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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

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


	September 30, 2020		December 31, 2019
(In Thousands)	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Financial assets:
Level 1 inputs:
Cash, due from banks and deposits in other banks	$101,129	$101,129	$95,424	$95,424
Investment securities available for sale	59,865	59,865	75,456	75,456
Marketable equity securities	8,534	8,534	7,945	7,945

Level 2 inputs:
Investment securities available for sale	155,504	155,504	200,682	200,682
Investment in Federal Home Loan Bank stock	2,508	2,508	2,138	2,138
Accrued interest receivable	8,024	8,024	4,512	4,512
Interest rate swaps	8,846	8,846	2,950	2,950

Level 3 inputs:
Loans and loans held for sale	1,620,826	1,602,727	1,111,205	1,095,031
Purchased receivables, net	13,520	13,520	24,373	24,373
Interest rate lock commitments	6,519	6,519	810	810
Mortgage servicing rights	10,589	10,589	11,920	11,920
Commercial servicing rights	1,286	1,286	1,214	1,214

Financial liabilities:
Level 2 inputs:
Deposits	$1,806,133	$1,808,534	$1,372,351	$1,373,647

Borrowings	13,737	15,119	8,891	9,216
Accrued interest payable	139	139	23	23
Interest rate swaps	11,002	11,002	3,484	3,484
Retail interest rate contracts	466	466	71	71

Level 3 inputs:

Junior subordinated debentures	10,310	10,610	10,310	11,000

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 and liabilities 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)
September 30, 2020
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$157,552	$37,691	$119,861	$—
Municipal securities	2,336	—	2,336	—

Corporate bonds	27,215	22,174	5,041	—
Collateralized loan obligations	28,266	—	28,266	—
Total available for sale securities	$215,369	$59,865	$155,504	$—
Marketable equity securities	$8,534	$8,534	$—	$—
Total marketable equity securities	$8,534	$8,534	$—	$—
Interest rate swaps	8,846	—	8,846	—
Interest rate lock commitments	6,519	—	—	6,519
Mortgage servicing rights	10,589	—	—	10,589
Commercial servicing rights	1,286	—	—	1,286
Total other assets	$27,240	$—	$8,846	$18,394
Liabilities:
Interest rate swaps	$11,002	$—	$11,002	$—
Retail interest rate contracts	466	—	466	—
Total other liabilities	$11,468	$—	$11,468	$—
December 31, 2019
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$211,852	$57,480	$154,372	$—
Municipal securities	3,297	—	3,297	—

Corporate bonds	35,066	17,976	17,090	—
Collateralized loan obligations	25,923	—	25,923	—
Total available for sale securities	$276,138	$75,456	$200,682	$—
Marketable equity securities	$7,945	$7,945	$—	$—
Total marketable securities	$7,945	$7,945	$—	$—
Interest rate swaps	2,950	—	2,950	—
Interest rate lock commitments	810	—	—	810
Mortgage servicing rights	11,920	—	—	11,920
Commercial servicing rights	1,214	—	—	1,214
Total other assets	$16,894	$—	$2,950	$13,944
Liabilities:
Interest rate swaps	$3,484	$—	$3,484	$—
Retail interest rate contracts	71	—	71	—
Total other liabilities	$3,555	$—	$3,555	$—

Fair Value, Assets Measured on Recurring Basis using Significant Unobservable Inputs

The following tables provide a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine-month periods ended September 30, 2020 and 2019:


(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 September 30, 2020
Interest rate lock commitments	$4,653	($1,784)	$15,329	($11,679)	$6,519	$6,519
Mortgage servicing rights	10,721	(1,505)	1,373	—	10,589	—
Commercial servicing rights	1,162	(101)	225	—	1,286	—
Total	$16,536	($3,390)	$16,927	($11,679)	$18,394	$6,519
Three Months Ended September 30, 2019
Interest rate lock commitments	$2,072	($553)	$4,569	($4,725)	$1,363	$1,363
Mortgage servicing rights	10,836	(663)	1,033	—	11,206	—
Commercial servicing rights	999	(20)	39	—	1,018	—
Total	$13,907	($1,236)	$5,641	($4,725)	$13,587	$1,363


(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
Nine Months Ended September 30, 2020
Interest rate lock commitments	$810	($4,923)	$40,441	($29,809)	$6,519	$6,519
Mortgage servicing rights	11,920	(4,363)	3,032	—	10,589	—
Commercial servicing rights	1,214	(180)	252	—	1,286	—
Total	$13,944	($9,466)	$43,725	($29,809)	$18,394	$6,519
Nine Months Ended September 30, 2019
Interest rate lock commitments	$978	($1,431)	$12,759	($10,943)	$1,363	$1,363
Mortgage servicing rights	10,821	(2,287)	2,672	—	11,206	—
Commercial servicing rights	1,030	(118)	106	—	1,018	—
Total	$12,829	($3,836)	$15,537	($10,943)	$13,587	$1,363

Fair Value, Assets Measured on Nonrecurring Basis

As of and for the periods ending September 30, 2020 and December 31, 2019, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis. 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)
September 30, 2020
Loans measured for impairment	$202	$—	$—	$202


Total	$202	$—	$—	$202
December 31, 2019
Loans measured for impairment	$561	$—	$—	$561


Total	$561	$—	$—	$561

The following table presents the gains resulting from nonrecurring fair value adjustments for the three and nine-month periods ended September 30, 2020 and 2019:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In Thousands)	2020	2019	2020	2019
Loans measured for impairment	$10	$96	$24	$89


Total loss from nonrecurring measurements	$10	$96	$24	$89

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 September 30, 2020 and December 31, 2019:


Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average Rate Range
September 30, 2020
Loans measured for impairment	In-house valuation of collateral	Discount rate	40	%


Interest rate lock commitment	External pricing model	Pull through rate	90.24	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	9.54% - 14.50%
		Discount rate	7.75	%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	7.64% - 15.67%
		Discount rate	11.70	%
December 31, 2019
Loans measured for impairment	In-house valuation of collateral	Discount rate	25	%


Interest rate lock commitment	External pricing model	Pull through rate	92.65	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	9.11% - 10.67%
		Discount rate	8.51% - 8.66%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	7.64% - 15.67%
		Discount rate	11.70	%