Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Financial Assets Measured at Fair Value on a Recurring Basis and the Change in Fair Value

The following tables present certain information regarding financial assets measured at fair value on a recurring basis at December 31, 2017 and 2016. There were no transfers between Level 1, 2, and 3 during the year ended December 31, 2017:



				Fair Value Measurements at December 31, 2017
(in thousands)	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale	$	120,121		$	—	$	120,121	$	—
Mortgage loans held-for-sale	269,140			—		269,140		—
Other assets⁽¹⁾	4,168			—		—		4,168
Other liabilities⁽¹⁾	(691		)	—		—		(691		)



				Fair Value Measurements at December 31, 2016
(in thousands)	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale	$	144,310		$	—	$	144,310	$	—
Mortgage loans held-for-sale	252,712			—		252,712		—
Other assets⁽¹⁾	7,111			—		—		7,111
Other liabilities⁽¹⁾	(1,065		)	—		—		(1,065		)


(1)	Includes mortgage-related IRLCs and derivative financial instruments to hedge interest rate risk. IRLCs recorded on a gross basis.

Reconciliation of All Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2017 and 2016. The changes in the fair value of economic hedges are recorded in noninterest income from mortgage banking activities in the Consolidated Statements of Comprehensive Income and are designed to partially offset the change in fair value of the financial instruments referenced in the following table:



	As of or for the Year Ended December 31,
	2017						2016
(in thousands)	Other assets⁽¹⁾			Other liabilities⁽¹⁾			Other assets⁽¹⁾			Other liabilities⁽¹⁾
Beginning balance	$	7,111		$	(1,065	)	$	4,022		$	(651	)
Total gains (losses) included in earnings:
Issuances	24,763			(3,924		)	31,188			(10,698		)
Settlements and closed loans	(28,018		)	4,298			(25,963		)	10,284
Expirations	312			—			(2,136		)	—
Ending balance	$	4,168		$	(691	)	$	7,111		$	(1,065	)


(1)	Includes mortgage-related IRLCs and derivative financial instruments executed to hedge interest rate risk.

Reconciliation of all Liabilities Measured on Recurring Basis Using Unobservable Inputs



	As of or for the Year Ended December 31,
	2017						2016
(in thousands)	Other assets⁽¹⁾			Other liabilities⁽¹⁾			Other assets⁽¹⁾			Other liabilities⁽¹⁾
Beginning balance	$	7,111		$	(1,065	)	$	4,022		$	(651	)
Total gains (losses) included in earnings:
Issuances	24,763			(3,924		)	31,188			(10,698		)
Settlements and closed loans	(28,018		)	4,298			(25,963		)	10,284
Expirations	312			—			(2,136		)	—
Ending balance	$	4,168		$	(691	)	$	7,111		$	(1,065	)


(1)	Includes mortgage-related IRLCs and derivative financial instruments executed to hedge interest rate risk.

Assets Measured at Fair Value on Nonrecurring Basis

The following tables present the assets that had changes in their recorded fair value and still held at the end of the reporting period by level within the fair value hierarchy based on the inputs used to estimate the fair value at the measurement date.



			Fair Value Measurements at December 31, 2017
(in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	23,257	$	—	$	—	$	23,257
ORE, net	4,993		—		—		4,993
Residential mortgage servicing rights	57,895		—		—		57,895
SBA servicing rights	1,027		—		—		1,027



			Fair Value Measurements at December 31, 2016
(in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	15,550	$	—	$	—	$	15,550
ORE, net	3,223		—		—		3,223
Residential mortgage servicing rights	44,600		—		—		44,600

Significant Unobservable Inputs Used in the Fair Value Measurement of Level 3 Assets and Liabilities

The following table shows the valuation technique and range, including weighted average, of the significant unobservable inputs and assumptions used in the fair value measurement of the Company’s Level 3 assets and liabilities:



