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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Dec. 31, 2017
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | N ote 19 FAIR VALUE MEASUREMENTS The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quo ted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices f or similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatil ities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from, or corroborated, by market data by correlation or other means. Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that re flect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. Assets and Liabilities Measured at Fair Value on a Recurring Basis Securities Available for Sale. U.S. Treasury securities a re reported at fair value utilizing Level 1 inputs. Other securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing servi ce. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, credit information and the bond’s terms and conditions, among ot her things. In general, the Company does not purchase securities that have a complicated structure. The Company’s entire portfolio consists of traditional investments, nearly all of which are U.S. Treasury obligations, federal agency bullet or mortgage p ass-through securities, or general obligation or revenue based municipal bonds. Pricing for such instruments is easily obtained. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by compar ison to prices obtained from third-party sources or derived using internal models. Fair Value Swap. The Company entered into a stand-alone derivative contract with the purchaser of its Visa Class B shares. The valuation represents the amount due and pay able to the counterparty based upon the revised share conversion rate, if any, during the period. At December 31, 2017, there were no amounts payable. A summary of fair values for assets and liabilities at December 31 consisted of the following:
(Dollars in Thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total Fair
Inputs | Inputs | Inputs | Value
2017 |  |  |  |  |  |  |  |  |  |  |  |
Securities Available for Sale: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government Treasury |  | $ | 235,341 |  | $ | - |  | $ | - |  | $ | 235,341
U.S. Government Agency |  |  | - |  |  | 144,644 |  |  | - |  |  | 144,644
States and Political Subdivisions |  |  | - |  |  | 91,157 |  |  | - |  |  | 91,157
Mortgage-Backed Securities |  |  | - |  |  | 1,185 |  |  | - |  |  | 1,185
Equity Securities |  |  | - |  |  | 8,584 |  |  | - |  |  | 8,584
2016 |  |  |  |  |  |  |  |  |  |  |  |
Securities Available for Sale: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government Treasury |  | $ | 286,278 |  | $ | - |  | $ | - |  | $ | 286,278
U.S. Government Agency |  |  | - |  |  | 131,640 |  |  | - |  |  | 131,640
State and Political Subdivisions |  |  | - |  |  | 94,839 |  |  | - |  |  | 94,839
Mortgage-Backed Securities |  |  | - |  |  | 1,430 |  |  | - |  |  | 1,430
Equity Securities |  |  | - |  |  | 8,547 |  |  | - |  |  | 8,547
Assets Measured at Fair Value on a Non-Recurring Basis Certain assets are measured at fair value on a non-recurring basis (i.e., the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances). An example would be assets exhibiting evidence of impairment. The following is a description of valuation methodologies used for assets measured on a non-recurring basis. Impaired Loans. Impairment for collateral dependent loans is measured using the fair value of the collateral less selling costs. The fair value of collateral is determined by an independent valuation or professional appraisal in conformance with banking regulations. Collateral values are estimated using Level 3 inputs due to the volatility in the real estate market, and the judgmen t and estimation involved in the real estate appraisal process. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. Valuation techniques are consistent with those techniques applied in prior periods. Impaired collateral dependent loans had a carrying value of $6.1 million with a valuation allowance of $1.1 million at December 31, 2017 and $6.3 million and $0.6 million, respectively, at December 31, 2016. Loans Held for Sale. These loans are carried at the lower of cost or fair value and are adjusted to fair value on a non-recurring basis. Fair value is based on observable markets rates for comparable loan products, which is considered a Level 2 fair value measurement. Other Real E state Owned. During 2017 and 2016, certain foreclosed assets, upon initial recognition, were measured and reported at fair value through a charge-off to the allowance for loan losses based on the fair value of