Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Fair value of assets and liabilities

The following table represents recurring level III assets:

(Dollars in thousands)	Interest Rate Lock Commitments		Municipal Securities			Total
Balance at December 31, 2017	$	1,426	$	22,909		$	24,335
Realized and unrealized gains included in earnings	886		—			886
Unrealized loss included in other comprehensive income (loss)	—		(338		)	(338		)
Balance at March 31, 2018	$	2,312	$	22,571		$	24,883

Balance at December 31, 2016	$	1,546	$	6,135		$	7,681
Realized and unrealized gains included in earnings	1,309		—			1,309
Unrealized gain included in other comprehensive income (loss)	—		54			54
Balance at March 31, 2017	$	2,855	$	6,189		$	9,044

Quantitative Information About the Level III Significant Unobservable Inputs for Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

The following tables presents quantitative information about the Level III significant unobservable inputs for assets and liabilities measured at fair value at March 31, 2018 and December 31, 2017.



	Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
March 31, 2018
Nonrecurring measurements:
Impaired loans	$	13,836	Appraisal of collateral ¹	Appraisal adjustments ²	20% - 62%
				Liquidation expense ³	5% - 10%

Other real estate owned	$	1,910	Appraisal of collateral ¹	Appraisal adjustments ²	20% - 30%
				Liquidation expense ³	5% - 10%

Recurring measurements:
Municipal securities	$	22,571	Appraisal of bond ³	Bond appraisal adjustment ⁴	5% - 15%

Interest rate lock commitments	$	2,312	Pricing model	Pull through rates	80% - 83%



	Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
December 31, 2017
Nonrecurring measurements:
Impaired loans	$	14,368	Appraisal of collateral ¹	Appraisal adjustments ²	20% - 62%
				Liquidation expense ³	5% - 10%

Other real estate owned	$	1,346	Appraisal of collateral ¹	Appraisal adjustments ²	20% - 30%
				Liquidation expense ³	5% - 10%

Recurring measurements:
Municipal securities	$	22,909	Appraisal of bond ³	Bond appraisal adjustment ⁴	5% - 15%

Interest rate lock commitments	$	1,426	Pricing model	Pull through rates	73% - 85%

¹ Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level III inputs which are not identifiable.

² Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

³ Fair value determined through independent analysis of liquidity, rating, yield and duration.

⁴ Appraisals may be adjusted for qualitative factors such as local economic conditions.

Carrying Values and Estimated Fair Values of Financial Instruments

The carrying values and estimated fair values of the Company’s financial instruments are summarized as follows:

Fair Value Measurements at:

(Dollars in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)
March 31, 2018
Financial assets:
Cash and cash equivalents	$	23,630	$	23,630	$	23,630	$	—	$	—
Certificates of deposits with other banks	14,778		14,695		—		14,695		—
Securities available-for-sale	226,504		226,504		—		203,933		22,571
Equity securities	6,979		6,979		6,079		—		900
Loans held for sale	51,280		51,280		—		51,280		—
Loans, net	1,147,106		1,137,716		—		—		1,137,716
Mortgage servicing rights	179		179		—		—		179
Interest rate lock commitment	2,312		2,312		—		—		2,312
Interest rate swap	765		765		—		765		—
Interest rate cap	103		103		—		103		—
Accrued interest receivable	5,915		5,915		—		1,644		4,271

Financial liabilities:
Deposits	$	1,153,907	$	1,114,189	$	—	$	1,114,189	$	—
Repurchase agreements	20,676		20,676		—		20,676		—
FHLB and other borrowings	207,370		207,372		—		207,372		—
Mortgage-backed security hedges	114		114		—		114		—
Interest rate swap	765		765		—		765		—
Accrued interest payable	908		908		—		908		—
Subordinated debt	33,524		35,117		—		35,117		—

December 31, 2017
Financial assets:
Cash and cash equivalents	$	20,305	$	20,305	$	20,305	$	—	$	—
Certificates of deposits with other banks	14,778		14,985		—		14,695		—
Securities available-for-sale	231,507		231,507		1,607		206,991		22,909
Loans held for sale	66,794		66,794		—		66,794		—
Loans, net	1,096,063		1,093,824		—		—		1,093,824
Mortgage servicing rights	182		182		—		—		182
Interest rate lock commitment	1,426		1,426		—		—		1,426
Interest rate swap	268		268		—		268		—
Interest rate cap	33		33		—		33		—
Accrued interest receivable	5,296		5,296		—		1,241		4,055

Financial liabilities:
Deposits	$	1,159,580	$	1,126,615	$	—	$	1,126,615	$	—
Repurchase agreements	22,403		22,403		—		22,403		—
FHLB and other borrowings	152,169		152,190		—		152,190		—
Mortgage-backed security hedges	78		78		—		78		—
Interest rate swap	268		268		—		268		—
Accrued interest payable	643		643		—		643		—
Subordinated debt	33,524		35,117		—		35,117		—

Recurring

Fair value of assets and liabilities

Financial Assets and Liabilities Measured at Fair Value

The following tables present the assets reported on the consolidated statements of financial condition at their fair value on a recurring basis as of March 31, 2018 and December 31, 2017 by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.



	March 31, 2018
(Dollars in thousands)	Level I		Level II		Level III		Total
Assets:
U.S. Government Agency securities	$	—	$	80,795	$	—	$	80,795
U.S. Sponsored Mortgage backed securities	—		56,318		—		56,318
Municipal securities	—		57,534		22,571		80,105
Other securities	—		9,286		—		9,286
Equity securities	6,079		—		900		6,979
Loans held for sale	—		51,280		—		51,280
Interest rate lock commitment	—		—		2,312		2,312
Interest rate swap	—		765		—		765
Interest rate cap	—		103		—		103
Liabilities:
Interest rate swap	—		765		—		765
Mortgage-backed security hedges	—		114		—		114



	December 31, 2017
(Dollars in thousands)	Level I		Level II		Level III		Total
Assets:
U.S. Government Agency securities	$	—	$	80,945	$	—	$	80,945
U.S. Sponsored Mortgage backed securities	—		58,154		—		58,154
Municipal securities	—		52,933		22,909		75,842
Equity securities	1,607		14,959		—		16,566
Loans held for sale	—		66,794		—		66,794
Interest rate lock commitment	—		—		1,426		1,426
Interest rate swap	—		268		—		268
Interest rate cap	—		33		—		33
Liabilities:
Interest rate swap	—		268		—		268
Mortgage-backed security hedges	—		78		—		78

Non-recurring

Fair value of assets and liabilities

Financial Assets and Liabilities Measured at Fair Value

Assets measured at fair value on a nonrecurring basis as of March 31, 2018 and December 31, 2017 are included in the table below:



	March 31, 2018
(Dollars in thousands)	Level I		Level II		Level III		Total
Impaired loans	$	—	$	—	$	13,836	$	13,836
Other real estate owned	—		—		1,910		1,910



	December 31, 2017
(Dollars in thousands)	Level I		Level II		Level III		Total
Impaired loans	$	—	$	—	$	14,368	$	14,368
Other real estate owned	—		—		1,346		1,346