XML 33 R21.htm IDEA: XBRL DOCUMENT v3.24.3
Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
FASB ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Transfers between levels, when determined to be appropriate, are recognized at the end of each reporting period.
 
The three levels of the fair value hierarchy under ASC 820 are:
 
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; 

Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
 
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
 
The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, segregated by the level of valuation inputs within the fair value hierarchy used to measure fair value:
 
Recurring Fair Value Measurements
September 30, 2024
(In thousands)Total(Level 1)(Level 2)(Level 3)
Assets
Available-for-sale debt securities
U.S. Treasuries$82,111 $0 $82,111 $0 
Obligations of U.S. Government sponsored entities400,205 0 400,205 0 
Obligations of U.S. states and political subdivisions79,518 0 79,518 0 
Mortgage-backed securities – residential, issued by:
U.S. Government agencies67,100 0 67,100 0 
U.S. Government sponsored entities677,953 0 677,953 0 
U.S. corporate debt securities2,392 0 2,392 0 
Total Available-for-sale debt securities$1,309,279 $0 $1,309,279 $0 
Equity securities, at fair value801 0 0 801 
Derivatives designated as hedging instruments362 0 362 0 
Derivatives not designated as hedging instruments4,452 0 4,452 0 
Liabilities
Derivatives not designated as hedging instruments$4,880 $0 $4,880 $0 
Recurring Fair Value Measurements
December 31, 2023
(In thousands)Total(Level 1)(Level 2)(Level 3)
Assets
Available-for-sale debt securities
U.S. Treasuries$109,904 $0 $109,904 $0 
Obligations of U.S. Government sponsored entities456,458 0 456,458 0 
Obligations of U.S. states and political subdivisions81,924 0 81,924 0 
Mortgage-backed securities – residential, issued by:
U.S. Government agencies45,240 0 45,240 0 
U.S. Government sponsored entities720,830 0 720,830 0 
U.S. corporate debt securities2,294 0 2,294 0 
Total Available-for-sale debt securities$1,416,650 $0 $1,416,650 $0 
Equity securities, at fair value787 0 0 787 
Derivatives designated as hedging instruments1,503 0 1,503 0 
Derivatives not designated as hedging instruments1,610 0 1,610 0 
Liabilities
Derivatives not designated as hedging instruments$1,826 $0 $1,826 $0 
 
Securities: Fair values for U.S. Treasury securities are based on quoted market prices. Fair values for obligations of U.S. government sponsored entities, mortgage-backed securities-residential, obligations of U.S. states and political subdivisions, and U.S. corporate debt securities are based on quoted market prices, where available, as provided by third party pricing vendors. If quoted market prices were not available, fair values are based on quoted market prices of comparable instruments in active markets and/or based upon a matrix pricing methodology, which uses comprehensive interest rate tables to determine market price, movement and yield relationships. These securities are reviewed periodically to determine if there are any events or changes in circumstances that would adversely affect their value.

The change in the fair value of equity securities valued using significant unobservable inputs (Level 3), for the periods ended September 30, 2024 and December 31, 2023, was immaterial.
 
There were no transfers between Levels 1, 2 and 3 for the nine months ended September 30, 2024.
 
The Company determines fair value for its available-for-sale debt securities using an independent bond pricing service for identical assets or very similar securities. The Company determines fair value for its equity securities based on the underlying equity fund’s pricing and valuation procedures which consider recent sales price, market quotations from a pricing service, or market quotes from an independent broker-dealer. The Company has reviewed the pricing sources, including methodologies used, and finds them to be fairly stated.

Derivatives: The Company has contracted with a third party vendor to provide periodic valuations for its interest rate derivatives to determine the fair value of its interest rate contracts. The vendor utilizes standard valuation methodologies applicable to interest rate derivatives such as discounted cash flow analysis. Such valuations are based upon readily observable market data and are therefore considered Level 2 valuations by the Company.

