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Fair Value Measurements (Tables)
 6 Months Ended
Jun. 30, 2017
Fair Value Measurements  
Schedule of balance of assets and liabilities which are measured at fair value on a recurring basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2017

 

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies mortgage-backed

 

$

 -

 

$

20,846

 

$

 -

 

$

20,846

States and political subdivisions

 

 

 -

 

 

205,170

 

 

20,348

 

 

225,518

Corporate bonds

 

 

 -

 

 

12,616

 

 

 -

 

 

12,616

Collateralized mortgage obligations

 

 

 -

 

 

98,235

 

 

2,678

 

 

100,913

Asset-backed securities

 

 

 -

 

 

140,385

 

 

 -

 

 

140,385

Collateralized loan obligations

 

 

 -

 

 

67,949

 

 

 -

 

 

67,949

Loans held-for-sale

 

 

 -

 

 

5,440

 

 

 -

 

 

5,440

Mortgage servicing rights

 

 

 -

 

 

 -

 

 

6,528

 

 

6,528

Other assets (Interest rate swap agreements)

 

 

 -

 

 

385

 

 

 -

 

 

385

Other assets (Mortgage banking derivatives)

 

 

 -

 

 

319

 

 

 -

 

 

319

Total

 

$

 -

 

$

551,345

 

$

29,554

 

$

580,899

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities (Interest rate swap agreements, including risk participation agreements)

 

$

 -

 

$

1,843

 

$

 -

 

$

1,843

Total

 

$

 -

 

$

1,843

 

$

 -

 

$

1,843

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies mortgage-backed

 

$

 -

 

$

41,534

 

$

 -

 

$

41,534

States and political subdivisions

 

 

 -

 

 

46,477

 

 

22,226

 

 

68,703

Corporate bonds

 

 

 -

 

 

10,630

 

 

 -

 

 

10,630

Collateralized mortgage obligations

 

 

 -

 

 

167,808

 

 

3,119

 

 

170,927

Asset-backed securities

 

 

 -

 

 

138,407

 

 

 -

 

 

138,407

Collateralized loan obligations

 

 

 -

 

 

101,637

 

 

 -

 

 

101,637

Loans held-for-sale

 

 

 -

 

 

4,918

 

 

 -

 

 

4,918

Mortgage servicing rights

 

 

 -

 

 

 -

 

 

6,489

 

 

6,489

Other assets (Interest rate swap agreements)

 

 

 -

 

 

673

 

 

 -

 

 

673

Other assets (Mortgage banking derivatives)

 

 

 -

 

 

287

 

 

 -

 

 

287

Total

 

$

 -

 

$

512,371

 

$

31,834

 

$

544,205

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities (Interest rate swap agreements, including risk participation agreements)

 

$

 -

 

$

1,667

 

$

 -

 

$

1,667

Total

 

$

 -

 

$

1,667

 

$

 -

 

$

1,667

 

Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2017

 

 

Securities available-for-sale

 

 

 

 

 

Collateralized

 

States and

 

Mortgage

 

 

Mortgage

 

Political

 

Servicing

 

   

Obligation

   

Subdivisions

   

Rights

Beginning balance January 1, 2017

 

$

3,119

 

$

22,226

 

$

6,489

Total gains or losses

 

 

 

 

 

 

 

 

 

Included in earnings (or changes in net assets)

 

 

23

 

 

 -

 

 

(280)

Included in other comprehensive income

 

 

(1)

 

 

(289)

 

 

 -

Purchases, issuances, sales, and settlements

 

 

 

 

 

 

 

 

 

Purchases

 

 

 -

 

 

10,456

 

 

 -

Issuances

 

 

 -

 

 

 -

 

 

601

Settlements

 

 

(463)

 

 

(12,045)

 

 

(282)

Ending balance June 30, 2017

 

$

2,678

 

$

20,348

 

$

6,528

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2016

 

 

Securities available-for-sale

 

 

 

 

 

States and

 

Mortgage

 

 

Political

 

Servicing

 

    

Subdivisions

    

Rights

Beginning balance January 1, 2016

 

$

111

 

$

5,847

Transfers out of Level 3

 

