Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Estimated Fair Values and Carrying Values of Financial Instruments

The following table contains the estimated fair values and the related carrying values of the Company's financial instruments. Items which are not financial instruments are not included. Due to the adoption of ASU 2016-01 as of January 1, 2018, the fair value as presented below is measured using the exit price notion in the periods after adoption and may not be comparable with prior periods presented as a result of the change in methodology.

			Fair Value
March 31, 2018	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	73,700	$	73,700	$	—	$	—	$	73,700
Investment securities		597,347		—		597,347		—		597,347
Federal Home Loan Bank Stock		11,810	N/A		N/A		N/A		N/A
Loans, net		3,220,257		—		—		3,213,659		3,213,659
Loans held for sale		414,518		—		414,518		—		414,518
Interest receivable		13,920		—		13,920		—		13,920
Mortgage servicing rights		93,160		—		—		93,160		93,160
Derivatives		14,904		—		14,904		—		14,904
Financial liabilities:
Deposits:
Without stated maturities	$	3,059,142	$	3,059,142	$	—	$	—	$	3,059,142
With stated maturities		707,009		—		706,585		—		706,585
Securities sold under agreement to repurchase		14,724		14,724		—		—		14,724
Short term borrowings		138,707		138,707		—		—		138,707
Interest payable		1,857		526		1,331		—		1,857
Long-term debt		139,586		—		138,456		—		138,456
Derivatives		3,655		—		3,655		—		3,655

			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
Investment securities		543,992		—		540,388		3,604		543,992
Federal Home Loan Bank Stock		11,412	N/A		N/A		N/A		N/A
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, net		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

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 March 31, 2018 are presented in the following tables:

At March 31, 2018	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:
Investment securities:
U.S. government agency securities	$	—	$	982	$	—	$	982
Mortgage-backed securities		—		472,930		—		472,930
Municipals, tax-exempt		—		113,158		—		113,158
Treasury securities		—		7,178		—		7,178
Equity securities		—		3,099		—		3,099
Total	$	—	$	597,347	$	—	$	597,347
Loans held for sale		—		414,518		—		414,518
Mortgage servicing rights		—		—		93,160		93,160
Derivatives		—		14,904		—		14,904
Financial Liabilities:
Derivatives	$	—	$	3,655	$	—	$	3,655

The balances and levels of the assets measured at fair value on a recurring basis at December 31, 2017 are presented in the following tables:

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

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 March 31, 2018 are presented in the following tables:

At March 31, 2018	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	$	—	$	—	$	800	$	800
Impaired loans:
Commercial and industrial		—		—		—		—
Construction
Residential real estate:
1-4 family mortgage		—		—		144		144
Commercial real estate:		—		—		—		—
Owner occupied
Non-owner occupied		—		—		—		—
Consumer and other		—		—		—		—
Total	$	—	$	—	$	144	$	144

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 tables:

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

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 months ended March 31, 2018 and 2017.

	Investment securities
	Three Months Ended March 31,
	2018			2017
Balance at beginning of period	$	3,604		$	4,549
Reclassification of equity securities without a readily determinable fair value to other assets ⁽¹⁾		(3,604	)		—
Balance at end of period	$	—		$	4,549

(1)	See Note 1, “Basis of Presentation” in the Notes to the consolidated financial statements for additional details regarding the adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities.

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 March 31, 2018 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

144

Valuation of collateral

Discount for comparable sales

0%-30%

Other real estate owned

800

Appraised value of property less costs to sell

Discount for costs to sell

0%-15%

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: