Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Estimated Fair Values of Financial Instruments

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

			Fair Value
December 31, 2017	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	119,751	$	119,751	$	—	$	—	$	119,751
Available-for-sale securities		543,992		—		540,388		3,604		543,992
Federal Home Loan Bank Stock		11,412		—		—		11,412		11,412
Loans, net		3,142,870		—		3,064,373		77,027		3,141,400
Loans held for sale		526,185		—		526,185		—		526,185
Interest receivable		13,069		—		13,069		—		13,069
Mortgage servicing rights		76,107		—		—		76,107		76,107
Derivatives		9,690		—		9,690		—		9,690
Financial liabilities:
Deposits:
Without stated maturities	$	2,976,066	$	2,976,066	$	—	$	—	$	2,976,066
With stated maturities		688,329		—		682,403		—		682,403
Securities sold under agreement to repurchase		14,293		14,293		—		—		14,293
Short term borrowings		190,000		190,000		—		—		190,000
Interest payable		1,504		575		929		—		1,504
Long-term debt		143,302		—		149,135		—		149,135
Derivatives		1,699		—		1,699		—		1,699

			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		632		249		383		—		632
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 December 31, 2017 are presented in the following table:

At December 31, 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	$	—	$	986	$	—	$	986
Mortgage-backed securities		—		418,781		—		418,781
Municipals, tax-exempt		—		109,251		—		109,251
Treasury securities		—		7,252		—		7,252
Equity securities		—		4,118		3,604		7,722
Total	$	—	$	540,388	$	3,604	$	543,992
Loans held for sale		—		526,185		—		526,185
Mortgage servicing rights		—		—		76,107		76,107
Derivatives		—		9,690		—		9,690
Financial Liabilities:
Derivatives	$	—	$	1,699	$	—	$	1,699

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

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 December 31, 2017 are presented in the following table:

At December 31, 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	$	—	$	—	$	13,174	$	13,174
Impaired loans:
Commercial and industrial		—		—		1,971		1,971
Construction						4,211		4,211
Residential real estate:
1-4 family mortgage		—		—		21,902		21,902
Commercial real estate:		—		—
Owner occupied						10,030		10,030
Non-owner occupied		—		—		13,593		13,593
Consumer and other		—		—		25,320		25,320
Total	$	—	$	—	$	77,027	$	77,027

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 table:

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

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 year ended December 31, 2017 and 2016:

	Available-for-sale securities
	Year Ended December 31,
	2017			2016
Balance at beginning of period	$	4,549		$	4,856
Realized gains included in net income		—			—
Unrealized gains included in other comprehensive income		—			—
Impairment of equity securities		(945	)		—
Purchases		—			—
Capital distribution		—			(307	)
Balance at end of period	$	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 December 31, 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

77,027

Valuation of collateral

Discount for comparable sales

0%-30%

Other real estate owned

13,174

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 9	See Note 9

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 December 31, 2017 and 2016:

December 31, 2017	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	482,089	$	467,039	$	15,050
Past due loans of 90 days or more		320		320		—
Nonaccrual loans		741		741		—

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		—		—		—