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Borrowed Funds

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Borrowed Funds

Borrowed Funds

Borrowed funds consist of the following obligations as of:

			September 30, 2020												December 31, 2019
			Amount						Rate						Amount						Rate
FHLB advances			$	205,000					2.24		%				$	245,000					2.32		%
Securities sold under agreements to repurchase without stated maturity dates			33,349						0.09		%				30,999						0.09		%
Total			$	238,349					1.94		%				$	275,999					2.07		%

FHLB advances are collateralized by a blanket lien on all qualified 1-4 family residential real estate loans, specific AFS securities, and FHLB stock.

The following table lists the maturities and weighted average interest rates of FHLB advances as of:

			September 30, 2020												December 31, 2019
			Amount						Rate						Amount						Rate
Fixed rate due 2020			$	15,000					1.75		%				$	55,000					2.18		%
Fixed rate due 2021			50,000						1.91		%				50,000						1.91		%
Variable rate due 2021 (1)			10,000						0.58		%				10,000						2.20		%
Fixed rate due 2022			20,000						1.97		%				20,000						1.97		%
Fixed rate due 2023			45,000						2.97		%				45,000						2.97		%
Fixed rate due 2024			55,000						2.68		%				55,000						2.68		%
Fixed rate due 2026			10,000						1.17		%				10,000						1.17		%
Total			$	205,000					2.24		%				$	245,000					2.32		%

(1)Hedged advance (see “Derivative Instruments” section below)

Securities sold under agreements to repurchase are classified as secured borrowings and are reflected at the amount of cash received in connection with the transaction. The securities underlying the agreements have a carrying value and a fair value of $33,375 and $31,020 at September 30, 2020 and December 31, 2019, respectively. Such securities remain under our control. We may be required to provide additional collateral based on the fair value of underlying securities.

Securities sold under repurchase agreements without stated maturity dates, federal funds purchased, and FRB Discount Window advances generally mature within one to four days from the transaction date. We had no FRB Discount Window advances during the three and nine-month periods ended September 30, 2020 and 2019.

A summary of securities sold under repurchase agreements without stated maturity dates and federal funds purchased was as follows for the:

			Three Months Ended September 30
			2020																		2019
			Maximum Month End Balance						Average Balance						Weighted Average Interest Rate During the Period						Maximum Month End Balance						Average Balance						Weighted Average Interest Rate During the Period
Securities sold under agreements to repurchase without stated maturity dates			$	33,349					$	30,578					0.10		%				$	32,386					$	32,520					0.09		%
Federal funds purchased			$	—					$	5					0.49		%				$	—					$	317					2.61		%

			Nine Months Ended September 30
			2020																		2019
			Maximum Month End Balance						Average Balance						Weighted Average Interest Rate During the Period						Maximum Month End Balance						Average Balance						Weighted Average Interest Rate During the Period
Securities sold under agreements to repurchase without stated maturity dates			$	33,349					$	30,845					0.10		%				$	37,441					$	31,350					0.10		%
Federal funds purchased			$	—					$	2					0.49		%				$	7,070					$	919					2.64		%

We had pledged AFS securities and 1-4 family residential real estate loans in the following amounts at:

			September 30 2020						December 31 2019
Pledged to secure borrowed funds			$	340,685					$	368,310
Pledged to secure repurchase agreements			33,375						31,020
Pledged for public deposits and for other purposes necessary or required by law			40,493						59,537
Total			$	414,553					$	458,867

AFS securities pledged to repurchase agreements without stated maturity dates consisted of the following at:

			September 30 2020						December 31 2019
States and political subdivisions			$	17,026					$	31,020
Mortgage-backed securities			9,081						—
Collateralized mortgage obligations			7,268						—
Total			$	33,375					$	31,020

AFS securities pledged to repurchase agreements are monitored to ensure the appropriate level is collateralized. In the event of maturities, calls, significant principal repayments, or significant decline in market values, we have an adequate level of AFS securities to pledge to satisfy collateral requirements.

As of September 30, 2020, we had the ability to borrow up to an additional $150,819, based on assets pledged as collateral. We had no investment securities that were restricted from being pledged for specific purposes.

Derivative Instruments

We use interest rate swaps to manage exposure to interest rate risk and variability in cash flows. The interest rate swaps, associated with our variable rate borrowings, are designated upon inception as cash flow hedges of forecasted interest payments. We have entered into LIBOR-based interest rate swaps that involve the receipt of variable amounts in exchange for fixed rate payments, in effect converting variable rate debt to fixed rate debt.

Cash flow hedges are assessed for effectiveness using regression analysis. The effective portion of changes in fair value are recorded in OCI and subsequently reclassified into interest expense in the same period in which the related interest on the

variable rate borrowings affects earnings. In the event that a portion of the changes in fair value were determined to be ineffective, the ineffective amount would be recorded in earnings.

The following tables provide information on derivatives related to variable rate borrowings as of:

September 30, 2020

Pay Rate

Receive Rate

Remaining Life (Years)

Notional Amount

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments

Cash Flow Hedges:

Interest rate swaps

1.56

%

3-Month LIBOR

0.6

$

10,000

Other liabilities

$

(78)

December 31, 2019

Pay Rate

Receive Rate

Remaining Life (Years)

Notional Amount

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments

Cash Flow Hedges:

Interest rate swaps

1.56

%

3-Month LIBOR

1.3

$

10,000

Other assets

$

67

Derivatives contain an element of credit risk which arises from the possibility that we will incur a loss as a result of a counterparty failing to meet its contractual obligations. Credit risk is minimized through counterparty collateral, transaction limits and monitoring procedures. We also manage dealer credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, the use of ISDA master agreements, and the use of counterparty limits. We do not anticipate any losses from failure of interest rate derivative counterparties to honor their obligations.

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- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

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