Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2017

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



	December 31, 2017				December 31, 2016
(In Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Level 1 inputs:
Cash, due from banks and deposits in other banks		$77,841		$77,841		$50,551		$50,551
Investment securities	59,117		59,117		43,486		43,486

Level 2 inputs:
Investment securities	253,633		253,633		288,632		288,655
Investment in Federal Home Loan Bank Stock	2,115		2,115		1,965		1,965
Accrued interest receivable	4,385		4,385		3,734		3,734
Interest rate swaps	261		261		71		71

Level 3 inputs:
Loans and loans held for sale	999,445		1,001,346		1,018,611		1,026,350
Purchased receivables, net	22,231		22,231		20,491		20,491
Interest rate lock commitments	873		873		1,137		1,137
Mortgage servicing rights	7,305		7,305		4,157		4,157

Financial liabilities:
Level 2 inputs:
Deposits		$1,258,283		$1,257,670		$1,267,653		$1,266,995
Securities sold under repurchase agreements	27,746		27,746		27,607		27,607
Borrowings	7,362		7,308		4,338		4,186
Accrued interest payable	24		24		64		64
Interest rate swaps	77		77		71		71
Retail interest rate contracts	—		—		78		78
Level 3 inputs:
Accrued liability, RML acquisition payments	—		—		186		186
Junior subordinated debentures	10,310		9,856		18,558		18,398

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)
December 31, 2017
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities		$249,461		$49,878		$199,583		$—
Municipal securities	14,421		—		14,421		—
Corporate bonds	37,132		3,508		33,624		—
Collateralized loan obligations	6,005		—		6,005		—
Preferred stock	5,731		5,731		—		—
Total available for sale securities		$312,750		$59,117		$253,633		$—
Interest rate swaps		$261		$—		$261		$—
Interest rate lock commitments	873		—		—		873
Mortgage servicing rights	7,305		—		—		7,305
Total other assets		$8,439		$—		$261		$8,178
Liabilities:
Interest rate swaps		$77		$—		$77		$—
Total other liabilities		$77		$—		$77		$—
December 31, 2016
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities		$263,361		$30,063		$233,298		$—
Municipal securities	18,157		—		18,157		—
U.S. Agency mortgage-backed securities	2		—		2		—
Corporate bonds	44,732		8,456		36,276		—
Preferred stock	4,967		4,967		—		—
Total available for sale securities		$331,219		$43,486		$287,733		$—
Interest rate swaps		$71		$—		$71		$—
Interest rate lock commitments	1,137		—		—		1,137
Mortgage servicing rights	4,157		—		—		4,157
Total other assets		$5,365		$—		$71		$5,294
Liabilities:
Interest rate swaps		$71		$—		$71		$—
Retail interest rate contracts	78		—		78		—
Total other liabilities		$149		$—		$149		$—

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 years ended December 31, 2017 and 2016:



(In Thousands)	Beginning balance		Change included in earnings			Purchases and issuances		Sales and settlements			Ending balance
December 31, 2017
Interest rate lock commitments		$1,137		($1,615	)		$15,084		($13,733	)		$873
Mortgage servicing rights	4,157		2			3,146		—			7,305
Total		$5,294		($1,613	)		$18,230		($13,733	)		$8,178
December 31, 2016
Interest rate lock commitments		$1,514		($2,063	)		$20,612		($18,926	)		$1,137
Mortgage servicing rights	1,654		(526		)	3,029		—			4,157
Total		$3,168		($2,589	)		$23,641		($18,926	)		$5,294

Fair Value, Assets Measured on Nonrecurring Basis

During 2017 and 2016, 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)
December 31, 2017
Loans measured for impairment		$7,988		$—		$—		$7,988
Other real estate owned	3,927		—		—		3,927
Other assets - equity method investment	2,292		—		—		2,292
Total		$14,207		$—		$—		$14,207
December 31, 2016
Loans measured for impairment		$9,222		$—		$—		$9,222
Other real estate owned	1,700		—		—		1,700
Total		$10,922		$—		$—		$10,922

The following table presents the losses resulting from nonrecurring fair value adjustments for the periods ended December 31, 2017 and 2016, respectively:



(In Thousands)	2017		2016		2015
Loans measured for impairment		$352		$270		$269
Other real estate owned	904		187		361
Other operating expense - impairment on equity method investment	686		—		—
Total loss from nonrecurring measurements		$1,942		$457		$630

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 nonrecurring basis at December 31, 2017 and 2016:



Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average or Rate Range
December 31, 2017
Loans measured for impairment	In-house valuation of collateral	Discount rate	32% - 40%
	Discounted cash flow	Discount rate	7	%
Other real estate owned	Fair value of collateral	Estimated capital costs to complete improvements	25% - 32%
Interest rate lock commitment	External pricing model	Pull through rate	93.05	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	8.94% - 11.34%
		Discount rate	9.42% - 10.05%
December 31, 2016
Loans measured for impairment	In-house valuation of collateral	Discount rate	49% - 100%
	Discounted cash flow	Discount rate	7	%
Other real estate owned	Fair value of collateral	Estimated capital costs to complete improvements	11.50% - 25%
Interest rate lock commitment	External pricing model	Pull through rate	93	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	11.2% - 21.29%
		Discount rate	9.21% - 10.75%