Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2017

Assets Measured at Fair Value on Recurring Basis

The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of September 30, 2017 and December 31, 2016 (in thousands):



			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2017
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	126,401	$	—	$	126,401	$	—
Obligations of states and political subdivisions	172,526		—		172,526		—
Mortgage-backed securities	315,357		—		315,357		—
Trust preferred securities	2,701		—		—		2,701
Other securities	4,219		175		4,044		—
Total available-for-sale securities	$	621,204	$	175	$	618,328	$	2,701
December 31, 2016
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	136,324	$	—	$	136,324	$	—
Obligations of states and political subdivisions	162,705		—		162,705		—
Mortgage-backed securities	314,991		—		314,991		—
Trust preferred securities	1,652		—		—		1,652
Other securities	4,176		144		4,032		—
Total available-for-sale securities	$	619,848	$	144	$	618,052	$	1,652

Fair Value of Assets Measured on a Recurring Basis Using Significant Unobservable Inputs

The change in fair value of assets measured on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2017 and 2016 is summarized as follows (in thousands):



	Trust Preferred Securities
	Three months ended						Nine months ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Beginning balance	$	2,424		$	1,746		$	1,652		$	1,906
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Total gains or losses:
Included in net income	—			—			—			—
Included in other comprehensive income (loss)	318			(66		)	1,166			(190		)
Purchases, issuances, sales and settlements:
Purchases	—			—			—			—
Issuances	—			—			—			—
Sales	—			—			—			—
Settlements	(41		)	(19		)	(117		)	(55		)
Ending balance	$	2,701		$	1,661		$	2,701		$	1,661
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—		$	—		$	—		$	—

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2017 and December 31, 2016 (in thousands):



	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2017
Impaired loans (collateral dependent)	$	6,793	$	—	$	—	$	6,793
Foreclosed assets held for sale	307		—		—		307
December 31, 2016
Impaired loans (collateral dependent)	$	6,938	$	—	$	—	$	6,938
Foreclosed assets held for sale	173		—		—		173

Significant Assumptions Used in Valuation of Level 3 Financial Instruments

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill at June 30, 2017 and December 31, 2016 (in thousands).



September 30, 2017	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Trust Preferred Securities	$	2,701	Discounted cash flow	Discount rate	13.3%
				Constant prepayment rate (1)	1.3%
				Cumulative projected prepayments	21.9%
				Probability of default	0.6%
				Projected cures given deferral	0.0%
				Loss severity	97.7%
Impaired loans (collateral dependent)	$	6,793	Third party valuations	Discount to reflect realizable value	0	%	-	40%	(	20%	)
Foreclosed assets held for sale	$	307	Third party valuations	Discount to reflect realizable value less estimated selling costs	0	%	-	40%	(	35%	)



December 31, 2016	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Trust Preferred Securities	$	1,652	Discounted cash flow	Discount rate	13.6%
				Constant prepayment rate (1)	1.3%
				Cumulative projected prepayments	22.4%
				Probability of default	0.5%
				Projected cures given deferral	0.0%
				Loss severity	97.6%
Impaired loans (collateral dependent)	$	6,938	Third party valuations	Discount to reflect realizable value	0	%	-	40%	(	20%	)
Foreclosed assets held for sale	$	173	Third party valuations	Discount to reflect realizable value less estimated selling costs	0	%	-	40%	(	35%	)

(1) Every five years

Carrying Amounts and Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following tables present estimated fair values of the Company’s financial instruments at September 30, 2017 and December 31, 2016 in accordance with FAS 107-1 and APB 28-1, codified with ASC 805 (in thousands):



	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
September 30, 2017
Financial Assets
Cash and due from banks	$	69,153	$	69,153	$	69,153	$	—	$	—
Federal funds sold	490		490		490		—		—
Certificates of deposit investments	1,685		1,708		—		1,708		—
Available-for-sale securities	621,204		621,204		175		618,328		2,701
Held-to-maturity securities	69,306		69,137		—		69,137		—
Loans held for sale	2,079		2,079		—		2,079		—
Loans net of allowance for loan losses	1,846,894		1,842,343		—		—		1,842,343
Interest receivable	10,876		10,876		—		10,876		—
Federal Reserve Bank stock	5,160		5,160		—		5,160		—
Federal Home Loan Bank stock	3,302		3,302		—		3,302		—
Financial Liabilities
Deposits	$	2,217,477	$	2,217,528	$	—	$	1,897,161	$	320,367
Securities sold under agreements to repurchase	116,360		116,348		—		116,348		—
Interest payable	552		552		—		552		—
Federal Home Loan Bank borrowings	87,052		87,396		—		87,396		—
Other borrowings	31,250		31,250		20,000		11,250		—
Junior subordinated debentures	23,980		17,640		—		17,640		—



	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
December 31, 2016
Financial Assets
Cash and due from banks	$	137,002	$	137,002	$	137,002	$	—	$	—
Federal funds sold	38,900		38,900		38,900		—		—
Certificates of deposit investments	14,643		14,651		—		14,651		—
Available-for-sale securities	619,848		619,848		144		618,052		1,652
Held-to-maturity securities	74,231		73,096		—		73,096		—
Loans held for sale	1,175		1,175		—		1,175		—
Loans net of allowance for loan losses	1,808,064		1,795,764		—		—		1,795,764
Interest receivable	10,553		10,553		—		10,553		—
Federal Reserve Bank stock	3,949		3,949		—		3,949		—
Federal Home Loan Bank stock	4,389		4,389		—		4,389		—
Financial Liabilities
Deposits	$	2,329,887	$	2,331,725	$	—	$	1,976,806	$	354,919
Securities sold under agreements to repurchase	185,763		185,766		—		185,766		—
Interest payable	535		535		—		535		—
Federal Home Loan Bank borrowings	40,094		40,318		—		40,318		—
Other borrowings	18,063		18,063		—		18,063		—
Junior subordinated debentures	23,917		17,068		—		17,068		—