Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2020

Assets Measured at Fair Value on a Recurring and Non-Recurring Basis

The following tables present for each of the fair-value hierarchy levels the Company’s assets that are measured at fair value on a recurring and non-recurring basis as of the dates indicated (in thousands).

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
March 31, 2020
Measured on a recurring basis:
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	—	$	10,079		$	—	$	10,079
Mortgage-backed securities		—		434,766			—		434,766
Other assets:
Hedging derivative instruments		—		2			—		2
Fair value adjusted through comprehensive income	$	—	$	444,847		$	—	$	444,847
Other assets:
Derivative instruments - interest rate products	$	—	$	19,921		$	—	$	19,921
Derivative instruments - credit contracts		—		32			—		32
Derivative instruments - mortgage banking		—		259			—		259
Other liabilities:
Derivative instruments - interest rate products		—		(20,431	)		—		(20,431	)
Derivative instruments - credit contracts		—		(42	)		—		(42	)
Derivative instruments - mortgage banking		—		(120	)		—		(120	)
Fair value adjusted through net income	$	—	$	(381	)	$	—	$	(381	)
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	—	$	3,822		$	—	$	3,822
Collateral dependent loans		—		—			12,040		12,040
Other assets:
Loan servicing rights		—		—			1,044		1,044
Other real estate owned		—		—			749		749
Total	$	—	$	3,822		$	13,833	$	17,655

There were no transfers between Levels 1 and 2 during the three months ended March 31, 2020. There were no liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2020.

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
December 31, 2019
Measured on a recurring basis:
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	—	$	26,877		$	—	$	26,877
Mortgage-backed securities		—		391,040			—		391,040
Other assets:
Hedging derivative instruments		—		-			—		-
Fair value adjusted through comprehensive income	$	—	$	417,917		$	—	$	417,917
Other assets:
Derivative instruments - interest rate products	$	—	$	6,419		$	—	$	6,419
Derivative instruments - credit contracts		—		13			—		13
Derivative instruments - mortgage banking		—		119			—		119
Other liabilities:
Derivative instruments - interest rate products		—		(6,720	)		—		(6,720	)
Derivative instruments - credit contracts		—		(18	)		—		(18	)
Derivative instruments - mortgage banking		—		(7	)		—		(7	)
Fair value adjusted through net income	$	—	$	(194	)	$	—	$	(194	)
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	—	$	4,224		$	—	$	4,224
Collateral dependent impaired loans		—		—			3,630		3,630
Other assets:
Loan servicing rights		—		—			1,129		1,129
Other real estate owned		—		—			468		468
Total	$	—	$	4,224		$	5,227	$	9,451

There were no transfers between Levels 1 and 2 during the three months ended March 31, 2019. There were no liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2019.

Additional Quantitative Information about Assets Measured at Fair Value on Recurring and Non-Recurring Basis

The following table presents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands).

Asset	Fair Value		Valuation Technique	Unobservable Input	Unobservable Input Value or Range
Collateral dependent loans	$	12,040	Appraisal of collateral ⁽¹⁾	Appraisal adjustments ⁽²⁾	11% ⁽³⁾
Loan servicing rights		1,044	Discounted cash flow	Discount rate	10.2% ⁽³⁾
				Constant prepayment rate	18.4% ⁽³⁾
Other real estate owned		749	Appraisal of collateral ⁽¹⁾	Appraisal adjustments ⁽²⁾	31% ⁽³⁾

⁽¹⁾	Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

⁽²⁾	Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

⁽³⁾	Weighted averages.

Changes in Level 3 Fair Value Measurements

There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of or during the three months ended March 31, 2020 and 2019.

Carrying Amount, Estimated Fair Value, and Placement in Fair Value Hierarchy of Financial Instruments

The following presents (in thousands) the carrying amount, estimated fair value, and placement in the fair value measurement hierarchy of the Company’s financial instruments as of the dates indicated.

	Level in	March 31, 2020				December 31, 2019
	Fair Value			Estimated				Estimated
	Measurement	Carrying		Fair		Carrying		Fair
	Hierarchy	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	152,168	$	152,168	$	112,947	$	112,947
Securities available for sale	Level 2		444,845		444,845		417,917		417,917
Securities held to maturity, net	Level 2		346,239		354,571		359,000		363,259
Loans held for sale	Level 2		3,822		3,822		4,224		4,224
Loans	Level 2		3,181,831		3,208,870		3,186,875		3,201,814
Loans ⁽¹⁾	Level 3		12,040		12,040		3,630		3,630
Accrued interest receivable	Level 1		12,198		12,198		11,308		11,308
FHLB and FRB stock	Level 2		13,167		13,167		20,637		20,637
Derivative instruments – cash flow hedge	Level 2		2		2		—		—
Derivative instruments – interest rate products	Level 2		19,921		19,921		6,419		6,419
Derivative instruments – credit contracts	Level 2		32		32		13		13
Derivative instruments – mortgage banking	Level 2		259		259		119		119
Financial liabilities:
Non-maturity deposits	Level 1		2,727,840		2,727,840		2,375,486		2,375,486
Time deposits	Level 2		1,059,345		1,062,306		1,180,189		1,179,991
Short-term borrowings	Level 1		109,500		109,500		275,500		275,500
Long-term borrowings	Level 2		32,291		42,653		39,273		41,083
Accrued interest payable	Level 1		11,053		11,053		10,942		10,942
Derivative instruments – interest rate products	Level 2		20,431		20,431		6,720		6,720
Derivative instruments – credit contracts	Level 2		42		42		18		18
Derivative instruments – mortgage banking	Level 2		120		120		7		7

⁽¹⁾	Comprised of collateral dependent loans.