Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2018

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



	December 31, 2018				December 31, 2017
(In Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Level 1 inputs:
Cash, due from banks and deposits in other banks		$77,538		$77,538		$77,841		$77,841
Investment securities available for sale	74,549		74,549		53,386		53,386
Marketable equity securities	7,265		7,265		5,731		5,731

Level 2 inputs:
Investment securities available for sale	197,061		197,061		253,633		253,633
Investment in Federal Home Loan Bank Stock	2,101		2,101		2,115		2,115
Accrued interest receivable	4,817		4,817		4,385		4,385
Interest rate swaps	853		853		261		261

Level 3 inputs:
Loans and loans held for sale¹	1,019,056		995,115		999,445		1,001,346
Purchased receivables, net	14,406		14,406		22,231		22,231
Interest rate lock commitments	978		978		873		873
Mortgage servicing rights	10,821		10,821		7,305		7,305
Commercial servicing rights	1,030		1,030		—		—

Financial liabilities:
Level 2 inputs:
Deposits		$1,228,088		$1,227,086		$1,258,283		$1,257,670
Securities sold under repurchase agreements	34,278		34,278		27,746		27,746
Borrowings	7,241		6,965		7,362		7,308
Accrued interest payable	22		22		24		24
Interest rate swaps	246		246		77		77
Retail interest rate contracts	262		262		—		—
Level 3 inputs:
Junior subordinated debentures	10,310		10,809		10,310		9,856

¹Carrying amount is net of unearned income. In accordance with the prospective adoption of ASU 2016-01, the fair value of loans and loans held for sale as of December 31, 2018 was measured using an exit price notion. The fair value of loans as of December 31, 2017 was measured using an entry price notion.

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, 2018
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities		$208,860		$54,863		$153,997		$—
Municipal securities	9,084		—		9,084		—
Corporate bonds	39,780		19,686		20,094		—
Collateralized loan obligations	13,886		—		13,886		—
Total available for sale securities		$271,610		$74,549		$197,061		$—
Marketable equity securities		$7,265		$7,265		$—		$—
Total marketable equity securities		$7,265		$7,265		$—		$—
Interest rate swaps		$853		$—		$853		$—
Interest rate lock commitments	978		—		—		978
Mortgage servicing rights	10,821		—		—		10,821
Commercial servicing rights	1,030		—		—		1,030
Total other assets		$13,682		$—		$853		$12,829
Liabilities:
Interest rate swaps		$246		$—		$246		$—
Retail interest rate contracts	262		—		262		—
Total other liabilities		$508		$—		$508		$—
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		—
Total available for sale securities		$307,019		$53,386		$253,633		$—
Marketable equity securities		$5,731		$5,731		$—		$—
Total marketable equity securities		$5,731		$5,731		$—		$—
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		$—

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, 2018 and 2017:



(In Thousands)	Beginning balance		Change included in earnings			Purchases and issuances		Sales and settlements			Ending balance
December 31, 2018
Interest rate lock commitments		$873		($2,018	)		$18,585		($16,462	)		$978
Mortgage servicing rights	7,305		(125		)	3,641		—			10,821
Commercial servicing rights	—		972			58		—			1,030
Total		$8,178		($1,171	)		$22,284		($16,462	)		$12,829
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

Fair Value, Assets Measured on Nonrecurring Basis

During 2018 and 2017, 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, 2018
Loans measured for impairment		$848		$—		$—		$848
Other assets - equity method investment	709		—		—		709
Total		$1,557		$—		$—		$1,557
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

The following table presents the (income) losses resulting from nonrecurring fair value adjustments for the periods ended December 31, 2018, 2017 and 2016, respectively:



(In Thousands)	2018			2017		2016
Loans measured for impairment		($952	)		$352		$270
Other real estate owned	—			904		187
Other operating expense - impairment on equity method investment	804			686		—
Total (income) loss from nonrecurring measurements		($148	)		$1,942		$457

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 at December 31, 2018 and 2017:



Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average or Rate Range
December 31, 2018
Loans measured for impairment	In-house valuation of collateral	Discount rate	65	%
	Discounted cash flow	Discount rate	8.25% - 8.50%
Interest rate lock commitment	External pricing model	Pull through rate	91.66	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	7.62% - 9.87%
		Discount rate	9.93% - 10.47%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	7.64% - 15.67%
		Discount rate	11.49	%
December 31, 2017
Loans measured for impairment	In-house valuation of collateral	Discount rate	32% - 40%
	Discounted cash flow	Discount rate	14	%
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	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	8.94% - 11.34%
		Discount rate	9.42% - 10.05%