Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2019

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



	March 31, 2019				December 31, 2018
(In Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Level 1 inputs:
Cash, due from banks and deposits in other banks		$78,933		$78,933		$77,538		$77,538
Investment securities available for sale	88,331		88,331		74,549		74,549
Marketable equity securities	7,798		7,798		7,265		7,265

Level 2 inputs:
Investment securities available for sale	186,110		186,110		197,061		197,061
Investment in Federal Home Loan Bank stock	2,071		2,071		2,101		2,101
Accrued interest receivable	5,010		5,010		4,817		4,817
Interest rate swaps	514		514		853		853

Level 3 inputs:
Loans and loans held for sale	1,012,552			$994,382	1,019,056		995,115
Purchased receivables, net	21,286		21,286		14,406		14,406
Interest rate lock commitments	1,237		1,237		978		978
Mortgage servicing rights	11,254		11,254		10,821		10,821
Commercial servicing rights	1,047		1,047		1,030		1,030

Financial liabilities:
Level 2 inputs:
Deposits		$1,228,018		$1,227,692		$1,228,088		$1,227,086
Securities sold under repurchase agreements	34,621		34,621		34,278		34,278
Borrowings	7,200		7,098		7,241		6,965
Accrued interest payable	57		57		22		22
Interest rate swaps	300		300		246		246
Retail interest rate contracts	130		130		262		262

Level 3 inputs:
Junior subordinated debentures	10,310		11,191		10,310		10,809

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, 2019
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities		$212,297		$55,037		$157,260		$—
Municipal securities	3,898		—		3,898		—
Corporate bonds	40,337		33,294		7,043		—
Collateralized loan obligations	17,909		—		17,909		—
Total available for sale securities		$274,441		$88,331		$186,110		$—
Marketable equity securities		$7,798		$7,798		$—		$—
Total marketable equity securities		$7,798		$7,798		$—		$—
Interest rate swaps		$514		$—		$514		$—
Interest rate lock commitments	1,237		—		—		1,237
Mortgage servicing rights	11,254		—		—		11,254
Commercial servicing rights	1,047		—		—		1,047
Total other assets		$14,052		$—		$514		$13,538
Liabilities:
Interest rate swaps		$300		$—		$300		$—
Retail interest rate contracts	130		—		130		—
Total other liabilities		$430		$—		$430		$—
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 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		$—

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-month periods ended March 31, 2019 and 2018:



(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, 2019
Interest rate lock commitments		$978		($329	)		$3,096		($2,508	)		$1,237		$1,237
Mortgage servicing rights	10,821		(674		)	1,107		—			11,254		—
Commercial servicing rights	1,030		(23		)	40		—			1,047		—
Total		$12,829		($1,026	)		$4,243		($2,508	)		$13,538		$1,237
Three Months Ended March 31, 2018
Interest rate lock commitments		$873		($400	)		$3,684		($2,834	)		$1,323		$1,323
Mortgage servicing rights	7,305		(26		)	760		—			8,039		—
Total		$8,178		($426	)		$4,444		($2,834	)		$9,362		$1,323

Fair Value, Assets Measured on Nonrecurring 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, 2019
Loans measured for impairment		$1,706		$—		$—		$1,706
Total		$1,706		$—		$—		$1,706
December 31, 2018
Loans measured for impairment		$848		$—		$—		$848
Other assets - equity method investment	709		—		—		709
Total		$1,557		$—		$—		$1,557

The following table presents the gains and (losses) resulting from nonrecurring fair value adjustments for the three-month periods ended March 31, 2019 and 2018:



	Three Months Ended March 31,
(In Thousands)	2019		2018
Loans measured for impairment		$292		($594	)
Total loss from nonrecurring measurements		$292		($594	)

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, 2019 and December 31, 2018:



Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average Rate Range
March 31, 2019
Loans measured for impairment	In-house valuation of collateral	Discount rate	10% - 61.50%
Interest rate lock commitment	External pricing model	Pull through rate	92.12	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	8.31% - 9.25%
		Discount rate	9.60% - 10.00%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	7.64% - 15.67%
		Discount rate	11.49	%
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	%