FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2020

Assets and Liabilities Measured at Fair Value on Recurring Basis


	Fair Value Measurements at
	March 31, 2020 Using:
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Available-for-sale debt securities:
U.S. Treasury securities and U.S. Government agencies	$	—	$	169,292	$	—	$	169,292
Private label mortgage backed security		—		—		3,249		3,249
Mortgage backed securities - residential		—		297,722		—		297,722
Collateralized mortgage obligations		—		59,881		—		59,881
Corporate bonds		—		9,615		—		9,615
Trust preferred security		—		—		4,100		4,100
Total available-for-sale debt securities	$	—	$	536,510	$	7,349	$	543,859

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	294	$	—	$	294
Community Reinvestment Act mutual fund		2,513		—		—		2,513
Total equity securities with readily determinable fair value	$	2,513	$	294	$	—	$	2,807

Mortgage loans held for sale	$	—	$	39,384	$	—	$	39,384
Consumer loans held for sale		—		—		3,431		3,431
Consumer loans held for investment		—		—		827		827
Rate lock loan commitments		—		4,568		—		4,568
Interest rate swap agreements		—		14,013		—		14,013

Financial liabilities:
Mandatory forward contracts	$	—	$	2,826	$	—	$	2,826
Interest rate swap agreements		—		14,249		—		14,249


	Fair Value Measurements at
	December 31, 2019 Using:
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Available-for-sale debt securities:
U.S. Treasury securities and U.S. Government agencies	$	—	$	134,640	$	—	$	134,640
Private label mortgage backed security		—		—		3,495		3,495
Mortgage backed securities - residential		—		255,847		—		255,847
Collateralized mortgage obligations		—		63,371		—		63,371
Corporate bonds		—		10,002		—		10,002
Trust preferred security		—		—		4,000		4,000
Total available-for-sale debt securities	$	—	$	463,860	$	7,495	$	471,355

Equity securities with readily determinable fair value:
Freddie Mac preferred stock	$	—	$	714	$	—	$	714
Community Reinvestment Act mutual fund		2,474		—		—		2,474
Total equity securities with readily determinable fair value	$	2,474	$	714	$	—	$	3,188

Mortgage loans held for sale	$	—	$	19,224	$	—	$	19,224
Consumer loans held for sale				—		598		598
Consumer loans held for investment		—		—		998		998
Rate lock loan commitments		—		789		—		789
Interest rate swap agreements		—		5,062		—		5,062

Financial liabilities:
Mandatory forward contracts	$	—	$	131	$	—	$	131
Interest rate swap agreements		—		5,166		—		5,166

Assets Measured at Fair Value on a Non-Recurring Basis


	Fair Value Measurements at
	March 31, 2020 Using:
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Value

Collateral-dependent loans:
Residential real estate:
Owner occupied	$	—	$	—	$	3,794	$	3,794
Commercial real estate		—		—		2,602		2,602
Commercial & industrial		—		—		1,336		1,336
Home equity		—		—		331		331
Total collateral-dependent loans*	$	—	$	—	$	8,063	$	8,063

Mortgage servicing rights	$	—	$	328	$	—	$	328


	Fair Value Measurements at
	December 31, 2019 Using:
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Value

Impaired loans:
Residential real estate:
Owner occupied	$	—	$	—	$	3,598	$	3,598
Nonowner occupied		—		—		14		14
Commercial real estate		—		—		3,276		3,276
Commercial & industrial		—		—		1,562		1,562
Home equity		—		—		470		470
Total impaired loans*	$	—	$	—	$	8,920	$	8,920

*The difference between the carrying value and the fair value of collateral-dependent/impaired loans measured at fair value is reconciled in a subsequent table of this Footnote.

