Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow the Company to sell its ownership interest back to the fund at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities, or funds.

Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or valuations using methodologies with observable inputs.

Level 3: Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques using unobservable inputs, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The fair values of all investment securities are based upon the assumptions that market participants would use in pricing the security. If available, fair values of investment securities are determined by quoted market prices (Level 1). For investment securities where quoted market prices are not available, fair values are calculated based on market prices on similar securities (Level 2). For investment securities where quoted prices or market prices of similar securities are not available, fair values are calculated by using observable and unobservable inputs such as discounted cash flows or other market indicators (Level 3). Security valuations are obtained from third party pricing services for comparable assets or liabilities.

Collateral-dependent loans are identified as part of the calculation of the ACL on loans. The fair value used to measure credit loss for this type of loan is commonly based on recent real estate appraisals which are generally obtained at least every 18 months or earlier if there are changes to risk characteristics of the underlying loan. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value based on the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business (Level 3). Individually evaluated loans are evaluated on a quarterly basis and their ACL on loans is adjusted accordingly.

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less costs to sell. Fair value is commonly based on recent real estate appraisals which are generally obtained at least every 18 months or earlier. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers for commercial properties or certified residential appraisers for residential properties whose qualifications and licenses have been reviewed and verified by the Company. Once received, the Company reviews the assumptions and approaches utilized in the appraisal as well as the resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On a quarterly basis, the Company compares the actual selling price of collateral that has been liquidated to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value.



	March 31, 2020
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Investment securities available for sale:
U.S. Treasury and U.S. Government-sponsored agencies	$	87,062	$	—	$	87,062	$	—
Municipal securities	179,608		850		178,758		—
Mortgage-backed securities and collateralized mortgage obligations:
Residential	322,684		—		322,684		—
Commercial	325,756		—		325,756		—
Corporate obligations	23,832		—		23,832		—
Other asset-backed securities	22,150		—		22,150		—
Total investment securities available for sale	961,092		850		960,242		—
Equity security	96		96		—		—
Derivative assets - interest rate swaps	28,075		—		28,075		—
Liabilities
Derivative liabilities - interest rate swaps	$	28,075	$	—	$	28,075	$	—



	December 31, 2019
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Investment securities available for sale:
U.S. Treasury and U.S. Government-sponsored agencies	$	105,223	$	—	$	105,223	$	—
Municipal securities	133,014		—		133,014		—
Mortgage-backed securities and collateralized mortgage obligations:
Residential	339,608		—		339,608		—
Commercial	327,095		—		327,095		—
Corporate obligations	24,194		—		24,194		—
Other asset-backed securities	23,178		—		23,178		—
Total investment securities available for sale	952,312		—		952,312		—
Equity Security	148		148		—		—
Derivative assets - interest rate swaps	8,318		—		8,318		—
Liabilities
Derivative liabilities - interest rate swaps	$	8,318	$	—	$	8,318	$	—

The Company may be required to measure certain financial assets and liabilities at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets.



	Basis⁽¹⁾		Fair Value at March 31, 2020
	Basis⁽¹⁾		Total		Level 1		Level 2		Level 3		Net Losses Recorded in Earnings During the Three Months Ended March 31, 2020
	(In thousands)
Collateral-dependent loans:
Commercial business:
Commercial and industrial	$	374	$	335	$	—	$	—	$	335	$	5
Total assets measured at fair value on a nonrecurring basis	$	374	$	335	$	—	$	—	$	335	$	5



	Basis⁽¹⁾		Fair Value at December 31, 2019
	Basis⁽¹⁾		Total		Level 1		Level 2		Level 3		Net Losses Recorded in Earnings During the Three Months Ended March 31, 2019
	(In thousands)
Impaired loans:
Commercial business:
Commercial and industrial	$	4,111	$	3,380	$	—	$	—	$	3,380	$	—
Total assets measured at fair value on a nonrecurring basis	$	4,111	$	3,380	$	—	$	—	$	3,380	$	—



	March 31, 2020
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range of Inputs; Weighted Average
	(Dollars in thousands)
Collateral-dependent loans	$	335	Market approach	Adjustment for differences between the comparable sales	N/A ⁽¹⁾



	December 31, 2019
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range of Inputs; Weighted Average
	(Dollars in thousands)
Impaired loans	$	3,380	Market approach	Adjustment for differences between the comparable sales	173.5% - (18.5%); 36.8%

Because broadly traded markets do not exist for most of the Company’s financial instruments, the fair value calculations attempt to incorporate the effect of current market conditions at a specific time. These determinations are subjective in nature, involve uncertainties and matters of significant judgment and do not include tax ramifications; therefore, the results cannot be determined with precision, substantiated by comparison to independent markets and may not be realized in an actual sale or immediate settlement of the instruments. There may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results. For all of these reasons, the aggregation of the fair value calculations presented herein do not represent, and should not be construed to represent, the underlying value of the Company.



	March 31, 2020
	Carrying Value		Fair Value		Fair Value Measurements Using:
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	162,913	$	—	$	162,913	$	—	$	—
Investment securities available for sale	961,092		961,092		850		960,242		—
Loans held for sale	3,808		3,935		—		—		3,935
Loans receivable, net	3,804,836		3,851,281		—		—		3,851,281
Accrued interest receivable	14,940		14,940		1		3,851		11,088
Derivative assets - interest rate swaps	28,075		28,075		—		28,075		—
Equity security	96		96		96		—		—
Financial Liabilities:
Noninterest deposits, interest bearing demand deposits, money market accounts and savings accounts	$	4,091,959	$	4,091,959	$	4,091,959	$	—	$	—
Certificate of deposit accounts	525,989		530,580		—		530,580		—
Securities sold under agreement to repurchase	11,792		11,792		11,792		—		—
Junior subordinated debentures	20,668		17,750		—		—		17,750
Accrued interest payable	154		154		69		59		26
Derivative liabilities - interest rate swaps	28,075		28,075		—		28,075		—



	December 31, 2019
	Carrying Value		Fair Value		Fair Value Measurements Using:
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	228,568	$	228,568	$	228,568	$	—	$	—
Investment securities available for sale	952,312		952,312		—		952,312		—
Loans held for sale	5,533		5,704		—		—		5,704
Loans receivable, net	3,731,708		3,791,557		—		—		3,791,557
Accrued interest receivable	14,446		14,446		79		3,668		10,699
Derivative assets - interest rate swaps	8,318		8,318		—		8,318		—
Equity security	148		148		148		—		—
Financial Liabilities:
Noninterest deposits, interest bearing demand deposits, money market accounts and savings accounts	$	4,058,098	$	4,058,098	$	4,058,098	$	—	$	—
Certificate of deposit accounts	524,578		529,679		—		529,679		—
Securities sold under agreement to repurchase	20,169		20,169		20,169		—		—
Junior subordinated debentures	20,595		20,000		—		—		20,000
Accrued interest payable	199		199		95		64		40
Derivative liabilities - interest rate swaps	8,318		8,318		—		8,318		—