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, 2018 and 2017. There were no transfers between Level 1 and Level 2 for items measured at fair value on a recurring basis during the periods presented.



	December 31, 2018
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Debt securities available-for-sale:
U.S. Treasury securities	$	—	$	9,736	$	—	$	9,736
Obligations of U.S. government corporations and agencies	—		128,261		—		128,261
Collateralized mortgage obligations of U.S. government corporations and agencies	—		148,659		—		148,659
Residential mortgage-backed securities of U.S. government corporations and agencies	—		24,350		—		24,350
Commercial mortgage-backed securities of U.S. government corporations and agencies	—		246,784		—		246,784
Obligations of states and political subdivisions	—		122,266		—		122,266
Total Debt Securities Available-for-Sale	—		680,056		—		680,056
Marketable equity securities⁽¹⁾	—		4,816		—		4,816
Total Securities	—		684,872		—		684,872
Securities held in a Rabbi Trust	4,725		—		—		4,725
Derivative financial assets:
Interest rate swaps	—		5,504		—		5,504
Interest rate lock commitments	—		251		—		251
Forward sale contracts - mortgage loans	—		55		—		55
Total Assets	$	4,725	$	690,682	$	—	$	695,407
LIABILITIES
Derivative financial liabilities:
Interest rate swaps	$	—	$	5,340	$	—	$	5,340
Total Liabilities	$	—	$	5,340	$	—	$	5,340

⁽¹⁾ASU No. 2016-01 was adopted January 1, 2018, resulting in separate classification of our marketable equity securities previously included in available-for-sale securities.



	December 31, 2017
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Debt securities available-for-sale:
U.S. Treasury securities	$	—	$	19,789	$	—	$	19,789
Obligations of U.S. government corporations and agencies	—		162,193		—		162,193
Collateralized mortgage obligations of U.S. government corporations and agencies	—		108,688		—		108,688
Residential mortgage-backed securities of U.S. government corporations and agencies	—		32,854		—		32,854
Commercial mortgage-backed securities of U.S. government corporations and agencies	—		242,221		—		242,221
Obligations of states and political subdivisions	—		127,402		—		127,402
Total Debt Securities Available-for-Sale	—		693,147		—		693,147
Marketable equity securities	—		5,144		—		5,144
Total Securities	—		698,291		—		698,291
Securities held in a Rabbi Trust	5,080		—		—		5,080
Derivative financial assets:
Interest rate swaps	—		3,074		—		3,074
Interest rate lock commitments	—		226		—		226
Total Assets	$	5,080	$	701,591	$	—	$	706,671
LIABILITIES
Derivative financial liabilities:
Interest rate swaps	$	—	$	3,055	$	—	$	3,055
Forward sale contracts	—		5		—		5
Total Liabilities	$	—	$	3,060	$	—	$	3,060

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, 2018 or December 31, 2017.

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, 2018								December 31, 2017
(dollars in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
ASSETS⁽¹⁾
Loans held for sale	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Impaired loans	—		—		21,441		21,441		—		—		6,759		6,759
Other real estate owned	—		—		2,826		2,826		—		—		444		444
Mortgage servicing rights	—		—		1,197		1,197		—		—		178		178
Total Assets	$	—	$	—	$	25,464	$	25,464	$	—	$	—	$	7,381	$	7,381

⁽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, 2018 and 2017 are presented in the following tables:



			Fair Value Measurements at December 31, 2018
(dollars in thousands)	Carrying Value⁽¹⁾		Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	155,489	$	155,489	$	155,489	$	—	$	—
Securities	684,872		684,872		—		684,872		—
Loans held for sale	2,371		2,469		—		—		2,469
Portfolio loans, net	5,885,652		5,728,843		—		—		5,728,843
Bank owned life insurance	73,900		73,900		—		73,900		—
FHLB and other restricted stock	29,435		29,435		—		—		29,435
Securities held in a Rabbi Trust	4,725		4,725		4,725		—		—
Mortgage servicing rights	4,464		5,181		—		—		5,181
Interest rate swaps	5,504		5,504		—		5,504		—
Interest rate lock commitments	251		251		—		251		—
Forward sale contracts - mortgage loans	55		55		—		55		—
LIABILITIES
Deposits	$	5,673,922	$	5,662,193	$	4,261,884	$	1,400,309	$	—
Securities sold under repurchase agreements	18,383		18,383		18,383		—		—
Short-term borrowings	470,000		470,000		470,000		—		—
Long-term borrowings	70,314		70,578		38,610		31,968
Junior subordinated debt securities	45,619		45,619		45,619		—		—
Interest rate swaps	5,340		5,340		—		5,340		—

⁽¹⁾As reported in the Consolidated Balance Sheets



			Fair Value Measurements at December 31, 2017
(dollars in thousands)	Carrying Value⁽¹⁾		Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	117,152	$	117,152	$	117,152	$	—	$	—
Securities	698,291		698,291		—		698,291		—
Loans held for sale	4,485		4,583		—		—		4,583
Portfolio loans, net	5,705,059		5,690,292		—		—		5,690,292
Bank owned life insurance	72,150		72,150		—		72,150		—
FHLB and other restricted stock	29,270		29,270		—		—		29,270
Securities held in a Rabbi Trust	5,080		5,080		5,080		—		—
Mortgage servicing rights	4,133		4,571		—		—		4,571
Interest rate swaps	3,074		3,074		—		3,074		—
Interest rate lock commitments	226		226		—		226		—
LIABILITIES
Deposits	$	5,427,891	$	5,426,928	$	4,033,092	$	1,393,836	$	—
Securities sold under repurchase agreements	50,161		50,161		50,161		—		—
Short-term borrowings	540,000		540,000		540,000		—		—
Long-term borrowings	47,301		47,618		38,160		9,458		—
Junior subordinated debt securities	45,619		45,619		45,619		—		—
Interest rate swaps	3,055		3,055		—		3,055		—
Forward sale contracts	5		5		—		5		—

⁽¹⁾As reported in the Consolidated Balance Sheets