FAIR VALUE MEASUREMENTS

The following tables present our assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at December 31, 2016 and 2015.



	December 31, 2016
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Securities available-for-sale:
U.S. Treasury securities	$	—	$	24,811	$	—	$	24,811
Obligations of U.S. government corporations and agencies	—		232,179		—		232,179
Collateralized mortgage obligations of U.S. government corporations and agencies	—		129,777		—		129,777
Residential mortgage-backed securities of U.S. government corporations and agencies	—		37,358		—		37,358
Commercial mortgage-backed securities of U.S. government corporations and agencies	—		125,604		—		125,604
Obligations of states and political subdivisions	—		132,509		—		132,509
Marketable equity securities	—		11,249		—		11,249
Total securities available-for-sale	—		693,487		—		693,487
Trading securities held in a Rabbi Trust	4,410		—		—		4,410
Total securities	4,410		693,487		—		697,897
Derivative financial assets:
Interest rate swaps	—		6,960		—		6,960
Interest rate lock commitments	—		236		—		236
Total Assets	$	4,410	$	700,683	$	—	$	705,093
LIABILITIES
Derivative financial liabilities:
Interest rate swaps	$	—	$	6,958	$	—	$	6,958
Forward sale contracts	—		27		—		27
Total Liabilities	$	—	$	6,985	$	—	$	6,985



	December 31, 2015
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Securities available-for-sale:
U.S. Treasury securities	$	—	$	14,941	$	—	$	14,941
Obligations of U.S. government corporations and agencies	—		263,303		—		263,303
Collateralized mortgage obligations of U.S. government corporations and agencies	—		128,835		—		128,835
Residential mortgage-backed securities of U.S. government corporations and agencies	—		40,125		—		40,125
Commercial mortgage-backed securities of U.S. government corporations and agencies	—		69,204		—		69,204
Obligations of states and political subdivisions	—		134,886		—		134,886
Marketable equity securities	—		9,669		—		9,669
Total securities available-for-sale			660,963		—		660,963
Trading securities held in a Rabbi Trust	4,021		—		—		4,021
Total securities	4,021		660,963		—		664,984
Derivative financial assets:
Interest rate swaps	—		11,295		—		11,295
Interest rate lock commitments	—		261		—		261
Total Assets	$	4,021	$	672,519	$	—	$	676,540
LIABILITIES
Derivative financial liabilities:
Interest rate swaps	$	—	$	11,276	$	—	$	11,276
Forward Sale Contracts	—		5		—		5
Total Liabilities	$	—	$	11,281	$	—	$	11,281

We classify financial instruments as Level 3 when valuation models are used because significant inputs are not observable in the market.

We may be required to measure certain assets and liabilities at fair value on a nonrecurring basis. Nonrecurring assets are recorded at the lower of cost or fair value in our financial statements. There were no liabilities measured at fair value on a nonrecurring basis at either December 31, 2016 or December 31, 2015. The following table presents our assets that are measured at fair value on a nonrecurring basis by the fair value hierarchy level as of the dates presented:



	December 31, 2016								December 31, 2015
(dollars in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
ASSETS⁽¹⁾
Loans held for sale	$	—	$	—	$	1,802	$	1,802	$	—	$	—	$	—	$	—
Impaired loans	—		—		10,329		10,329		—		—		9,373		9,373
Other real estate owned	—		—		396		396		—		—		158		158
Mortgage servicing rights	—		—		4,098		4,098		—		—		3,396		3,396
Total Assets	$	—	$	—	$	16,625	$	16,625	$	—	$	—	$	12,927	$	12,927

⁽¹⁾This table presents only the nonrecurring items that are recorded at fair value in our financial statements.

The carrying values and fair values of our financial instruments at December 31, 2016 and 2015 are presented in the following tables:



			Fair Value Measurements at December 31, 2016
(dollars in thousands)	Carrying Value⁽¹⁾		Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	139,486	$	139,486	$	139,486	$	—	$	—
Securities available-for-sale	693,487		693,487		—		693,487		—
Loans held for sale	3,793		3,815		—		—		3,815
Portfolio loans, net of unearned income	5,611,419		5,551,266		—		—		5,551,266
Bank owned life insurance	72,081		72,081		—		72,081		—
FHLB and other restricted stock	31,817		31,817		—		—		31,817
Trading securities held in a Rabbi Trust	4,410		4,410		4,410		—		—
Mortgage servicing rights	3,744		4,098		—		—		4,098
Interest rate swaps	6,960		6,960		—		6,960		—
Interest rate lock commitments	236		236		—		236		—
LIABILITIES
Deposits	$	5,272,377	$	5,276,499	$	—	$	—	$	5,276,499
Securities sold under repurchase agreements	50,832		50,832		—		—		50,832
Short-term borrowings	660,000		660,000		—		—		660,000
Long-term borrowings	14,713		15,267		—		—		15,267
Junior subordinated debt securities	45,619		45,619		—		—		45,619
Interest rate swaps	6,958		6,958		—		6,958		—
Forward sale contracts	27		27		—		27		—

⁽¹⁾As reported in the Consolidated Balance Sheets



			Fair Value Measurements at December 31, 2015
(dollars in thousands)	Carrying Value⁽¹⁾		Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	99,399	$	99,399	$	99,399	$	—	$	—
Securities available-for-sale	660,963		660,963		—		660,963		—
Loans held for sale	35,321		35,500		—		—		35,500
Portfolio loans, net of unearned income	5,027,612		5,001,004		—		—		5,001,004
Bank owned life insurance	70,175		70,175		—		70,175		—
FHLB and other restricted stock	23,032		23,032		—		—		23,032
Trading securities held in a Rabbi Trust	4,021		4,021		4,021		—		—
Mortgage servicing rights	3,237		3,396		—		—		3,396
Interest rate swaps	11,295		11,295		—		11,295		—
Interest rate lock commitments	261		261		—		261		—
LIABILITIES
Deposits	$	4,876,611	$	4,881,718	$	—	$	—	$	4,881,718
Securities sold under repurchase agreements	62,086		62,086		—		—		62,086
Short-term borrowings	356,000		356,000		—		—		356,000
Long-term borrowings	117,043		117,859		—		—		117,859
Junior subordinated debt securities	45,619		45,619		—		—		45,619
Interest rate swaps	11,276		11,276		—		11,276		—
Forward sale contracts	5		5		—		5		—

⁽¹⁾As reported in the Consolidated Balance Sheets