Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2016

Estimated Fair Values of Financial Instruments

The estimated fair values of the Company’s financial instruments are as follows (in thousands):

			Fair Value
September 30, 2016	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	117,297	$	117,297	$	—	$	—	$	117,297
Available-for-sale securities		553,357		—		548,808		4,549		553,357
Federal Home Loan Bank Stock		6,528		—		—		6,528		6,528
Loans, net		1,770,053		—		1,763,866		2,968		1,766,834
Loans held for sale		486,601		—		486,601		—		486,601
Interest receivable		7,040		—		7,040		—		7,040
Mortgage servicing rights, net		46,291		—		—		46,291		46,291
Derivatives		16,811		—		16,811		—		16,811
Financial liabilities:
Deposits:
Without stated maturities	$	2,241,048	$	2,241,048	$	—	$	—	$	2,241,048
With stated maturities		399,024		—		398,592		—		398,592
Securities sold under agreement to repurchase		29,137		29,137		—		—		29,137
Short term borrowings		80,000		80,000		—		—		80,000
Interest payable		518		176		342		—		518
Long-term debt		45,291		—		44,385		—		44,385
Derivatives		4,807		—		4,807		—		4,807

			Fair Value
December 31, 2015	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	97,723	$	97,723	$	—	$	—	$	97,723
Available-for-sale securities		649,387		—		644,531		4,856		649,387
Federal Home Loan Bank Stock		6,528		—		—		6,528		6,528
Loans, net		1,677,403		—		1,638,506		36,951		1,675,457
Loans held for sale		273,196		—		273,196		—		273,196
Interest receivable		6,763		—		6,763		—		6,763
Mortgage servicing rights, net		29,711		—		—		29,711		29,711
Derivatives		6,023		—		6,023		—		6,023
Financial liabilities:
Deposits:
Without stated maturities	$	2,112,915		2,112,915	$	—	$	—		2,112,915
With stated maturities		325,559		—		323,624		—		323,624
Securities sold under agreement to repurchase		105,133		105,133		—		—		105,133
Short term borrowings		18,000		18,000		—		—		18,000
Interest payable		550		244		306		—		550
Long-term debt		56,616		—		55,484		—		55,484
Derivatives		369		—		369		—		369

Reconciliation for Assets and Liabilities Measured at Fair Value on Recurring Basis using Significant Unobservable Inputs or Level 3 Inputs

The following table provides a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs, during the nine months ended September 30, 2016 and 2015 (in thousands):

	Available-for-sale securities September 30,
	2016			2015
Balance at beginning of period	$	4,856		$	4,688
Realized gains included in net income		—			—
Unrealized gains included in other comprehensive income		—			118
Purchases		—			—
Sales		(307	)		—
Balance at end of period	$	4,549		$	4,806

Information About Significant Unobservable Inputs (Level 3) Used in Valuation of Assets Measured at Fair Value on Nonrecurring Basis

The following table presents information as of September 30, 2016 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:

Financial instrument	Fair Value		Valuation technique	Significant Unobservable inputs	Range of inputs
Impaired loans	$	2,968	Appraised value of collateral	Discount for comparable sales	0%-30%
Foreclosed assets	$	2,564	Appraised value of property less costs to sell	Discount for costs to sell	0%-10%
Mortgage servicing rights, net	$	46,291	Discounted cash flows	See Note 6	See Note 6

The following table presents information as of December 31, 2015 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:

Financial instrument	Fair Value		Valuation technique	Significant Unobservable inputs	Range of inputs
Impaired loans	$	29,135	Appraised value of collateral	Discount for comparable sales	0%-30%
Foreclosed assets	$	6,275	Appraised value of property less costs to sell	Discount for costs to sell	0%-46%
Mortgage servicing rights, net	$	29,711	Discounted cash flows	See Note 6	See Note 6

Differences between Fair Value and Principal Balance for Loans Held for Sale Measured at Fair Value

The following table summarizes the differences between the fair value and the principal balance for loans held for sale measured at fair value as of September 30, 2016 and December 31, 2015:

September 30, 2016	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	486,601	$	465,735	$	20,866
Past due loans of 90 days or more		—		—		—
Nonaccrual loans		—		—		—

December 31, 2015
Mortgage loans held for sale measured at fair value	$	273,196	$	264,968	$	8,228
Past due loans of 90 days or more		—		—		—
Nonaccrual loans		—		—		—

Fair Value, Measurements, Recurring

Balances and Levels of Assets Measured at Fair Value on Recurring and Nonrecurring Basis

The balances and levels of the assets measured at fair value on a recurring basis at September 30, 2016 are presented in the following tables (in thousands):

At September 30, 2016	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Recurring valuations:
Financial assets:
Available-for-sale securities:
U.S. government agency securities	$	—	$	2,501	$	—	$	2,501
Mortgage-backed securities		—		433,564		—		433,564
Municipals, tax-exempt		—		104,112		—		104,112
Treasury securities		—		4,506		—		4,506
Equity securities		—		4,125		4,549		8,674
Total	$	—	$	548,808	$	4,549	$	553,357
Loans held for sale		—		486,601		—		486,601
Derivatives		—		16,811		—		16,811
Financial Liabilities:
Derivatives		—		4,807		—		4,807

The balances and levels of the assets measured at fair value on a recurring basis at December 31, 2015 are presented in the following tables (in thousands):

At December 31, 2015	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Recurring valuations:
Financial assets:
Available-for-sale securities:
U.S. government agency securities	$	—	$	33,808	$	—	$	33,808
Mortgage-backed securities		—		522,373		—		522,373
Municipals, tax-exempt		—		79,837		—		79,837
Treasury securities		—		4,485		—		4,485
Equity securities		—		4,028		4,856		8,884
Total	$	—	$	644,531	$	4,856	$	649,387
Loans held for sale		—		273,196		—		273,196
Derivatives		—		6,023		—		6,023
Financial Liabilities:
Derivatives	$	—	$	369	$	—	$	369

Fair Value, Measurements, Nonrecurring

Balances and Levels of Assets Measured at Fair Value on Recurring and Nonrecurring Basis

The balances and levels of the assets measured at fair value on a non-recurring basis at September 30, 2016 are presented in the following tables (in thousands):

At September 30, 2016	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Non-recurring valuations:
Financial assets:
Foreclosed assets	$	—	$	—	$	2,564	$	2,564
Mortgage servicing rights	$	—	$	—		46,291		46,291
Impaired loans:
Commercial and industrial		—		—		362		362
Commercial real estate:
Owner occupied		—		—		825		825
Non-owner occupied		—		—		1,352		1,352
Residential real estate:
1-4 family mortgage		—		—		110		110
Residential line of credit		—		—		315		315
Consumer and other		—		—		4		4
Total	$	—	$	—	$	2,968	$	2,968

The balances and levels of the assets measured at fair value on a non-recurring basis at December 31, 2015 are presented in the following tables (in thousands):

At December 31, 2015	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Non-recurring valuations:
Financial assets:
Foreclosed assets	$	—	$	—	$	6,275	$	6,275
Impaired Loans:
Commercial and industrial		—		—		2,007		2,007
Commercial real estate:								—
Owner occupied		—		—		6,493		6,493
Non-owner occupied		—		—		7,572		7,572
Construction		—		—		6,896		6,896
Residential real estate:								—
1-4 family mortgage		—		—		6,127		6,127
Multifamily		—		—		36		36
Consumer and other		—		—		4		4
Total	$	—	$	—	$	29,135	$	29,135