Fair value of financial instruments (Tables)

12 Months Ended

Dec. 31, 2018

Estimated Fair 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
December 31, 2018	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	125,356	$	125,356	$	—	$	—	$	125,356
Investment securities	658,805		—		658,805		—		658,805
Loans, net	3,638,579		—		—		3,630,500		3,630,500
Loans held for sale	278,815		—		278,815		—		278,815
Interest receivable	14,503		—		2,848		11,655		14,503
Mortgage servicing rights	88,829		—		—		88,829		88,829
Derivatives	14,316		—		14,316		—		14,316
Financial liabilities:
Deposits:
Without stated maturities	$	3,051,972	$	3,051,972	$	—	$	—	$	3,051,972
With stated maturities	1,119,745		—		1,122,076		—		1,122,076
Securities sold under agreement to repurchase and federal funds sold	15,081		15,081		—		—		15,081
Federal Home Loan Bank advances	181,765		—		181,864		—		181,864
Subordinated debt	30,930		—		30,000		—		30,000
Interest payable	5,015		530		4,485		—		5,015
Derivatives	11,637		—		11,637		—		11,637



	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	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 and federal funds sold	14,293		14,293		—		—		14,293
Federal Home Loan Bank advances	302,372		190,000		112,465		—		302,465
Subordinated debt	30,930		—		36,670		—		36,670
Interest payable	1,504		575		929		—		1,504
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 December 31, 2018 are presented in the following table:



December 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:
Available-for-sale securities:
U.S. government agency securities	$	—	$	989	$	—	$	989
Mortgage-backed securities	—		508,580		—		508,580
Municipals, tax-exempt	—		138,887		—		138,887
Treasury securities	—		7,242		—		7,242
Equity securities	—		3,107		—		3,107
Total	$	—	$	658,805	$	—	$	658,805
Loans held for sale	—		278,815		—		278,815
Mortgage servicing rights	—		—		88,829		88,829
Derivatives	—		14,316		—		14,316
Financial Liabilities:
Derivatives	—		11,637		—		11,637

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

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⁽¹⁾:
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

(1) Includes both impaired non-purchased loans and PCI loans.

The balances and levels of the assets measured at fair value on a non-recurring basis at December 31, 2018 are presented in the following table:



At December 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	$	—	$	—	$	2,266	$	2,266
Impaired loans⁽¹⁾:
Commercial and industrial	—		—		732		732
Construction	—		—		832		832
Residential real estate:
1-4 family mortgage	—		—		146		146
Commercial real estate:
Owner occupied	—		—		87		87
Non-owner occupied	—		—		6,921		6,921
Total	$	—	$	—	$	8,718	$	8,718

(1) Includes both impaired non-purchased loans and PCI loans.

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, 2018 and 2017:



	Available-for-sale securities
	Year Ended December 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		)	—
Impairment of equity securities	—			(945		)
Balance at end of period	$	—		$	3,604

⁽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 December 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⁽¹⁾	$	8,718	Valuation of collateral	Discount for comparable sales	0%-30%
Other real estate owned	$	2,266	Appraised value of property less costs to sell	Discount for costs to sell	0%-15%

(1) Includes both impaired non-purchased loans and PCI loans.

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⁽¹⁾	$	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%

(1) Includes both impaired non-purchased loans and PCI loans.

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, 2018 and 2017:



December 31, 2018	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	278,418	$	267,907	$	10,511
Past due loans of 90 days or more	—		—		—
Nonaccrual loans	397		397		—

December 31, 2017
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		—