Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

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 March 31, 2018 and December 31, 2017 (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)
March 31, 2018
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	121,085	$	—	$	121,085	$	—
Obligations of states and political subdivisions	160,225		—		160,225		—
Mortgage-backed securities	283,837		—		283,837		—
Trust preferred securities	2,522		—		—		2,522
Other securities	2,193		192		2,001		—
Total available-for-sale securities	$	569,862	$	192	$	567,148	$	2,522
December 31, 2017
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	113,770	$	—	$	113,770	$	—
Obligations of states and political subdivisions	166,266		—		166,266		—
Mortgage-backed securities	293,811		—		293,811		—
Trust preferred securities	2,548		—		—		2,548
Other securities	2,184		172		2,012		—
Total available-for-sale securities	$	578,579	$	172	$	575,859	$	2,548

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 three months ended March 31, 2018 and 2017 is summarized as follows (in thousands):



	Trust Preferred Securities
	Three months ended
	March 31, 2018			March 31, 2017
Beginning balance	$	2,548		$	1,652
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Total gains or losses:
Included in net income	—			—
Included in other comprehensive income (loss)	18			23
Purchases, issuances, sales and settlements:
Purchases	—			—
Issuances	—			—
Sales	—			—
Settlements	(44		)	(37		)
Ending balance	$	2,522		$	1,638
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 March 31, 2018 and December 31, 2017 (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)
March 31, 2018
Impaired loans (collateral dependent)	$	3,489	$	—	$	—	$	3,489
Foreclosed assets held for sale	24		—		—		24
December 31, 2017
Impaired loans (collateral dependent)	$	3,053	$	—	$	—	$	3,053
Foreclosed assets held for sale	91		—		—		91

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).



March 31, 2018	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Trust Preferred Securities	$	2,522	Discounted cash flow	Discount rate	11.7%
				Constant prepayment rate (1)	1.5%
				Cumulative projected prepayments	23.9%
				Probability of default	0.5%
				Projected cures given deferral	0.0%
				Loss severity	97.8%
Impaired loans (collateral dependent)	$	3,489	Third party valuations	Discount to reflect realizable value	0	%	-	40%	(	20%	)
Foreclosed assets held for sale	$	24	Third party valuations	Discount to reflect realizable value less estimated selling costs	0	%	-	40%	(	35%	)



December 31, 2017	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Trust Preferred Securities	$	2,548	Discounted cash flow	Discount rate	12.7%
				Constant prepayment rate (1)	1.3%
				Cumulative projected prepayments	21.6%
				Probability of default	0.5%
				Projected cures given deferral	0.0%
				Loss severity	97.7%
Impaired loans (collateral dependent)	$	3,053	Third party valuations	Discount to reflect realizable value	0	%	-	40%	(	20%	)
Foreclosed assets held for sale	$	91	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 March 31, 2018 and December 31, 2017 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
March 31, 2018
Financial Assets
Cash and due from banks	$	54,344	$	54,344	$	54,344	$	—	$	—
Federal funds sold	491		491		491		—		—
Certificates of deposit investments	1,685		1,682		—		1,682		—
Available-for-sale securities	569,862		569,862		192		567,148		2,522
Held-to-maturity securities	69,358		67,631		—		67,631		—
Loans held for sale	1,309		1,309		—		1,309		—
Loans net of allowance for loan losses	1,955,617		1,887,726		—		—		1,887,726
Interest receivable	10,182		10,182		—		10,182		—
Federal Reserve Bank stock	5,160		5,160		—		5,160		—
Federal Home Loan Bank stock	2,407		2,407		—		2,407		—
Financial Liabilities
Deposits	$	2,291,891	$	2,287,907	$	—	$	1,949,676	$	338,231
Securities sold under agreements to repurchase	132,435		132,420		—		132,420		—
Interest payable	709		709		—		709		—
Federal Home Loan Bank borrowings	60,024		59,599		—		59,599		—
Other borrowings	9,375		9,375		—		9,375		—
Junior subordinated debentures	24,021		18,899		—		18,899		—



	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
December 31, 2017
Financial Assets
Cash and due from banks	$	88,388	$	88,388	$	88,388	$	—	$	—
Federal funds sold	491		491		491		—		—
Certificates of deposit investments	1,685		1,692		—		1,692		—
Available-for-sale securities	578,579		578,579		172		575,859		2,548
Held-to-maturity securities	69,332		68,457		—		68,457		—
Loans held for sale	1,025		1,025		—		1,025		—
Loans net of allowance for loan losses	1,918,499		1,899,678		—		—		1,899,678
Interest receivable	10,832		10,832		—		10,832		—
Federal Reserve Bank stock	5,160		5,160		—		5,160		—
Federal Home Loan Bank stock	2,407		2,407		—		2,407		—
Financial Liabilities
Deposits	$	2,274,639	$	2,272,868	$	—	$	1,930,604	$	342,264
Securities sold under agreements to repurchase	155,388		155,394		—		155,394		—
Interest payable	602		602		—		602		—
Federal Home Loan Bank borrowings	60,038		59,968		—		59,968		—
Other borrowings	10,313		10,313		—		10,313		—
Junior subordinated debentures	24,000		18,050		—		18,050		—