Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 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 September 30, 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)
September 30, 2018
Available-for-sale securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	122,669	$	—	$	122,669	$	—
Obligations of states and political subdivisions	173,346		—		173,346		—
Mortgage-backed securities	300,669		—		300,669		—
Other securities	2,396		381		2,015		—
Total available-for-sale securities	$	599,080	$	381	$	598,699	$	—
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 nine months ended September 30, 2018 and 2017 is summarized as follows (in thousands):



	Trust Preferred Securities
	Three months ended					Nine months ended
	September 30, 2018		September 30, 2017			September 30, 2018			September 30, 2017
Beginning balance	$	—	$	2,424		$	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)	—		318			18			1,166
Purchases, issuances, sales and settlements:
Purchases	—		—			—			—
Issuances	—		—			—			—
Sales	—		—			(2,522		)	—
Settlements	—		(41		)	(44		)	(117		)
Ending balance	$	—	$	2,701		$	—		$	2,701
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, 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)
September 30, 2018
Impaired loans (collateral dependent)	$	9,356	$	—	$	—	$	9,356
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 September 30, 2018 and December 31, 2017 (in thousands).



September 30, 2018	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans (collateral dependent)	$	9,356	Third party valuations	Discount to reflect realizable value	0	%	-	40%	(	20%	)



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 September 30, 2018 and December 31, 2017 in accordance with ASC 825 (in thousands):



	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
September 30, 2018
Financial Assets
Cash and due from banks	$	63,823	$	63,823	$	63,823	$	—	$	—
Federal funds sold	662		662		662		—		—
Certificates of deposit investments	2,183		2,183		—		2,183		—
Available-for-sale securities	599,080		599,080		381		598,699		—
Held-to-maturity securities	69,409		67,395		—		67,395		—
Loans held for sale	940		940		—		940		—
Loans net of allowance for loan losses	2,375,381		2,325,734		—		—		2,325,734
Interest receivable	14,928		14,928		—		14,928		—
Federal Reserve Bank stock	7,390		7,390		—		7,390		—
Federal Home Loan Bank stock	3,880		3,880		—		3,880		—
Financial Liabilities
Deposits	$	2,651,397	$	2,651,414	$	—	$	2,123,040	$	528,374
Federal funds purchased	22,000		22,000		22,000		—		—
Securities sold under agreements to repurchase	98,875		98,868		—		98,868		—
Interest payable	1,400		1,400		—		1,400		—
Federal Home Loan Bank borrowings	120,736		120,264		—		120,264		—
Other borrowings	7,500		7,500		—		7,500		—
Junior subordinated debentures	28,958		23,780		—		23,780		—



	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		—