Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2016

Estimated fair values as of the periods indicated are as follows:



	March 31, 2016				December 31, 2015
(In Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Level 1 inputs:
Cash, due from banks and deposits in other banks		$79,275		$79,275		$58,673		$58,673
Investment securities	59,374		59,374		43,033		43,033

Level 2 inputs:
Investment securities	237,890		237,941		248,983		249,039
Investment in Federal Home Loan Bank stock	1,875		1,875		1,816		1,816
Accrued interest receivable	3,880		3,880		3,620		3,620
Interest rate contracts	306		306		125		125

Level 3 inputs:
Loans and loans held for sale	1,009,424		1,009,507		1,031,340		1,033,551
Purchased receivables, net	11,707		11,707		13,326		13,326
Interest rate lock commitments	1,858		1,858		1,514		1,514
Mortgage servicing rights	2,234		2,234		1,654		1,654

Financial liabilities:
Level 2 inputs:
Deposits		$1,246,968		$1,246,814		$1,240,792		$1,240,223
Securities sold under repurchase agreements	25,946		25,946		31,420		31,420
Borrowings	7,727		7,493		2,120		2,101
Accrued interest payable	93		93		56		56
Interest rate contracts	673		673		216		216
Level 3 inputs:
RML earn-out liability	6,775		6,775		6,624		6,624
Junior subordinated debentures	18,558		18,909		18,558		17,433

Unrecognized financial instruments:
Commitments to extend credit⁽¹⁾		$223,854		$2,239		$222,387		$2,224
Standby letters of credit⁽¹⁾	6,580		66		6,399		64

⁽¹⁾Carrying amounts reflect the notional amount of credit exposure under these financial instruments.

Schedule Of Assets And Liabilities Measured At Fair Value On A Recurring Basis

The following table sets forth the balances as of the periods indicated of assets measured at fair value on a recurring basis:



(In Thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2016
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities		$240,669		$35,264		$205,405		$—
Municipal securities	10,092		—		10,092		—
U.S. Agency mortgage-backed securities	7		—		7		—
Corporate bonds	40,712		19,228		21,484		—
Preferred stock	4,882		4,882		—		—
Total available for sale securities		$296,362		$59,374		$236,988		$—
Interest rate contracts		$306		$—		$306		$—
Interest rate lock commitments	1,858		—		—		1,858
Mortgage servicing rights	2,234		—		—		2,234
Total other assets		$4,398		$—		$306		$4,092
Liabilities:
Interest rate contracts		$673		$—		$673		$—
December 31, 2015
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities		$237,436		$35,008		$202,428		$—
Municipal securities	10,326		—		10,326		—
U.S. Agency mortgage-backed securities	809		—		809		—
Corporate bonds	39,018		4,501		34,517		—
Preferred stock	3,524		3,524		—		—
Total available for sale securities		$291,113		$43,033		$248,080		$—
Interest rate contracts		$125		$—		$125		$—
Interest rate lock commitments	1,514		—		—		1,514
Mortgage servicing rights	1,654		—		—		1,654
Total other assets		$3,293		$—		$125		$3,168
Liabilities:
Interest rate contracts		$216		$—		$216		$—

Fair Value, Assets Measured on Recurring Basis

The following table provides a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three months ended March 31, 2016 and 2015, respectively:



(In Thousands)	Beginning balance		Change included in earnings			Purchases and issuances		Sales and settlements			Ending balance		Net change in unrealized gains (losses) relating to items held at end of period
Three Months Ended March 31, 2016
Interest rate lock commitments		$1,514		$188			$4,961		($4,805	)		$1,858		$1,858
Mortgage servicing rights	1,654		(112		)	692		—			2,234		—
Total		$3,168		$76			$5,653		($4,805	)		$4,092		$1,858
Three Months Ended March 31, 2015
Interest rate lock commitments		$841		$1,715			$5,185		($5,769	)		$1,972		$1,972
Mortgage servicing rights		$1,010		($39	)		$—		$—			$971		$—
Total		$1,851		$1,676			$5,185		($5,769	)		$2,943		$1,972

Schedule Of Asset Impairment

As of and for the three months ending March 31, 2016 and 2015, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis, except for certain assets as shown in the following table. For loans measured for impairment, the Company classifies fair value measurements using observable inputs, such as external appraisals, as Level 2 valuations in the fair value hierarchy, and unobservable inputs, such as in-house evaluations, as Level 3 valuations in the fair value hierarchy.



(In Thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total (gains) losses
March 31, 2016
Loans measured for impairment		$594		$—		$—		$594		($225	)
Total		$594		$—		$—		$594		($225	)
March 31, 2015
Loans measured for impairment		$2,725		$—		$—		$2,725		$340
Other real estate owned	649		—		—		649		268
Total		$3,374		$—		$—		$3,374		$608

Schedule of Valuation Assumptions

The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and nonrecurring basis at March 31, 2016:



Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average Rate Range
Loans measured for impairment	In-house valuation of collateral	Discount rate	100%
Interest rate lock commitment	External pricing model	Pull through rate	92.01	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	10.12% - 21.30%
		Discount rate	8.95% - 10.50%
RML earn-out liability	Discounted cash flow	Discount rate	0.55% - 6.88%
		Financial projections of mortgage operations	NA⁽¹⁾