the foreclosed asset less estimated cost to s ell. The fair value of the foreclosed asset is determined by an independent valuation or professional appraisal in conformance with banking regulations. On an ongoing basis, we obtain updated appraisals on foreclosed assets and record valuation adjustmen ts as necessary. The fair value of foreclosed assets is estimated using Level 3 inputs due to the judgment and estimation involved in the real estate valuation process. Assets and Liabilities Disclosed at Fair Value The Company is required to disclo se the estimated fair value of financial instruments, both assets and liabilities, for which it is practical to estimate fair value and the following is a description of valuation methodologies used for those assets and liabilities. Cash and Short-Term In vestments. The carrying amount of cash and short-term investments is used to approximate fair value, given the short time frame to maturity and as such assets do not present unanticipated credit concerns. Securities Held to Maturity. Securities held to maturity are valued in accordance with the methodology previously noted in the caption “Assets and Liabilities Measured at Fair Value on a Recurring Basis – Securities Available for Sale”. Loans. The loan portfolio is segregated into categories and the fair value of each loan category is calculated using present value techniques based upon projected cash flows and estimated discount rates that reflect the credit, interest rate, and liquidity risks inherent in each loan category. The calculated present values are then reduced by an allocation of the allowance for loan losses against each respective loan category. Deposits. The fair value of Noninterest Bearing Deposits, NOW Accounts, Money Market Accounts and Savings Accounts are the amounts payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using present value techniques and rates currently offered for deposits of similar remaining maturities. Subordinated Notes Payable. The fair value of ea ch note is calculated using present value techniques, based upon projected cash flows and estimated discount rates as well as rates being offered for similar obligations. Short-Term and Long-Term Borrowings. The fair value of each note is calculated usin g present value techniques, based upon projected cash flows and estimated discount rates as well as rates being offered for similar debt. A summary of estimated fair values of significant financial instruments at December 31 consisted of the following:
|  | 2017
(Dollars in Thousands) |  | Carrying |  | Level 1 |  | Level 2 |  | Level 3
Value | Inputs | Inputs | Inputs
ASSETS: |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 58,419 |  | $ | 58,419 |  | $ | - |  | $ | -
Short-Term Investments |  |  | 227,023 |  |  | 227,023 |  |  | - |  |  | -
Investment Securities, Available for Sale |  |  | 480,911 |  |  | 235,341 |  |  | 245,570 |  |  | -
Investment Securities, Held to Maturity |  |  | 216,679 |  |  | 97,815 |  |  | 117,192 |  |  | -
Loans Held for Sale |  |  | 4,817 |  |  | - |  |  | 4,817 |  |  | -
Loans, Net of Allowance for Loan Losses |  |  | 1,640,185 |  |  | - |  |  | - |  |  | 1,625,310
LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 2,469,877 |  | $ | - |  | $ | 2,382,818 |  | $ | -
Short-Term Borrowings |  |  | 7,480 |  |  | - |  |  | 7,482 |  |  | -
Subordinated Notes Payable |  |  | 52,887 |  |  | - |  |  | 41,718 |  |  | -
Long-Term Borrowings |  |  | 13,967 |  |  | - |  |  | 14,081 |  |  | -
|  | 2016
(Dollars in Thousands) |  | Carrying |  | Level 1 |  | Level 2 |  | Level 3
Value | Inputs | Inputs | Inputs
ASSETS: |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 48,268 |  | $ | 48,268 |  | $ | - |  | $ | -
Short-Term Investments |  |  | 247,779 |  |  | 247,779 |  |  | - |  |  | -
Investment Securities, Available for Sale |  |  | 522,734 |  |  | 286,278 |  |  | 236,456 |  |  | -
Investment Securities, Held to Maturity |  |  | 177,365 |  |  | 119,157 |  |  | 57,589 |  |  | -
Loans Held for Sale |  |  | 10,886 |  |  | - |  |  | 10,886 |  |  | -
Loans, Net of Allowance for Loan Losses |  |  | 1,547,858 |  |  | - |  |  | - |  |  | 1,543,576
LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 2,412,286 |  | $ | - |  | $ | 2,272,572 |  | $ | -
Short-Term Borrowings |  |  | 12,749 |  |  | - |  |  | 12,802 |  |  | -
Subordinated Notes Payable |  |  | 52,887 |  |  | - |  |  | 42,024 |  |  | -
Long-Term Borrowings |  |  | 14,881 |  |  | - |  |  | 15,122 |  |  | -
All non-financial instruments are excluded from the above table. The disclosures also do not include goodwill. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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