Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Fair Value Assets and Liabilities Measured on Recurring and Non Recurring Basis

Assets and liabilities measured at fair value under FASB ASC 820-10 on a recurring and non-recurring basis, including financial assets and liabilities for which the Corporation has elected the fair value option, are summarized below:



	Fair Value Measurement at December 31, 2017 Using
Description	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Financial Assets-Recurring
Available-for-sale investment securities
U.S. Treasury notes	$	50	$	50	$	—	$	—
US Government agency	5,065		—		5,065		—
Mortgage backed	260,455		—		260,455		—
Corporate bonds	4,482		—		4,482		—
Asset backed securities	33,600		—		29,321		4,279
Certificates of deposit	1,981		—		1,981		—
Municipals	100,434		—		100,434		—
CRA Mutual fund	1,379		—		1,379		—
Total available-for-sale investment securities	407,446		50		403,117		4,279
Residential loans held for sale	31,999		—		31,999		—
Derivative assets	420		—		—		420
Total Financial Assets-Recurring	$	439,865	$	50	$	435,116	$	4,699
Financial Liabilities-Recurring
Derivative liabilities	$	195	$	—	$	—	$	195
Total Financial Liabilities-Recurring	$	195	$	—	$	—	$	195
Financial Assets-Non-Recurring
Impaired loans (1)	$	4,626	$	—	$	—	$	4,626
Long-lived asset held for sale	643				—		643
Total Financial Assets-Non-Recurring	$	5,269	$	—	$	—	$	5,269

(1) Represents the carrying value of loans for which adjustments are based on the appraised value of the collateral, if collateral dependent, or the present value of expected future cash flows, discounted at the loan's effective interest rate.



	Fair Value Measurement at December 31, 2016 Using
Description	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Financial Assets-Recurring
Available-for-sale investment securities
US Government agency	$	4,994	$	—	$	4,994	$	—
Mortgage backed	119,807		—		119,807		—
Corporate bonds	8,666		—		8,666		—
Asset backed securities	12,864		—		8,364		4,500
Certificates of deposit	2,009		—		2,009		—
Municipals - nontaxable	44,359		—		44,359		—
CRA Mutual fund	1,391		—		1,391		—
Total available-for-sale investment securities	194,090		—		189,590		4,500
Residential loans held for sale	35,676		—		35,676		—
Derivative assets	993		—		—		993
Total Financial Assets-Recurring	$	230,759	$	—	$	225,266	$	5,493
Financial Liabilities-Recurring
Derivative liabilities	$	325	$	—	$	—	$	325
Total Financial Liabilities-Recurring	$	325	$	—	$	—	$	325
Financial Assets-Non-Recurring
Impaired loans (1)	$	6,922	$	—	$	—	$	6,922
Total Financial Assets-Non-Recurring	$	6,922	$	—	$	—	$	6,922

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows for the twelve month period ended December 31, 2017 and 2016.



	Net Derivatives			Securities Available-For- Sale			Total
	(In Thousands)
Balance January 1, 2017	$	668		$	4,500		$	5,168
Realized and unrealized losses included in earnings	(486		)	—			(486		)
Unrealized gains (losses) included in other comprehensive income	43			(221		)	(178		)
Purchases, settlements, paydowns, and maturities	—			—			—
Transfer into Level 3	—			—			—
Balance December 31, 2017	$	225		$	4,279		$	4,504



	Net Derivatives		Securities Available-For- Sale		Total
	(In Thousands)
Balance January 1, 2016	$	273	$	—	$	273
Realized and unrealized gains included in earnings	395		—		395
Unrealized gains (losses) included in other comprehensive income	—		—		—
Purchases, settlements, paydowns, and maturities	—		—		—
Transfer into Level 3	—		4,500		4,500
Balance December 31, 2016	$	668	$	4,500	$	5,168

Level 3 Fair Value Measurements Qualitative Information Disclosure

The following table presents qualitative information about Level 3 fair value measurements for financial instruments measured at fair value at December 31, 2017 and 2016:



2017
Description	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	(In Thousands)
Financial Assets - Recurring
Asset-backed securities	$	4,279	Valuation service	Discounted cash flows	3% - 6% (5.0%)
Derivative assets	$	420	Market pricing (3)	Estimated pullthrough	75% - 90% (89.0%)
Derivative liabilities	$	195	Market pricing (3)	Estimated pullthrough	75% - 90% (89.0%)
Financial Assets - Non-recurring
Impaired loans - Real estate secured	$	2,736	Appraisal of collateral (1)	Liquidation expenses (2)	0% - 15% (10%)
Impaired loans - Non-real estate secured	$	1,890	Cash flow basis	Liquidation expenses (2)	0% - 10% (5%)


(1)	Fair value is generally determined through independent appraisals of the underlying collateral on real estate secured loans, which generally include various level 3 inputs which are not identifiable.