Impaired collateral dependent loans classified with Level 3 fair value hierarchy


(in thousands)	March 31, 2020		December 31, 2019

Carrying amount of loans measured at fair value	$	6,870	$	7,729
Estimated selling costs considered in carrying amount		1,195		1,193
Valuation allowance		(2)		(2)
Total fair value	$	8,063	$	8,920

Provisions for loss on collateral dependent impaired loans


	Three Months Ended
	March 31,
(in thousands)	2020		2019

Credit loss expense on collateral-dependent, impaired loans	$	16	$	14

Carrying amount and estimated fair values of financial instruments


			Fair Value Measurements at
			March 31, 2020:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	316,263	$	316,263	$	—	$	—	$	316,263
Available-for-sale debt securities		543,859		—		536,510		7,349		543,859
Held-to-maturity debt securities		61,664		—		59,725		—		59,725
Equity securities with readily determinable fair values		2,807		2,513		294		—		2,807
Mortgage loans held for sale, at fair value		39,384		—		39,384		—		39,384
Consumer loans held for sale, at fair value		3,431		—		—		3,431		3,431
Consumer loans held for sale, at the lower of cost or fair value		12,089		—		—		12,089		12,089
Loans, net		4,445,168		—		—		4,425,308		4,425,308
Federal Home Loan Bank stock		38,900		—		—		—		NA
Accrued interest receivable		12,037		—		12,037		—		12,037
Rate lock loan commitments		4,568		—		4,568		—		4,568
Interest rate swap agreements		14,013		—		14,013		—		14,013

Liabilities:
Noninterest-bearing deposits	$	1,300,891		—	$	1,300,891		—	$	1,300,891
Transaction deposits		2,033,829		—		2,033,829		—		2,033,829
Time deposits		736,737		—		748,977		—		748,977
Securities sold under agreements to repurchase and other short-term borrowings		126,080		—		126,080		—		126,080
Federal Home Loan Bank advances		572,500		—		575,135		—		575,135
Subordinated note		41,240		—		34,571		—		34,571
Accrued interest payable		3,437		—		3,437		—		3,437
Mandatory forward contracts		2,826		—		2,826		—		2,826
Interest rate swap agreements		14,249		—		14,249		—		14,249


			Fair Value Measurements at
			December 31, 2019:
									Total
	Carrying								Fair
(in thousands)	Value		Level 1		Level 2		Level 3		Value

Assets:
Cash and cash equivalents	$	385,303	$	385,303	$	—	$	—	$	385,303
Available-for-sale debt securities		471,355		—		463,860		7,495		471,355
Held-to-maturity debt securities		62,531		—		63,156		—		63,156
Equity securities with readily determinable fair values		3,188		2,474		714		—		3,188
Mortgage loans held for sale, at fair value		19,224		—		19,224		—		19,224
Consumer loans held for sale, at fair value		598		—		—		598		598
Consumer loans held for sale, at the lower of cost or fair value		11,646		—		—		11,646		11,646
Loans, net		4,389,800		—		—		4,381,396		4,381,396
Federal Home Loan Bank stock		30,831		—		—		—		NA
Accrued interest receivable		12,937		—		12,937		—		12,937
Rate lock loan commitments		789		—		789		—		789
Interest rate swap agreements		5,062		—		5,062		—		5,062

Liabilities:
Noninterest-bearing deposits	$	1,033,379		—	$	1,033,379		—	$	1,033,379
Transaction deposits		2,018,687		—		2,018,687		—		2,018,687
Time deposits		733,942		—		737,733		—		737,733
Securities sold under agreements to repurchase and other short-term borrowings		167,617		—		167,617		—		167,617
Federal Home Loan Bank advances		750,000		—		749,667		—		749,667
Subordinated note		41,240		—		32,587		—		32,587
Accrued interest payable		2,802		—		2,802		—		2,802
Mandatory forward contracts		131		—		131		—		131
Interest rate swap agreements		5,166		—		5,166		—		5,166

Nonrecurring basis

Fair Value Disclosures

Fair value inputs quantitative information


					Range
	Fair		Valuation	Unobservable	(Weighted
March 31, 2020 (dollars in thousands)	Value		Technique	Inputs	Average)

Collateral-dependent loans - residential real estate owner occupied	$	3,794	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 50% (16%)

Collateral-dependent loans - commercial real estate	$	2,602	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 44% (2%)

Collateral-dependent loans - commercial & industrial	$	1,336	Sales comparison approach	Adjustments determined for differences between comparable sales	14% - 50% (43%)

