Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2024

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


	June 30, 2024		December 31, 2023
(In Thousands)	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Financial assets:
Level 1 inputs:
Cash, due from banks and deposits in other banks	$54,422	$54,422	$118,530	$118,530
Investment securities available for sale	289,442	289,442	310,896	310,896
Marketable equity securities	12,381	12,381	13,153	13,153

Level 2 inputs:
Investment securities available for sale	295,522	295,522	327,040	327,040
Investment in Federal Home Loan Bank stock	4,929	4,929	2,980	2,980
Loans held for sale	85,926	85,926	31,974	31,974
Accrued interest receivable	13,050	13,050	11,958	11,958
Interest rate swaps	14,172	14,172	11,836	11,836
Retail interest rate contracts	120	120	—	—

Level 3 inputs:
Investment securities held to maturity	36,750	33,709	36,750	33,413
Loans	1,875,907	1,688,042	1,789,497	1,686,362
Purchased receivables, net	25,722	25,722	36,842	36,842
Interest rate lock commitments	1,059	1,059	342	342
Mortgage servicing rights	21,077	21,077	19,564	19,564
Commercial servicing rights	2,116	2,116	2,200	2,200

Financial liabilities:
Level 2 inputs:
Deposits	$2,463,806	$2,460,917	$2,485,055	$2,482,937

Accrued interest payable	697	697	202	202
Borrowings	43,961	40,874	13,675	11,872
Interest rate swaps	12,534	12,534	10,470	10,470
Retail interest rate contracts	—	—	13	13

Level 3 inputs:

Junior subordinated debentures	10,310	11,641	10,310	12,030

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)
June 30, 2024
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$525,683	$280,749	$244,934	$—


Corporate bonds	8,693	8,693	—	—
Collateralized loan obligations	50,588	—	50,588	—
Total available for sale securities	$584,964	$289,442	$295,522	$—
Marketable equity securities	$12,381	$12,381	$—	$—
Total marketable equity securities	$12,381	$12,381	$—	$—
Interest rate swaps	$14,228	$—	$14,228	$—
Interest rate lock commitments	1,059	—	—	1,059
Mortgage servicing rights	21,077	—	—	21,077
Commercial servicing rights	2,116	—	—	2,116
Retail interest rate contracts	120	—	—	120
Total other assets	$38,600	$—	$14,228	$24,372
Liabilities:
Interest rate swaps	$12,534	$—	$12,534	$—

Total other liabilities	$12,534	$—	$12,534	$—
December 31, 2023
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$564,125	$300,274	$263,851	$—
Municipal securities	816	—	816	—

Corporate bonds	13,624	10,622	3,002	—
Collateralized loan obligations	59,371	—	59,371	—
Total available for sale securities	$637,936	$310,896	$327,040	$—
Marketable equity securities	$13,153	$13,153	$—	$—
Total marketable securities	$13,153	$13,153	$—	$—
Interest rate swaps	$11,836	$—	$11,836	$—
Interest rate lock commitments	342	—	—	342
Mortgage servicing rights	19,564	—	—	19,564
Commercial servicing rights	2,200	—	—	2,200

Total other assets	$33,942	$—	$11,836	$22,106
Liabilities:
Interest rate swaps	$10,470	$—	$10,470	$—
Retail interest rate contracts	13	—	13	—
Total other liabilities	$10,483	$—	$10,483	$—

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 six-month periods ended June 30, 2024 and 2023:


(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 June 30, 2024
Interest rate lock commitments	$765	($453)	$3,416	($2,669)	$1,059	$1,059
Mortgage servicing rights	20,055	(81)	1,103	—	21,077	—
Commercial servicing rights	2,100	(16)	32	—	2,116	—
Total	$22,920	($550)	$4,551	($2,669)	$24,252	$1,059
Three Months Ended June 30, 2023
Interest rate lock commitments	$685	($378)	$2,735	($2,191)	$851	$851
Mortgage servicing rights	18,303	(574)	519	—	18,248	—
Commercial servicing rights	2,170	(56)	25	—	2,139	—
Total	$21,158	($1,008)	$3,279	($2,191)	$21,238	$851


(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
Six Months Ended June 30, 2024
Interest rate lock commitments	$342	($728)	$5,929	($4,484)	$1,059	$1,059
Mortgage servicing rights	19,564	(106)	1,619	—	21,077	—
Commercial servicing rights	2,200	(145)	61	—	2,116	—
Total	$22,106	($979)	$7,609	($4,484)	$24,252	$1,059
Six Months Ended June 30, 2023
Interest rate lock commitments	$440	($552)	$4,232	($3,269)	$851	$851
Mortgage servicing rights	18,635	(1,369)	982	—	18,248	—
Commercial servicing rights	2,129	(105)	115	—	2,139	—
Total	$21,204	($2,026)	$5,329	($3,269)	$21,238	$851

Fair Value, Assets Measured on Nonrecurring Basis

As of and for the periods ending June 30, 2024 and December 31, 2023, 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 individually measured for credit losses, 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)
June 30, 2024
Loans individually measured for credit losses	$295	$—	$—	$295


Total	$295	$—	$—	$295
December 31, 2023
Loans individually measured for credit losses	$—	$—	$—	$—


Total	$—	$—	$—	$—

The following table presents the (gains) losses resulting from nonrecurring fair value adjustments for the three and six-month periods ended June 30, 2024 and 2023:


	Three Months Ended June 30,		Six Months Ended June 30,
(In Thousands)	2024	2023	2024	2023
Loans individually measured for credit losses	($182)	($27)	$2	$—


Total loss from nonrecurring measurements	($182)	($27)	$2	$—

Schedule of Valuation Assumptions

The following tables provide 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 June 30, 2024 and December 31, 2023:


Financial Instrument	Valuation Technique - Recurring Basis	Unobservable Input	Weighted Average Rate Range
June 30, 2024



Interest rate lock commitment	External pricing model	Pull through rate	92.42	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	6.10% - 15.14%
		Discount rate	9.50% - 11.00%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	3.99% - 18.90%
		Discount rate	9.50	%
December 31, 2023



Interest rate lock commitment	External pricing model	Pull through rate	89.84	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	6.13% - 25.33%
		Discount rate	9.50% - 11.00%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	3.99% - 18.90%
		Discount rate	9.50	%


Financial Instrument	Valuation Technique - Nonrecurring Basis	Unobservable Input	Weighted Average Rate Range
June 30, 2024
Loans individually measured for credit losses	In-house valuation of collateral	Discount rate	7%

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References + Details