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Fair Value Measurements
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
 
FASB ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FASB ASC Topic 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
 
The three levels of the fair value hierarchy are:
 
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
 
Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
 
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
 
The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018 segregated by the level of valuation inputs within the fair value hierarchy used to measure fair value.
 
Recurring Fair Value Measurements
December 31, 2019
(In thousands)
Fair Value
12/31/2019
 
(Level 1)
 
(Level 2)
 
(Level 3)
Available-for-sale securities
 
 
 
 
 
 
 
U.S. Treasuries
$
1,840

 
$
0

 
$
1,840

 
$
0

Obligations of U.S. Government sponsored entities
372,488

 
0

 
372,488

 
0

Obligations of U.S. states and political subdivisions
97,785

 
0

 
97,785

 
0

Mortgage-backed securities - residential
 
 
 
 
 
 
 
U.S. Government agencies
164,451

 
0

 
164,451

 
0

U.S. Government sponsored entities
659,590

 
0

 
659,590

 
0

Non-U.S. Government agencies or sponsored entities
0

 
0

 
0

 
0

U.S. corporate debt securities
2,433

 
0

 
2,433

 
0

Total Available-for-sale securities
1,298,587

 
0

 
1,298,587

 
0

Equity securities
915

 
0

 
0

 
915


 
The change in the fair value of the $915,000 of available-for-sale securities valued using significant unobservable inputs (level 3), between January 1, 2019 and December 31, 2019 was immaterial.

Recurring Fair Value Measurements
December 31, 2018
(In thousands)
Fair Value
12/31/2018
 
(Level 1)
 
(Level 2)
 
(Level 3)
Available-for-sale securities
 
 
 
 
 
 
 
U.S. Treasuries
$
289

 
$
0

 
$
289

 
$
0

Obligations of U.S. Government sponsored entities
485,898

 
0

 
485,898

 
0

Obligations of U.S. states and political subdivisions
85,440

 
0

 
85,440

 
0

Mortgage-backed securities - residential
 
 
 
 
 
 
 
U.S. Government agencies
128,267

 
0

 
128,267

 
0

U.S. Government sponsored entities
630,558

 
0

 
630,558

 
0

Non-U.S. Government agencies or sponsored entities
31

 
0

 
31

 
0

U.S. corporate debt securities
2,175

 
0

 
2,175

 
0

Total Available-for-sale securities
1,332,658

 
0

 
1,332,658

 
0

Equity securities
887

 
0

 
0

 
887


 
The Company determines fair value for its available-for-sale securities using an independent bond pricing service for identical assets or very similar securities. The pricing service uses a variety of techniques to determine fair value, including market maker bids, quotes and pricing models. Inputs to the model include recent trades, benchmark interest rates, spreads, and actual and projected cash flows. The Company reviews the prices supplied by the independent pricing service, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, the Company’s investment portfolio consists of traditional investments, nearly all of which are U.S. Treasury obligations, federal agency bullet or mortgage pass-through securities, or general obligation municipal bonds. Pricing for such instruments is fairly generic and is easily obtained. At least annually, the Company will validate prices supplied by the independent pricing service by comparing to prices obtained from a second third-party source. Based on the inputs used by our independent pricing services, the Company identifies the appropriate level within the fair value hierarchy to report these fair values.

Certain assets are measured at fair value on a nonrecurring basis, that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. For the Company, these include loans held for sale, collateral dependent impaired loans, other real estate owned, goodwill and other intangible assets. During 2019, certain collateral dependent impaired loans and other real estate owned at December 31, 2019, were adjusted down to fair value. Collateral values are estimated using Level 2 inputs based upon observable market data. Real estate values are generally valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally available in the market.

(In thousands)
 
 
Fair value measurements at reporting date using:
 
Gain (losses) from fair value changes
 
As of
 
Quoted prices in active markets for identical assets
 
Significant other observable inputs
 
Significant unobservable inputs
 
Twelve months ended
Assets:
12/31/2019
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
12/31/2019
Impaired loans
$
14,050

 
$
0

 
$
14,050

 
$
0

 
$
(4,184
)
Other real estate owned
315

 
0

 
315

 
0

 
(94
)
 
(In thousands)
 
 
Fair value measurements at reporting date using:
 
Gain (losses) from fair value changes
 
As of
 
Quoted prices in active markets for identical assets
 
Significant other observable inputs
 
Significant unobservable inputs
 
Twelve months ended
Assets:
12/31/2018
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
12/31/2018
Impaired loans
$
6,500

 
$
0

 
$
6,500

 
$
0

 
$
(173
)
Other real estate owned
1,594

 
0

 
1,594

 
0

 
(211
)


The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2019 and 2018. The carrying amounts shown in the table are included in the Consolidated Statements of Condition under the indicated captions. The fair value estimates, methods and assumptions set forth below for the Company’s financial instruments, including those financial instruments carried at cost, are made solely to comply with disclosures required by generally accepted accounting principles in the United States and does not always incorporate the exit-price concept of fair value prescribed by ASC Topic 820-10 and should be read in conjunction with the financial statements and notes included in this Report.