Collateral-dependent loans - home equity	$	331	Sales comparison approach	Adjustments determined for differences between comparable sales	2% (2%)


					Range
	Fair		Valuation	Unobservable	(Weighted
December 31, 2019 (dollars in thousands)	Value		Technique	Inputs	Average)

Impaired loans - residential real estate owner occupied	$	3,598	Sales comparison approach	Adjustments determined for differences between comparable sales	0% - 58% (12%)

Impaired loans - residential real estate nonowner occupied	$	14	Sales comparison approach	Adjustments determined for differences between comparable sales	5% (5%)

Impaired loans - commercial real estate	$	3,276	Sales comparison approach	Adjustments determined for differences between comparable sales	1% - 10% (4%)

Impaired loans - commercial & industrial	$	1,562	Income approach	Adjustments for differences between net operating income expectations	3% - 50% (37%)

Impaired loans - home equity	$	470	Sales comparison approach	Adjustments determined for differences between comparable sales	2% (2%)

Private label mortgage backed security

Fair Value Disclosures

Reconciliation of the Bank's investments measured at fair value on a recurring basis using significant unobservable inputs


	Three Months Ended
	March 31,
(in thousands)	2020		2019

Balance, beginning of period	$	3,495	$	3,712
Total gains or losses included in earnings:
Net change in unrealized gain		1		(33)
Recovery of actual losses previously recorded		—		37
Principal paydowns		(247)		(57)
Balance, end of period	$	3,249	$	3,659

Private label mortgage backed security | Recurring basis

Fair Value Disclosures

Fair value inputs quantitative information


	Fair		Valuation
March 31, 2020 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	3,249	Discounted cash flow	(1) Constant prepayment rate	2.7% - 5.0%

				(2) Probability of default	1.8% - 6.0%

				(3) Loss severity	50% - 75%


	Fair		Valuation
December 31, 2019 (dollars in thousands)	Value		Technique	Unobservable Inputs	Range

Private label mortgage backed security	$	3,495	Discounted cash flow	(1) Constant prepayment rate	2.3% - 5.0%

				(2) Probability of default	1.8% - 6.3%

				(3) Loss severity	50% - 75%

Trust preferred security

Fair Value Disclosures

Reconciliation of the Bank's investments measured at fair value on a recurring basis using significant unobservable inputs


	Three Months Ended
	March 31,
(in thousands)	2020		2019

Balance, beginning of period	$	4,000	$	4,075
Total gains or losses included in earnings:
Discount accretion		11		10
Net change in unrealized gain		89		15
Balance, end of period	$	4,100	$	4,100

Mortgage loans held for sale

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	March 31, 2020		December 31, 2019

Aggregate fair value	$	39,384	$	19,224
Contractual balance		38,208		18,690
Unrealized gain		1,176		534

Schedule of gains and losses from changes in fair value included in earnings


	Three Months Ended
	March 31,
(in thousands)	2020		2019

Interest income	$	214	$	102
Change in fair value		642		(82)
Total included in earnings	$	856	$	20

Consumer loans

Fair Value Disclosures

Schedule of aggregate fair value, contractual balance and unrealized gain


(in thousands)	March 31, 2020		December 31, 2019

Aggregate fair value	$	3,431	$	598
Contractual balance		3,454		593
Unrealized (loss) gain		23		5

Schedule of gains and losses from changes in fair value included in earnings


	Three Months Ended
	March 31,
(in thousands)	2020		2019

Interest income	$	1,476	$	—
Change in fair value		18		—
Total included in earnings	$	1,494	$	—

Consumer loans | Recurring basis

Fair Value Disclosures

Reconciliation of the Bank's investments measured at fair value on a recurring basis using significant unobservable inputs


	Fair		Valuation
March 31, 2020 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate

Consumer loans held for sale	$	3,431	Contract Terms	(1) Net Premium	1.4%

				(2) Discounted Sales	5.00%


	Fair		Valuation
December 31, 2019 (dollars in thousands)	Value		Technique	Unobservable Inputs	Rate

Consumer loans held for sale	$	598	Contract Terms	(1) Net Premium	1.4%

				(2) Discounted Sales	5.00%