Certain assets are measured at fair value on a nonrecurring basis. For the Company, these include loans held for sale, individually evaluated loans, and other real estate owned ("OREO"). For the three and nine months ended September 30, 2024, certain individually evaluated loans were remeasured and reported at fair value through a specific valuation allowance and/or partial charge-offs for credit losses based upon the fair value of the underlying collateral. Collateral values are estimated using Level 3 inputs based upon customized discounting criteria. In addition to collateral dependent evaluated loans, certain other real estate owned was remeasured and reported at fair value based upon the fair value of the underlying collateral. The fair values of other real estate owned are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria. In general, the fair values of other real estate owned are based upon appraisals, with discounts made to reflect estimated costs to sell the real estate. Upon initial recognition, fair value write-downs are taken through a charge-off to the allowance for credit losses. Subsequent fair value write-downs on other real estate owned are reported in other noninterest expense.
Three months ended September 30, 2024
(In thousands)Fair value measurements at reporting
date using:		Gain (losses)
from fair
value changes
Assets:As of 09/30/2024Quoted prices in
active markets for
identical assets
(Level 1)		Significant other
observable inputs
(Level 2)		Significant
unobservable inputs
(Level 3)		Three months ended 9/30/2024
Individually evaluated loans$1,211 $0 $0 $1,211 $0 

Three months ended September 30, 2023
(In thousands)Fair value measurements at reporting
date using:		Gain (losses)
from fair
value changes
Assets:As of 09/30/2023Quoted prices in
active markets for
identical assets
(Level 1)		Significant other
observable inputs
(Level 2)		Significant
unobservable inputs
(Level 3)		Three months ended 9/30/2023
Other real estate owned$0 $0 $0 $0 $1 

Nine months ended September 30, 2024
(In thousands)Fair value measurements at reporting
date using:		Gain (losses)
from fair
value changes
Assets:As of 09/30/2024Quoted prices in
active markets for
identical assets
(Level 1)		Significant other
observable inputs
(Level 2)		Significant
unobservable inputs
(Level 3)		Nine months ended 9/30/2024
Individually evaluated loans$3,420 $0 $0 $3,420 $0 
Other real estate owned81 0 0 81 43 

Nine months ended September 30, 2023
(In thousands)Fair value measurements at reporting
date using:		Gain (losses)
from fair
value changes
Assets:As of 09/30/2023Quoted prices in
active markets for
identical assets
(Level 1)		Significant other
observable inputs
(Level 2)		Significant
unobservable inputs
(Level 3)		Nine months ended 9/30/2023
Individually evaluated loans$3,742 $0 $0 $3,742 $826 
Other real estate owned0 0 0 23 

The fair value estimates, methods and assumptions set forth below for the Company's financial instruments, including those financial instruments carried at cost, are made solely to comply with disclosures required by GAAP and should be read in conjunction with the financial statements and notes included in this Report.

For loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For real estate loans, fair value of the loan’s collateral is determined by third party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property. For example, land is generally based on the sales comparable method while construction is based on the
income and/or sales comparable methods. The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach. The Company reviews the third party appraisal for appropriateness and adjusts the value downward to consider selling and closing costs, which typically range from 5% to 8% of the appraised value. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business. 

The following tables present the carrying amounts and estimated fair values of the Company’s financial instruments at September 30, 2024 and December 31, 2023. The carrying amounts shown in the tables are included in the Consolidated Statements of Condition under the indicated captions.

