  | $ | 345 |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 23%-23% (23%)
Individual Analyzed Loans - Residential Mortgage Loans |  | $ | — |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | —%-—% (—%)
December 31, 2020 |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input(s) |  | Range (Weighted Average)
Individual Analyzed Loans - Commercial and Industrial Loans |  | $ | 4,985 |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 26%-100% (61%)
Individual Analyzed Loans - Commercial Real Estate Loans |  | $ | 8,893 |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 30%-100% (56%)
Individual Analyzed Loans - Agricultural Loans |  | $ | 551 |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 30%-96% (65%)
Individual Analyzed Loans - Consumer Loans |  | $ | — |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 100% (100%)
Individual Analyzed Loans - Home Equity Loans |  | $ | 369 |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 9%-9% (9%)
Individual Analyzed Loans - Residential Mortgage Loans |  | $ | 75 |  |  | Sales comparison approach |  | Adjustment for physical condition of comparable properties sold |  | 43%-97% (67%)
The carrying amounts and estimated fair values of the Company’s financial instruments not previously presented are provided in the tables below for the periods ending September 30, 2021 and December 31, 2020. Not all of the Company’s assets and liabilities are considered financial instruments, and therefore are not included in the tables. Because no active market exists for a significant portion of the Company’s financial instruments, fair value estimates were based on subjective judgments, and therefore cannot be determined with precision.
|  |  |  | Fair Value Measurements at September 30, 2021 Using
|  | Carrying Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial Assets: |  |  |  |  |  |  |  |  |  |
Cash and Short-term Investments |  | $ | 448,743 |  |  | $ | 54,617 |  |  | $ | 394,126 |  |  | $ | — |  |  | $ | 448,743 |
Interest Bearing Time Deposits with Banks |  | 745 |  |  | — |  |  | 745 |  |  | — |  |  | 745 |
Loans, Net |  | 2,960,180 |  |  | — |  |  | — |  |  | 2,962,916 |  |  | 2,962,916 |
Accrued Interest Receivable |  | 20,002 |  |  | — |  |  | 8,362 |  |  | 11,640 |  |  | 20,002 |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |
Demand, Savings, and Money Market Deposits |  | (4,215,525) |  |  | (4,215,525) |  |  | — |  |  | — |  |  | (4,215,525) |
Time Deposits |  | (377,426) |  |  | — |  |  | (376,922) |  |  | — |  |  | (376,922) |
Short-term Borrowings |  | (52,591) |  |  | — |  |  | (52,591) |  |  | — |  |  | (52,591) |
Long-term Debt |  | (133,799) |  |  | — |  |  | (79,221) |  |  | (54,144) |  |  | (133,365) |
Accrued Interest Payable |  | (1,126) |  |  | — |  |  | (1,093) |  |  | (33) |  |  | (1,126) |
|  |  |  | Fair Value Measurements at December 31, 2020 Using
|  | Carrying Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial Assets: |  |  |  |  |  |  |  |  |  |
Cash and Short-term Investments |  | $ | 345,748 |  |  | $ | 57,972 |  |  | $ | 287,776 |  |  | $ | — |  |  | $ | 345,748 |
Interest Bearing Time Deposits with Banks |  | 1,241 |  |  | — |  |  | 1,241 |  |  | — |  |  | 1,241 |
Loans, Net |  | 3,026,340 |  |  | — |  |  | — |  |  | 3,032,690 |  |  | 3,032,690 |
Accrued Interest Receivable |  | 20,278 |  |  | — |  |  | 6,137 |  |  | 14,141 |  |  | 20,278 |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |
Demand, Savings, and Money Market Deposits |  | (3,612,078) |  |  | (3,612,078) |  |  | — |  |  | — |  |  | (3,612,078) |
Time Deposits |  | (494,452) |  |  | — |  |  | (495,171) |  |  | — |  |  | (495,171) |
Short-term Borrowings |  | (52,905) |  |  | — |  |  | (52,905) |  |  | — |  |  | (52,905) |
Long-term Debt |  | (141,624) |  |  | — |  |  | (88,342) |  |  | (54,960) |  |  | (143,302) |
Accrued Interest Payable |  | (1,084) |  |  | — |  |  | (1,049) |  |  | (35) |  |  | (1,084) |

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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