(2)	Valuations of impaired loans may be adjusted by management for qualitative factors such as liquidation expenses. The range and weighted average of liquidation expense adjustments are presented as a percent of the appraisal.


(3)	Market pricing on derivative assets and liabilities is adjusted by management for the anticipated percent of derivative assets and liabilities that will create a realized gain or loss. The range and weighted average of estimated pull-through is presented.



2016
Description	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	(In Thousands)
Financial Assets - Recurring
Asset-backed securities	$	4,500	Valuation service	Discounted cash flows	3% - 6% (5.0%)
Derivative assets	$	993	Market pricing (3)	Estimated pullthrough	75% - 90% (89.0%)
Derivative liabilities	$	325	Market pricing (3)	Estimated pullthrough	75% - 90% (89.0%)
Financial Assets - Non-recurring
Impaired loans - Real estate secured	$	1,371	Appraisal of collateral (1)	Liquidation expenses (2)	0% - 15% (10%)
Impaired loans - Non-real estate secured	$	5,551	Cash flow basis	Liquidation expenses (2)	0% - 10% (5%)


(1)	Fair value is generally determined through independent appraisals of the underlying collateral on real estate secured loans, which generally include various level 3 inputs which are not identifiable.


(2)	Valuations of impaired loans may be adjusted by management for qualitative factors such as liquidation expenses. The range and weighted average of liquidation expense adjustments are presented as a percent of the appraisal.


(3)	Market pricing on derivative assets and liabilities is adjusted by management for the anticipated percent of derivative assets and liabilities that will create a realized gain or loss. The range and weighted average of estimated pull-through is presented.

Disclosure of Long Lived Assets Held-for-sale

The following tables reflect the difference between the fair value carrying amount of residential mortgage loans held for sale, measured at fair value under FASB ASC 825-10, and the aggregate unpaid principal amount the Corporation is contractually entitled to receive at maturity.



	December 31, 2017
(In Thousands)	Aggregate Fair Value		Difference		Contractual Principal
Residential mortgage loans held for sale	$	31,999	$	1,102	$	30,897



	December 31, 2016
(In Thousands)	Aggregate Fair Value		Difference		Contractual Principal
Residential mortgage loans held for sale	$	35,676	$	1,004	$	34,672

Disclosure of Carrying Amounts and Estimated Fair Value of Financial Instruments

The carrying amounts and estimated fair values of financial instruments at December 31, 2017 and 2016 were as follows:



	December 31,
	2017				2016
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In Thousands)
Financial assets:
Cash and short-term investments	$	122,313	$	122,313	$	91,059	$	91,059
Securities available-for-sale	407,446		407,446		194,090		194,090
Securities held-to-maturity	15,721		16,379		9,200		9,293
Restricted stock	16,572		16,572		10,092		10,092
Loans, net of allowance	1,995,103		2,016,530		1,069,366		1,080,820
Derivatives	420		420		993		993
Total financial assets	$	2,557,575	$	2,579,660	$	1,374,800	$	1,386,347
Financial liabilities:
Deposits	$	2,234,148	$	2,161,134	$	1,054,327	$	1,040,402
Short-term borrowings	145,993		145,396		186,009		185,910
Long-term borrowings	43,883		43,703		60,000		59,954
Derivatives	195		195		325		325
Total financial liabilities	$	2,424,219	$	2,350,428	$	1,300,661	$	1,286,591

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) the reasons for electing a fair value option for each eligible item or group of similar eligible items and (b) if the fair value option is elected for some but not all eligible items within a group of similar eligible items: (i) a description of those similar items and the reasons for partial election and (ii) information of how the group of similar items relates to individual balance sheet line items; (c) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, information of how each line item in the statement of financial position relates to major categories of assets and liabilities presented in accordance with other fair value disclosures; (2) for items included in the income statement: (a) a description of how interest and dividends are measured and where they are reported in the income statement; (b) how the gains or losses attributable to changes in instrument-specific credit risk were determined; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk: (i) qualitative information about the reasons for the changes and (ii) how the gains and losses attributable to changes in instrument-specific credit risk were determined; and (3) certain other disclosures as required or determined to be provided.

+ References + Details