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Fair Value
 12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Fair Value
Fair Value Measurement

Fair value is defined as 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. The following three levels of inputs are used to measure fair value:
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 company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Corporation used the following methods and significant assumptions to estimate fair value:

Investment Securities: The fair values of most trading securities and debt securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather relying on the securities’ relationship to other benchmark quoted securities (Level 2). These models utilize the market approach with standard inputs that include, but are not limited to benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities that observable inputs about the specific issuer are not available, fair values are estimated using observable data from other securities presumed to be similar or other market data on other similar securities (Level 3).

Derivatives: The Corporation’s derivative instruments are interest rate swaps that are similar to those that trade in liquid markets. As such, significant fair value inputs can generally be verified and do not typically involve significant management judgments (Level 2).

Individually Evaluated Loans: The fair value of individually evaluated loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals prepared by third-parties. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also adjusts appraised values based on the length of time that has passed since the appraisal date and other factors. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued 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, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.
Assets and liabilities measured at fair value on a recurring basis are as follows at December 31, 2020 and December 31, 2019:
  Fair Value Measurements at December 31, 2020 Using
DescriptionTotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets:
Securities Available For Sale:
U.S. Government sponsored entities$157,042 $0 $157,042 $0 
States and political subdivisions70,883 0 70,819 64 
Residential and multi-family mortgage315,192 15,039 300,153 0 
Corporate notes and bonds14,926 0 14,926 0 
Pooled SBA25,886 0 25,886 0 
Other979 979 0 0 
Total Securities Available For Sale$584,908 $16,018 $568,826 $64 
Interest rate swaps$4,017 $0 $4,017 $0 
Trading Securities:
Corporate equity securities$4,343 $4,343 $0 $0 
Mutual funds1,283 1,283 0 0 
Certificates of deposit404 404 0 0 
Corporate notes and bonds569 569 0 0 
U.S. Government sponsored entities50 0 50 0 
Total Trading Securities$6,649 $6,599 $50 $0 
Liabilities
Interest rate swaps$(4,785)$0 $(4,785)$0 

  Fair Value Measurements at December 31, 2019 Using
DescriptionTotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets:
Securities Available For Sale:
U.S. Government sponsored entities$127,094 $0 $127,094 $0 
States and political subdivisions104,363 0 104,363 0 
Residential and multi-family mortgage276,636 0 273,841 2,795 
Corporate notes and bonds8,082 0 8,082 0 
Pooled SBA25,174 0 25,174 0 
Other964 964 0 0 
Total Securities Available For Sale$542,313 $964 $538,554 $2,795 
Interest rate swaps$1,877 $0 $1,877 $0 
Trading Securities:
Corporate equity securities$7,946 $7,946 $0 $0 
Mutual funds807 807 0 0 
Certificates of deposit350 350 0 0 
Corporate notes and bonds655 655 0 0 
U.S. Government sponsored entities51 0 51 0 
Total Trading Securities$9,809 $9,758 $51 $0 
Liabilities
Interest rate swaps$(2,362)$0 $(2,362)$0 
The table below presents a reconciliation of the fair value of securities available for sale measured on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2020 and 2019, respectively: 

States and Political SubdivisionsResidential & Multi-Family Mortgage
Balance, January 1, 2020$0 $2,795 
Purchases422 0 
Total gains or (losses):
Included in other comprehensive income (loss)0 0 
Transfers out of Level 3(358)$(2,795)
Balance, December 31, 2020$64 $0 

 Residential & Multi-Family Mortgage
Balance, January 1, 2019$0 
Purchases2,796 
Total gains or (losses):
Included in other comprehensive income (loss)(1)
Balance, December 31, 2019$2,795 

Assets and liabilities measured at fair value on a non-recurring basis are as follows at December 31, 2020 and December 31, 2019: 
  Fair Value Measurements at December 31, 2020 Using
DescriptionTotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets:
Collateral-dependent loans:
Farmland$659 0 0 $659 
Owner-occupied, nonfarm nonresidential properties329 0 0 329 
Commercial and industrial3,680 0 0 3,680 
Other construction loans and all land development loans and other land loans1,790 0 0 1,790 
Multifamily (5 or more) residential properties0 0 0 0 
Non-owner occupied, nonfarm nonresidential9,622 0 0 9,622 
Residential mortgages secured by first liens659 0 0 659 