($ in thousands)	Fair Value at December 31,				Valuation Technique	Unobservable Inputs	Range/Weighted Average at December 31, 2017	Range/Weighted Average at December 31, 2016
($ in thousands)	2017		2016		Valuation Technique	Unobservable Inputs	Range/Weighted Average at December 31, 2017	Range/Weighted Average at December 31, 2016
Nonrecurring:
Impaired loans	$	23,257	$	15,550	Appraised value less estimated selling costs	Estimated selling costs	0.00% - 10.00% 10.00%	0.00% - 10.00% 9.69%
Other real estate	4,993		3,223		Discounted appraisals less estimated selling costs	Estimated selling costs	0.00% - 10.00% 9.61%	0.00% - 10.00% 9.13%
Residential mortgage servicing rights	57,895		44,600		Discounted cash flows	Discount rate	9.64% - 11.13% 9.95%	9.64% - 11.13% 9.91%
						Modeled prepayment speeds	7.60% - 15.75% 8.19%	7.47% - 18.03% 7.98%
SBA servicing rights	1,027		—		Discounted cash flows	Discount rate	13.12%	N/A
						Modeled prepayment speeds	11.33%	N/A
Recurring:
IRLCs	$	3,439	$	3,231	Pricing model	Modeled pull-through ratio	83.14%	82.50%
Forward commitments	38		2,815		Investor pricing	Pricing spreads	90.00% - 104.94% 102.64%	90.00% - 106.14% 101.94%

Difference Between the Aggregate Fair Value and the Aggregate Unpaid Principal Balance of Loans Held-for-sale

The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of loans held-for-sale for which the fair value option (“FVO”) has been elected as of December 31, 2017 and 2016. There were no loans held-for-sale measured under FVO that were 90 days or more past due or in nonaccrual status at December 31, 2017 or 2016.



(in thousands)	Aggregate Fair Value December 31, 2017		Aggregate Unpaid Principal Balance at December 31, 2017		Aggregate Fair Value Over Unpaid Principal
Residential mortgage loans held-for-sale	$	269,140	$	262,315	$	6,825

(in thousands)	Aggregate Fair Value December 31, 2016		Aggregate Unpaid Principal Balance at December 31, 2016		Aggregate Fair Value Over Unpaid Principal
Residential mortgage loans held-for-sale	$	252,712	$	250,095	$	2,616

Disclosure of Carrying Amount and Fair Value of Financial Instruments

The following tables include the carrying amount and estimated fair value, as well as the level within the fair value hierarchy, of the Company’s financial instruments. The fair value estimates presented are based upon relevant information available to management as of December 31, 2017 and 2016:



			Fair Value Measurements at December 31, 2017
(in thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Financial instruments (assets):
Cash and cash equivalents	$	186,302	$	186,302	$	—	$	—	$	186,302
Investment securities available-for-sale	120,121		—		120,121		—		120,121
Investment securities held-to-maturity	21,689		—		17,684		4,001		21,685
Total loans, net ⁽¹⁾	3,908,949		—		269,140		3,466,838		3,735,978
Financial instruments (liabilities):
Noninterest-bearing demand deposits	1,125,598		—		—		1,125,598		1,125,598
Interest-bearing deposits	2,741,602		—		—		2,739,204		2,739,204
Short-term borrowings	150,580		—		150,580		—		150,580
Subordinated debt	120,587		—		114,402		—		114,402



			Fair Value Measurements at December 31, 2016
(in thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Financial instruments (assets):
Cash and cash equivalents	$	149,711	$	149,711	$	—	$	—	$	149,711
Investment securities available-for-sale	144,310		—		144,310		—		144,310
Investment securities held-to-maturity	16,583		—		12,438		4,096		16,534
Total loans, net ⁽¹⁾	3,737,761		—		252,712		3,236,345		3,489,057
Financial instruments (liabilities):
Noninterest-bearing demand deposits	964,900		—		—		964,900		964,900
Interest-bearing deposits	2,665,694		—		—		2,664,872		2,664,872
Short-term borrowings	243,351		—		243,351		—		243,351
Subordinated debt	120,454		—		114,537		—		114,537


(1)	Includes $269,140 and $252,712 in residential mortgage loans held-for-sale at December 31, 2017, and 2016, respectively, for which the Company has elected FVO.

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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