Estimated Fair Value of Financial Instruments
September 30, 2024
(In thousands)Carrying
Amount		Fair Value(Level 1)(Level 2)(Level 3)
Financial Assets:
Cash and cash equivalents$132,320 $132,320 $132,320 $0 $0 
Securities - held-to-maturity312,446 276,599 0 276,599 0 
FHLB stock and other stock30,936 30,936 0 30,936 0 
Accrued interest receivable28,194 28,194 0 28,194 0 
Loans/leases, net1
5,825,877 5,489,226 0 0 5,489,226 
Financial Liabilities:
Time deposits$1,042,007 $1,039,418 $0 $1,039,418 $0 
Other deposits5,535,889 5,535,889 0 5,535,889 0 
Fed funds purchased and securities sold
under agreements to repurchase67,506 67,506 0 67,506 0 
Other borrowings539,327 541,082 0 541,082 0 
Accrued interest payable3,957 3,957 0 3,957 0 
 
Estimated Fair Value of Financial Instruments
December 31, 2023
(In thousands)Carrying
Amount		Fair Value(Level 1)(Level 2)(Level 3)
Financial Assets:
Cash and cash equivalents$79,542 $79,542 $79,542 $0 $0 
Securities - held to maturity312,401 267,455 0 267,455 0 
FHLB stock and other stock33,719 33,719 0 33,719 0 
Accrued interest receivable26,107 26,107 0 26,107 0 
Loans/leases, net1
5,554,351 5,126,679 0 0 5,126,679 
Financial Liabilities:
Time deposits$998,013 $990,933 $0 $990,933 $0 
Other deposits5,401,834 5,401,834 0 5,401,834 0 
Fed funds purchased and securities sold
under agreements to repurchase50,996 50,996 0 50,996 0 
Other borrowings602,100 600,814 0 600,814 0 
Accrued interest payable3,474 3,474 0 3,474 0 
1 Lease receivables, although excluded from the scope of ASC Topic 825, are included in the estimated fair value amounts at their carrying value.
 
The following methods and assumptions were used in estimating fair value disclosures for financial instruments:
 
Cash and Cash Equivalents: The carrying amounts reported in the Consolidated Statements of Condition for cash, noninterest-bearing deposits, money market funds, and Federal funds sold approximate the fair value of those assets.

Securities - Held-to-Maturity: Fair values for U.S. Treasury securities are based on quoted market prices. Fair values for obligations of U.S. government sponsored entities and mortgage-backed securities-residential are based on quoted market prices, where available, as provided by third party pricing vendors. If quoted market prices were not available, fair values are based on quoted market prices of comparable instruments in active markets and/or based upon a matrix pricing methodology, which uses comprehensive interest rate tables to determine market price, movement and yield relationships. These securities are reviewed periodically to determine if there are any events or changes in circumstances that would adversely affect their value.

FHLB Stock and Other Stock: The carrying amount of FHLB stock approximates fair value. If the stock is redeemed, the Company will receive an amount equal to the par value of the stock. For miscellaneous equity securities, carrying value is cost.
 
Loans and Leases: Fair value for loans are calculated using an exit price notion. The Company's valuation methodology takes into account factors such as estimated cash flows, including contractual cash flow and assumptions for prepayments; liquidity risk; and credit risk. The fair values of residential loans were estimated using discounted cash flow analyses, based upon available market benchmarks for rates and prepayment assumptions. The fair values of commercial and consumer loans were estimated using discounted cash flow analyses, based upon interest rates currently offered for loans and leases with similar terms and credit quality. The fair values of loans held for sale were determined based upon contractual prices for loans with similar characteristics.
 
Accrued Interest Receivable and Accrued Interest Payable: The carrying amount of these short term instruments approximates fair value.
 
Deposits: The fair values disclosed for noninterest bearing accounts and accounts with no stated maturities are equal to the amount payable on demand at the reporting date. The fair value of time deposits is based upon discounted cash flow analyses using rates offered for FHLB advances, which is the Company’s primary alternative source of funds.

Fed Funds Purchased and Securities Sold Under Agreements to Repurchase: The carrying amount of these instruments approximates fair value because the instruments have short-term maturities.

Other borrowings: The fair value of other borrowings is based upon discounted cash flow analyses using current rates offered for FHLB advances, with similar terms.