Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2017

Assets Measured at Fair Value on Recurring Basis

The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of June 30, 2017 and December 31, 2016 (in thousands):



			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2017
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	142,573		—		142,573		—
Obligations of states and political subdivisions	176,012		—		176,012		—
Mortgage-backed securities	356,944		—		356,944		—
Trust preferred securities	2,424		—		—		2,424
Other securities	4,187		151		4,036		—
Total available-for-sale securities	$	682,140	$	151	$	679,565	$	2,424
December 31, 2016
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	136,324		—		136,324		—
Obligations of states and political subdivisions	162,705		—		162,705		—
Mortgage-backed securities	314,991		—		314,991		—
Trust preferred securities	1,652		—		—		1,652
Other securities	4,176		144		4,032		—
Total available-for-sale securities	$	619,848	$	144	$	618,052	$	1,652

Fair Value of Assets Measured on a Recurring Basis Using Significant Unobservable Inputs

The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2017 and 2016 is summarized as follows (in thousands):



	Trust Preferred Securities
	Three months ended						Six months ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Beginning balance	$	1,638		$	1,698		$	1,652		$	1,906
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Total gains or losses:
Included in net income	—			—			—			—
Included in other comprehensive income (loss)	825			67			848			(124		)
Purchases, issuances, sales and settlements:
Purchases	—			—			—			—
Issuances	—			—			—			—
Sales	—			—			—			—
Settlements	(39		)	(19		)	(76		)	(36		)
Ending balance	$	2,424		$	1,746		$	2,424		$	1,746
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—		$	—		$	—		$	—

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2017 and December 31, 2016 (in thousands):



	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2017
Impaired loans (collateral dependent)	$	9,321	$	—	$	—	$	9,321
Foreclosed assets held for sale	111		—		—		111
December 31, 2016
Impaired loans (collateral dependent)	$	6,938	$	—	$	—	$	6,938
Foreclosed assets held for sale	173		—		—		173

Significant Assumptions Used in Valuation of Level 3 Financial Instruments

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill at June 30, 2017 and December 31, 2016 (in thousands).



June 30, 2017	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Trust Preferred Securities	$	2,424	Discounted cash flow	Discount rate	13.3%
				Constant prepayment rate (1)	1.3%
				Cumulative projected prepayments	21.8%
				Probability of default	0.5%
				Projected cures given deferral	0.0%
				Loss severity	97.6%
Impaired loans (collateral dependent)	$	9,321	Third party valuations	Discount to reflect realizable value	0	%	-	40%	(	20%	)
Foreclosed assets held for sale	$	111	Third party valuations	Discount to reflect realizable value less estimated selling costs	0	%	-	40%	(	35%	)



December 31, 2016	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Trust Preferred Securities	$	1,652	Discounted cash flow	Discount rate	13.6%
				Constant prepayment rate (1)	1.3%
				Cumulative projected prepayments	22.4%
				Probability of default	0.5%
				Projected cures given deferral	0.0%
				Loss severity	97.6%
Impaired loans (collateral dependent)	$	6,938	Third party valuations	Discount to reflect realizable value	0	%	-	40%	(	20%	)
Foreclosed assets held for sale	$	173	Third party valuations	Discount to reflect realizable value less estimated selling costs	0	%	-	40%	(	35%	)

(1) Every five years

Carrying Amounts and Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following tables present estimated fair values of the Company’s financial instruments at June 30, 2017 and December 31, 2016 in accordance with FAS 107-1 and APB 28-1, codified with ASC 805 (in thousands):



	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
June 30, 2017
Financial Assets
Cash and due from banks	$	73,398	$	73,398	$	73,398	$	—	$	—
Federal funds sold	491		491		491		—		—
Certificates of deposit investments	1,685		1,712		—		1,712		—
Available-for-sale securities	682,140		682,140		151		679,565		2,424
Held-to-maturity securities	74,281		74,224		—		74,224		—
Loans held for sale	1,932		1,932		—		1,932		—
Loans net of allowance for loan losses	1,805,493		1,724,890		—		—		1,724,890
Interest receivable	9,620		9,620		—		9,620		—
Federal Reserve Bank stock	4,128		4,128		—		4,128		—
Federal Home Loan Bank stock	2,407		2,407		—		2,407		—
Financial Liabilities
Deposits	$	2,289,406	$	2,293,494	$	—	$	1,960,434	$	333,060
Securities sold under agreements to repurchase	142,411		142,406		—		142,406		—
Interest payable	502		502		—		502		—
Federal Home Loan Bank borrowings	45,066		45,408		—		45,408		—
Other borrowings	12,188		12,188		—		12,188		—
Junior subordinated debentures	23,959		17,396		—		17,396		—



	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
December 31, 2016
Financial Assets
Cash and due from banks	$	137,002	$	137,002	$	137,002	$	—	$	—
Federal funds sold	38,900		38,900		38,900		—		—
Certificates of deposit investments	14,643		14,651		—		14,651		—
Available-for-sale securities	619,848		619,848		144		618,052		1,652
Held-to-maturity securities	74,231		73,096		—		73,096		—
Loans held for sale	1,175		1,175		—		1,175		—
Loans net of allowance for loan losses	1,808,064		1,795,764		—		—		1,795,764
Interest receivable	10,553		10,553		—		10,553		—
Federal Reserve Bank stock	3,949		3,949		—		3,949		—
Federal Home Loan Bank stock	4,389		4,389		—		4,389		—
Financial Liabilities
Deposits	$	2,329,887	$	2,331,725	$	—	$	1,976,806	$	354,919
Securities sold under agreements to repurchase	185,763		185,766		—		185,766		—
Interest payable	535		535		—		535		—
Federal Home Loan Bank borrowings	40,094		40,318		—		40,318		—
Other borrowings	18,063		18,063		—		18,063		—
Junior subordinated debentures	23,917		17,068		—		17,068		—