Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Estimated Fair Values of Financial Instruments

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

			Fair Value
September 30, 2017	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	97,165	$	97,165	$	—	$	—	$	97,165
Available-for-sale securities		543,282		—		539,678		3,604		543,282
Federal Home Loan Bank Stock		11,152		—		—		11,152		11,152
Loans, net		3,091,080		—		2,999,008		78,920		3,077,928
Loans held for sale		466,369		—		466,369		—		466,369
Interest receivable		11,218		—		11,218		—		11,218
Mortgage servicing rights		63,046		—		—		63,046		63,046
Derivatives		10,316		—		10,316		—		10,316
Financial liabilities:
Deposits:
Without stated maturities	$	3,051,322	$	3,051,322	$	—	$	—	$	3,051,322
With stated maturities		667,216		—		662,988		—		662,988
Securities sold under agreement to repurchase		14,556		14,556		—		—		14,556
Short term borrowings		52,766		52,766		—		—		52,766
Interest payable		1,262		367		895		—		1,262
Long-term debt		143,533		—		148,136		—		148,136
Derivatives		2,434		—		2,434		—		2,434

			Fair Value
December 31, 2016	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	136,327	$	136,327	$	—	$	—	$	136,327
Available-for-sale securities		582,183		—		577,634		4,549		582,183
Federal Home Loan Bank Stock		7,743		—		—		7,743		7,743
Loans, net		1,827,037		—		1,822,054		1,281		1,823,335
Loans held for sale		507,442		—		507,442		—		507,442
Interest receivable		7,241		—		7,241		—		7,241
Mortgage servicing rights, net		32,070		—		—		33,081		33,081
Derivatives		19,745		—		19,745		—		19,745
Financial liabilities:
Deposits:
Without stated maturities	$	2,280,531	$	2,280,531	$	—	$	—	$	2,280,531
With stated maturities		391,031		—		390,484		—		390,484
Securities sold under agreement to repurchase		21,561		21,561		—		—		21,561
Short term borrowings		150,000		150,000		—		—		150,000
Interest payable		620		237		383		—		620
Long-term debt		44,892		—		47,377		—		47,377
Derivatives		586		—		586		—		586

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

The balances and levels of the assets measured at fair value on a recurring basis at September 30, 2017 are presented in the following tables:

At September 30, 2017	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	$	—	$	992	$	—	$	992
Mortgage-backed securities		—		418,794		—		418,794
Municipals, tax-exempt		—		106,950		—		106,950
Treasury securities		—		8,819		—		8,819
Equity securities		—		4,123		3,604		7,727
Total	$	—	$	539,678	$	3,604	$	543,282
Loans held for sale		—		466,369		—		466,369
Mortgage servicing rights		—		—		63,046		63,046
Derivatives		—		10,316		—		10,316
Financial Liabilities:
Derivatives	$	—	$	2,434	$	—	$	2,434

The balances and levels of the assets measured at fair value on a recurring basis at December 31, 2016 are presented in the following tables:

At December 31, 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	$	—	$	985	$	—	$	985
Mortgage-backed securities		—		443,908		—		443,908
Municipals, tax-exempt		—		116,923		—		116,923
Treasury securities		—		11,757		—		11,757
Equity securities		—		4,061		4,549		8,610
Total	$	—	$	577,634	$	4,549	$	582,183
Loans held for sale		—		507,442		—		507,442
Derivatives		—		19,745		—		19,745
Financial Liabilities:
Derivatives	$	—	$	586	$	—	$	586

Balances and Levels of Assets Measured at Fair Value on Non-recurring Basis

The balances and levels of the assets measured at fair value on a non-recurring basis at September 30, 2017 are presented in the following tables:

At September 30, 2017	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:
Other real estate owned	$	—	$	—	$	8,704	$	8,704
Impaired loans:
Commercial and industrial		—		—		2,659		2,659
Construction						4,295
Residential real estate:
1-4 family mortgage		—		—		22,948		22,948
Commercial real estate:		—		—				—
Owner occupied						8,306
Non-owner occupied		—		—		13,912		13,912
Consumer and other		—		—		26,800		26,800
Total	$	—	$	—	$	78,920	$	78,920

The balances and levels of the assets measured at fair value on a non-recurring basis at December 31, 2016 are presented in the following tables:

At December 31, 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:
Other real estate owned	$	—	$	—	$	2,315	$	2,315
Mortgage servicing rights		—		—		32,070		32,070
Impaired Loans:
Commercial and industrial		—		—		542		542
Residential real estate:
1-4 family mortgage		—		—		103		103
Commercial real estate:
Owner occupied		—		—		635		635
Consumer and other		—		—		1		1
Total	$	—	$	—	$	1,281	$	1,281

Summary of Changes in Fair Value on Available-for-Sale Securities Measured at Fair Value on Recurring Basis using Significant Unobservable Inputs or Level 3 Inputs

The following table summarizes changes in fair value on available-for-sale securities measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs, during the three and nine months ended September 30, 2017 and 2016.

	Available-for-sale securities
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Balance at beginning of period	$	4,549		$	4,856		$	4,549		$	4,856
Realized gains included in net income		—			—			—			—
Unrealized gains included in other comprehensive income		—			—			—			—
Impairment of equity securities		(945	)		—			(945	)		—
Purchases		—			—			—			—
Capital distribution		—			(307	)		—			(307	)
Balance at end of period	$	3,604		$	4,549		$	3,604		$	4,549

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, 2017 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

78,920

Valuation of collateral

Discount for comparable sales

0%-30%

Other real estate owned

8,704

Appraised value of property less costs to sell

Discount for costs to sell

0%-15%

The following table presents information as of December 31, 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	$	1,281	Valuation of collateral	Discount for comparable sales	0%-30%
Other real estate owned	$	2,315	Appraised value of property less costs to sell	Discount for costs to sell	0%-10%
Mortgage servicing rights, net	$	33,081	Discounted cash flows	See Note 7	See Note 7

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, 2017 and December 31, 2016:

September 30, 2017	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	452,794	$	424,081	$	28,713
Past due loans of 90 days or more		—		—		—
Nonaccrual loans		—		—		—

December 31, 2016
Mortgage loans held for sale measured at fair value	$	507,442	$	501,503	$	5,939
Past due loans of 90 days or more		—		—		—
Nonaccrual loans		—		—		—