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Fair Value Measurement | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurement | (13) Fair Value Measurement The Company uses a fair value hierarchy to measure fair value. This hierarchy describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices for identical assets in active markets that are identifiable on the measurement date; Level 2: Significant other observable inputs, such as quoted prices for similar assets, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data; and Level 3: Significant unobservable inputs that reflect the Company’s own view about the assumptions that market participants would use in pricing an asset. Debt securities: The fair values of securities available for sale are determined by 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 by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). Equity securities: The Company’s equity securities are not actively traded in an open market. The fair value of these equity security available for sale not actively traded in an open market is determined by using market data inputs for similar securities that are observable (Level 2 inputs). The fair value of the swap asset/liability: The fair value of the swap asset and liability is based on an external derivative model using data inputs based on similar transactions as of the valuation date and classified Level 2. The changes in fair value of these assets/liabilities had no impact on net income or comprehensive income. Mortgage servicing rights: Mortgage servicing rights do not trade in an active market with readily observable market data. As a result, the Company estimates the fair value of mortgage servicing rights by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The Company stratifies its mortgage servicing portfolio on the basis of loan type. The assumptions used in the discounted cash flow model are those that the Company believes market participants would use in estimating future net servicing income. Significant assumptions in the valuation of mortgage servicing rights include estimated loan repayment rates, the discount rate, servicing costs, and the timing of cash flows, among other factors. Mortgage servicing rights are classified as Level 3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and estimation. Impaired loans: The Company has measured impairment on impaired loans based on the discounted cash flows of the loan or the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value of the collateral dependent loan is less than the carrying amount of the loan, a specific reserve for the loan is made in the allowance for loan losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included as a Level 3 measurement. If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not included in the table below as it is not currently being carried at its fair value. Assets and liabilities measured at fair value are summarized in the table below.
|  | Fair Value Measurements at September 30, 2021 Using: |
Assets: |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets measured at fair value on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ | — |  |  | $ | 53,277 |  |  | $ | — |
Obligations of states and political subdivisions |  |  | — |  |  |  | 256,715 |  |  |  | — |
Mortgage-backed securities in government sponsored entities |  |  | — |  |  |  | 188,157 |  |  |  | — |
Total securities available for sale |  |  | — |  |  |  | 498,149 |  |  |  | — |
Equity securities |  |  | — |  |  |  | 1,077 |  |  |  | — |
Swap asset |  |  | — |  |  |  | 12,858 |  |  |  | — |
Liabilities measured at fair value on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |
Swap liability |  | $ | — |  |  | $ | 12,858 |  |  | $ | — |
Assets measured at fair value on a nonrecurring basis: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage Servicing Rights |  | $ | — |  |  | $ | — |  |  | $ | 2,576 |
Impaired loans |  |  | — |  |  |  | — |  |  |  | 11 |
Other real estate owned |  |  | — |  |  |  | — |  |  |  | 26 |
|  | Fair Value Measurements at December 31, 2020 Using: |
Assets: |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets measured at fair value on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies |  | $ | — |  |  | $ | 21,693 |  |  | $ | — |
Obligations of states and political subdivisions |  |  | — |  |  |  | 229,012 |  |  |  | — |
Mortgage-backed securities in government sponsored entities |  |  | — |  |  |  | 112,759 |  |  |  | — |
Total securities available for sale |  |  | — |  |  |  | 363,464 |  |  |  | — |
Equity securities |  |  | — |  |  |  | 886 |  |  |  | — |
Swap asset |  |  | — |  |  |  | 21,700 |  |  |  | — |
Liabilities measured at fair value on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |
Swap liability |  |  | — |  |  |  | 21,764 |  |  |  | — |
Assets measured at fair value on a nonrecurring basis: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage Servicing Rights |  | $ | — |  |  | $ | — |  |  | $ | 2,246 |
Impaired loans |  |  | — |  |  |  | — |  |  |  | 1 |
Other real estate owned |  |  | — |  |  |  | — |  |  |  | 31 |
The following tables present quantitative information about the Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a nonrecurring basis as of September 30, 2021 and December 31, 2020.