  Fair Value Measurements at December 31, 2019 Using
DescriptionTotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets:
Impaired loans:
Commercial, industrial, and agricultural$2,910 0 0 $2,910 
Commercial mortgages1,147 0 0 1,147 
A loan is considered to be a collateral dependent loan when, based on current information and events, the Corporation expects repayment of the financial assets to be provided substantially through the operation or sale of the collateral and the Corporation has determined that the borrower is experiencing financial difficulty as of the measurement date. The allowance for credit losses is measured by estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the underlying fair value of the loan’s collateral. 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 Corporation reviews the third-party appraisal for appropriateness and may adjust the value downward to consider selling and closing costs. 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 table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2020:
Fair
value		Valuation
Technique		Unobservable InputsRange
(Weighted
Average)
Collateral-dependent loans - Farmland$659 Valuation of third party appraisal on underlying collateralLoss severity rates
45%-54% (47%)
Collateral-dependent loans - Owner-occupied, nonfarm nonresidential properties329 Valuation of third party appraisal on underlying collateralLoss severity rates
60%-90% (80%)
Collateral-dependent loans - Commercial and industrial3,680 Valuation of third party appraisal on underlying collateralLoss severity rates
0%-100% (39%)
Collateral-dependent loans - Other construction loans and all land development loans and other land loans1,790 Valuation of third party appraisal on underlying collateralLoss severity rates
25%-41% (28%)
Collateral-dependent loans - Multifamily (5 or more) residential properties0 Valuation of third party appraisal on underlying collateralLoss severity rates
58% (58%)
Collateral-dependent loans - Non-owner occupied, nonfarm nonresidential9,622 Valuation of third party appraisal on underlying collateralLoss severity rates
25%-100% (29%)
Collateral-dependent loans - Residential mortgages secured by first liens659 Valuation of third party appraisal on underlying collateralLoss severity rates
31% (31%)

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2019: 
Fair
value		Valuation
Technique		Unobservable InputsRange (Weighted
Average)
Impaired loans – commercial, industrial, and agricultural$2,910Valuation of third party appraisal on underlying collateralLoss severity rates
0%-100% (54%)
Impaired loans – commercial mortgages$1,147Valuation of third party appraisal on underlying collateralLoss severity rates
25%-100% (52%)
Fair Value of Financial Instruments

The following table presents the carrying amount and fair value of financial instruments at December 31, 2020: 
 Carrying
Amount		Fair Value Measurement Using:Total
Fair Value
 Level 1Level 2Level 3
ASSETS
Cash and cash equivalents$532,694 $532,694 $0 $0 $532,694 
Securities available for sale584,908 16,018 568,826 64 584,908 
Trading securities6,649 6,599 50 0 6,649 
Loans held for sale8,514 0 8,617 0 8,617 
Net loans3,337,449 0 0 3,339,482 3,339,482 
FHLB and other equity interests21,018 n/an/an/an/a
Interest rate swaps4,017 0 4,017 0 4,017 
Accrued interest receivable17,659 61 2,152 15,446 17,659 
LIABILITIES
Deposits$(4,181,744)$(3,705,200)$(488,000)$0 $(4,193,200)
FHLB and other borrowings0 0 0 0 0 
Subordinated debentures(70,620)0 (62,583)0 (62,583)
Interest rate swaps(4,785)0 (4,785)0 (4,785)
Accrued interest payable(1,096)0 (1,096)0 (1,096)

The following table presents the carrying amount and fair value of financial instruments at December 31, 2019:
 Carrying
Amount		Fair Value Measurement Using:Total
Fair Value
 Level 1Level 2Level 3
ASSETS
Cash and cash equivalents$192,974 $192,974 $0 $0 $192,974 
Securities available for sale542,313 964 538,554 2,795 542,313 
Trading securities9,809 9,758 51 0 9,809 
Loans held for sale930 0 933 0 933 
Net loans2,784,562 0 0 2,778,914 2,778,914 
FHLB and other equity interests27,868 n/an/an/an/a
Interest rate swaps1,877 0 1,877 0 1,877 
Accrued interest receivable11,486 6 3,238 8,242 11,486 
LIABILITIES
Deposits$(3,102,327)$(2,674,511)$(432,287)$0 $(3,106,798)
FHLB and other borrowings(227,907)0 (230,679)0 (230,679)
Subordinated debentures(70,620)0 (64,084)0 (64,084)
Interest rate swaps(2,362)0 (2,632)0 (2,632)
Accrued interest payable(1,597)0 (1,597)0 (1,597)

While estimates of fair value are based on management’s judgment of the most appropriate factors as of the balance sheet date, there is no assurance that the estimated fair values would have been realized if the assets had been disposed of or the liabilities settled at that date, since market values may differ depending on various circumstances. The estimated fair values would also not apply to subsequent dates. The fair value of other equity interests is based on the net asset values provided by the underlying investment partnership. ASU 2015-7 removes the requirement to categorize within the fair value hierarchy all investments measured using the net asset value per share practical expedient and related disclosures. In addition, other assets and liabilities that are not financial instruments, such as premises and equipment, are not included in the disclosures.

Also, non-financial assets such as, among other things, the estimated earnings power of core deposits, the earnings potential of trust accounts, the trained workforce, and customer goodwill, which typically are not recognized on the balance sheet, may have value but are not included in the fair value disclosures.