 

(42)

 

 

 -

Total gains or losses

 

 

 

 

 

 

Included in earnings (or changes in net assets)

 

 

 -

 

 

(1,464)

Included in other comprehensive income

 

 

 9

 

 

 -

Purchases, issuances, sales, and settlements

 

 

 

 

 

 

Issuances

 

 

 -

 

 

625

Settlements

 

 

(78)

 

 

(310)

Ending balance June 30, 2016

 

$

 -

 

$

4,698

 

Schedule of quantitative information about level 3 fair value measurements

The following table and commentary presents quantitative and qualitative information about Level 3 fair value measurements as of June 30, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

Measured at fair value

 

 

 

 

 

 

Unobservable

 

 

 

Average

on a recurring basis:

   

Fair Value

   

Valuation Methodology

   

Inputs

   

Range of Input

   

of Inputs

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage servicing rights

 

$

6,528

 

Discounted Cash Flow

 

Discount Rate

 

10.0 - 206.3%

 

10.2

%

 

 

 

 

 

 

 

Prepayment Speed

 

7.0 - 68.3%

 

10.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table and commentary presents quantitative and qualitative information about Level 3 fair value measurements as of December 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

Measured at fair value

 

 

 

 

 

 

Unobservable

 

 

 

Average

on a recurring basis:

   

Fair Value

   

Valuation Methodology

   

Inputs

   

Range of Input

   

of Inputs

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage servicing rights

 

$

6,489

 

Discounted Cash Flow

 

Discount Rate

 

10.0 - 17.0%

 

10.2

%

 

 

 

 

 

 

 

Prepayment Speed

 

6.5 - 77.8%

 

9.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In addition to the above, Level 3 fair value measurement included $20.3 million for state and political subdivisions representing various local municipality securities and $2.7 million of collateralized mortgage obligations at June 30, 2017.  Both of these were classified as securities available-for-sale, and were valued using a discount based on market spreads of similar assets, but the liquidity premium was an unobservable input.  The state and political subdivisions securities balance in Level 3 fair value at June 30, 2016, was zero; the securities were transferred to Level 3 in the fourth quarter of 2016.  Given the small dollar amount and size of the municipality involved, this is categorized as Level 3 based on the payment stream received by the Company from the municipality.  That payment stream is otherwise an unobservable input.

Schedule of assets measured at fair value on a nonrecurring basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2017

 

    

Level 1

    

Level 2

    

Level 3

    

Total

Impaired loans1

 

$

 -

 

$

 -

 

$

142

 

$

142

Other real estate owned, net2

 

 

 -

 

 

 -

 

 

11,724

 

 

11,724

Total

 

$

 -

 

$

 -

 

$

11,866

 

$

11,866

 

1 Represents carrying value and related write-downs of loans for which adjustments are substantially based on the appraised value of collateral for collateral-dependent loans; had a carrying amount and a valuation allowance of $98,000 resulting in a decrease of specific allocations within the allowance for loan losses of $705,000 for the six months ended June 30, 2017.

2 OREO is measured at the lower of carrying or fair value less costs to sell, and had a net carrying amount of $11.7 million, which is made up of the outstanding balance of $21.6 million, net of a valuation allowance of $8.3 million and participations of $1.6 million, at June 30, 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

    

Level 1

    

Level 2

    

Level 3

    

Total

Impaired loans1

 

$

 -

 

$

 -

 

$

 -

 

$

 -

Other real estate owned, net2

 

 

 -

 

 

 -

 

 

11,916

 

 

11,916

Total

 

$

 -

 

$

 -

 

$

11,916

 

$

11,916

 

1 Represents carrying value and related write-downs of loans for which adjustments are substantially based on the appraised value of collateral for collateral-dependent loans; had a carrying amount and a valuation allowance of $1.0 million, resulting in an increase of specific allocations within the allowance for loan losses of $1.0 million for the year ended December 31, 2016.

2 OREO is measured at the lower of carrying or fair value less costs to sell, and had a net carrying amount of $11.9 million, which is made up of the outstanding balance of $23.5 million, net of a valuation allowance of $10.0 million and participations of $1.6 million, at December 31, 2016.