|  | Quantitative Information about Level 3 Fair Value Measurements |
September 30, 2021 |  | Fair Value |  |  | Valuation Technique |  | Unobservable Input |  | Range |  |  | Weighted Average |
Impaired loans |  | $ | 11 |  |  | Appraisal of collateral |  | Appraisal adjustments |  | 10% |  |  | 10% |
|  |  |  |  |  |  |  | Holding period |  | 24 Months |  |  | 24 Months |
Other real estate owned |  | $ | 26 |  |  | Appraisal of collateral |  | Appraisal adjustments |  | 10% |  |  | 10% |
Mortgage Servicing Rights |  | $ | 2,576 |  |  | Discounted Cash Flow |  | Constant Prepayment Rate |  | 8.7% - 35% |  |  | 16% |
|  |  |  |  |  |  |  | Discount Rate |  | 12% |  |  | 12% |
|  | Quantitative Information about Level 3 Fair Value Measurements |
December 31, 2020 |  | Fair Value |  |  | Valuation Technique |  | Unobservable Input |  | Range |  |  | Weighted Average |
Impaired loans |  | $ | 1 |  |  | Appraisal of collateral |  | Appraisal adjustments |  | 0% - 30% |  |  | 19% |
|  |  |  |  |  |  |  | Holding period |  | 23 months |  |  | 23 months |
Other real estate owned |  | $ | 31 |  |  | Appraisal of collateral |  | Appraisal adjustments |  | 10% |  |  | 10% |
Mortgage Servicing Rights |  | $ | 2,246 |  |  | Discounted Cash Flow |  | Constant Prepayment Rate |  | 12% - 50% |  |  | 22% |
|  |  |  |  |  |  |  | Discount Rate |  | 12% |  |  | 12% |
The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at September 30, 2021 were as follows:
September 30, 2021 |  | Carrying Amount |  |  | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Financial Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from financial institutions |  | $ | 253,165 |  |  | $ | 253,165 |  |  | $ | 253,165 |  |  | $ | — |  |  | $ | — |
Other securities |  |  | 17,011 |  |  |  | 17,011 |  |  |  | 17,011 |  |  |  | — |  |  |  | — |
Loans, held for sale |  |  | 5,810 |  |  |  | 5,926 |  |  |  | 5,926 |  |  |  | — |  |  |  | — |
Loans, net of allowance |  |  | 1,978,246 |  |  |  | 1,996,174 |  |  |  | — |  |  |  | — |  |  |  | 1,996,174 |
Bank owned life insurance |  |  | 46,728 |  |  |  | 46,728 |  |  |  | 46,728 |  |  |  | — |  |  |  | — |
Accrued interest receivable |  |  | 7,728 |  |  |  | 7,728 |  |  |  | 7,728 |  |  |  | — |  |  |  | — |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonmaturing deposits |  |  | 2,181,931 |  |  |  | 2,181,931 |  |  |  | 2,181,931 |  |  |  | — |  |  |  | — |
Time deposits |  |  | 252,835 |  |  |  | 253,643 |  |  |  | — |  |  |  | — |  |  |  | 253,643 |
Long-term FHLB advances |  |  | 75,000 |  |  |  | 76,617 |  |  |  | — |  |  |  | — |  |  |  | 76,617 |
Securities sold under agreement to repurchase |  |  | 23,331 |  |  |  | 23,331 |  |  |  | 23,331 |  |  |  | — |  |  |  | — |
Subordinated debentures |  |  | 29,427 |  |  |  | 29,534 |  |  |  | — |  |  |  | — |  |  |  | 29,534 |
Accrued interest payable |  |  | 115 |  |  |  | 115 |  |  |  | 115 |  |  |  | — |  |  |  | — |
The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at December 31, 2020 were as follows:
December 31, 2020 |  | Carrying Amount |  |  | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Financial Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from financial institutions |  | $ | 139,522 |  |  | $ | 139,522 |  |  | $ | 139,522 |  |  | $ | — |  |  | $ | — |
Other securities |  |  | 20,537 |  |  |  | 20,537 |  |  |  | 20,537 |  |  |  | — |  |  |  | — |
Loans, held for sale |  |  | 7,001 |  |  |  | 7,141 |  |  |  | 7,141 |  |  |  | — |  |  |  | — |
Loans, net of allowance |  |  | 2,032,474 |  |  |  | 2,063,249 |  |  |  | — |  |  |  | — |  |  |  | 2,063,249 |
Bank owned life insurance |  |  | 45,976 |  |  |  | 45,976 |  |  |  | 45,976 |  |  |  | — |  |  |  | — |
Accrued interest receivable |  |  | 9,421 |  |  |  | 9,421 |  |  |  | 9,421 |  |  |  | — |  |  |  | — |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonmaturing deposits |  |  | 1,902,560 |  |  |  | 1,902,560 |  |  |  | 1,902,560 |  |  |  | — |  |  |  | — |
Time deposits |  |  | 286,838 |  |  |  | 288,298 |  |  |  | — |  |  |  | — |  |  |  | 288,298 |
Long-term FHLB advances |  |  | 125,000 |  |  |  | 130,942 |  |  |  | — |  |  |  | — |  |  |  | 130,942 |
Securities sold under agreement to repurchase |  |  | 28,914 |  |  |  | 28,914 |  |  |  | 28,914 |  |  |  | — |  |  |  | — |
Subordinated debentures |  |  | 29,427 |  |  |  | 31,479 |  |  |  | — |  |  |  | — |  |  |  | 31,479 |
Accrued interest payable |  |  | 204 |  |  |  | 204 |  |  |  | 204 |  |  |  | — |  |  |  | — |

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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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