Estimated Fair Value of Financial Instruments
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
(In thousands)
Carrying Amount
 
Fair Value
 
(Level 1)
 
(Level 2)
 
(Level 3)
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
137,982

 
$
137,982

 
$
137,982

 
$
0

 
$
0

Securities - held-to-maturity
0

 
0

 
0

 
0

 
0

FHLB and FRB stock
33,695

 
33,695

 
0

 
33,695

 
0

Accrued interest receivable
19,293

 
19,293

 
0

 
19,293

 
0

 Loans and leases, net1
4,877,658

 
4,798,268

 
0

 
14,050

 
4,784,218

 
 
 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
 
 
Time deposits
$
675,014

 
$
677,205

 
$
0

 
$
677,205

 
$
0

Other deposits
4,537,907

 
4,537,907

 
0

 
4,537,907

 
0

Securities sold under agreements to repurchase
60,346

 
60,346

 
0

 
60,346

 
0

Other borrowings
658,100

 
659,895

 
0

 
659,895

 
0

Trust preferred debentures
17,035

 
21,904

 
0

 
21,904

 
0

Accrued interest payable
2,486

 
2,486

 
0

 
2,486

 
0

 
1 Lease receivables, although excluded from the scope of ASC Topic 825, are included in the estimated fair value amounts at their carrying value.

Estimated Fair Value of Financial Instruments
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
(In thousands)
Carrying Amount
 
Fair Value
 
(Level 1)
 
(Level 2)
 
(Level 3)
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
80,389

 
$
80,389

 
$
80,389

 
$
0

 
$
0

Securities - held-to-maturity
140,579

 
139,377

 
0

 
139,377

 
0

FHLB and FRB stock
52,262

 
52,262

 
0

 
52,262

 
0

Accrued interest receivable
20,922

 
20,922

 
0

 
20,922

 
0

 Loans and leases, net1
4,790,529

 
4,649,308

 
0

 
6,500

 
4,642,808

 
 
 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
 
 
Time deposits
$
637,295

 
$
631,489

 
$
0

 
$
631,489

 
$
0

Other deposits
4,251,664

 
4,251,664

 
0

 
4,251,664

 
0

Securities sold under agreements to repurchase
81,842

 
81,842

 
0

 
81,842

 
0

Other borrowings
1,076,075

 
1,074,081

 
0

 
1,074,081

 
0

Trust preferred debentures
16,863

 
21,921

 
0

 
21,921

 
0

Accrued interest payable
2,408

 
2,408

 
0

 
2,408

 
0

 
1 Lease receivables, although excluded from the scope of ASC Topic 825, are included in the estimated fair value amounts at their carrying value.
 
The following methods and assumptions were used in estimating fair value disclosures for financial instruments.
 
Cash and Cash Equivalents
The carrying amounts reported in the Consolidated Statements of Condition for cash, noninterest-bearing deposits, money market funds, and Federal funds sold approximate the fair value of those assets.
 
Securities
Fair values for U.S. Treasury securities are based on quoted market prices. Fair values for obligations of U.S. government sponsored entities, mortgage-backed securities-residential, obligations of U.S. states and political subdivisions, and U.S. corporate debt securities are based on quoted market prices, where available, as provided by third party pricing vendors. If quoted market prices were not available, fair values are based on quoted market prices of comparable instruments in active markets and/or based upon matrix pricing methodology, which uses comprehensive interest rate tables to determine market price, movement and yield relationships. For miscellaneous equity securities, carrying value is cost. These securities are reviewed periodically to determine if there are any events or changes in circumstances that would adversely affect their value.
 
FHLB and FRB Stock
The carrying amount of FHLB and FRB stock approximates fair value. If the stock is redeemed, the Company will receive an amount equal to the par value of the stock.
 
Loans and Leases
Fair value for loans are calculated using an exit price notion. The Company's valuation methodology takes into account factors such as estimated cash flows, including contractual cash flow and assumptions for prepayments; liquidity risk; and credit risk. The fair values of residential loans were estimated using discounted cash flow analyses, based upon available market benchmarks for rates and prepayment assumptions. The fair values of commercial and consumer loans were estimated using discounted cash flow analyses, based upon interest rates currently offered for loans and leases with similar terms and credit quality. The fair values of loans held for sale were determined based upon contractual prices for loans with similar characteristics.
 
Accrued Interest Receivable and Accrued Interest Payable
The carrying amount of these short term instruments approximate fair value.
 
Deposits
The fair values disclosed for noninterest bearing accounts and accounts with no stated maturities are equal to the amount payable on demand at the reporting date. The fair value of time deposits is based upon discounted cash flow analyses using rates offered for FHLB advances, which is the Company’s primary alternative source of funds.
 
Securities Sold Under Agreements to Repurchase
The carrying amounts of repurchase agreements and other short-term borrowings approximate their fair values. Fair values of long-term borrowings are estimated using a discounted cash flow approach, based on current market rates for similar borrowings. For securities sold under agreements to repurchase where the Company has elected the fair value option, the Company also receives pricing information from third parties, including the FHLB.
 
Other Borrowings
The fair values of other borrowings are estimated using discounted cash flow analysis, discounted at the Company’s current incremental borrowing rate for similar borrowing arrangements. For other borrowings where the Company has elected the fair value option, the Company also receives pricing information from third parties, including the FHLB.
 
Trust Preferred Debentures
The fair value of the trust preferred debentures has been estimated using a discounted cash flow analysis which uses a discount factor of a market spread over current interest rates for similar instruments.