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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2021

Estimated fair values as of the periods indicated are as follows:


	September 30, 2021		December 31, 2020
(In Thousands)	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Financial assets:
Level 1 inputs:
Cash, due from banks and deposits in other banks	$492,279	$492,279	$115,965	$115,965
Investment securities available for sale	121,787	121,787	58,865	58,865
Marketable equity securities	8,551	8,551	9,052	9,052

Level 2 inputs:
Investment securities available for sale	256,485	256,485	188,768	188,768
Investment in Federal Home Loan Bank stock	3,110	3,110	2,551	2,551
Loans held for sale	106,224	106,224	146,178	146,178
Accrued interest receivable	7,546	7,546	7,979	7,979
Interest rate swaps	6,132	6,132	7,387	7,387


Level 3 inputs:
Investment securities held to maturity	20,000	19,264	10,000	10,000
Loans	1,450,657	1,419,567	1,444,051	1,414,179
Purchased receivables, net	20,118	20,118	13,922	13,922
Interest rate lock commitments	3,248	3,248	4,034	4,034
Mortgage servicing rights	13,080	13,080	11,218	11,218
Commercial servicing rights	1,278	1,278	1,310	1,310

Financial liabilities:
Level 2 inputs:
Deposits	$2,296,541	$2,297,426	$1,824,981	$1,826,990

Borrowings	14,605	14,809	14,817	15,538
Accrued interest payable	129	129	65	65
Interest rate swaps	7,032	7,032	9,122	9,122
Retail interest rate contracts	—	—	880	880

Level 3 inputs:

Junior subordinated debentures	10,310	9,833	10,310	10,475

Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table sets forth the balances as of the periods indicated of assets and liabilities measured at fair value on a recurring basis:


(In Thousands)	Total	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
September 30, 2021
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$299,824	$102,014	$197,810	$—
Municipal securities	850	—	850	—

Corporate bonds	35,411	19,773	15,638	—
Collateralized loan obligations	43,037	—	43,037	—
Total available for sale securities	$379,122	$121,787	$257,335	$—
Marketable equity securities	$8,551	$8,551	$—	$—
Total marketable equity securities	$8,551	$8,551	$—	$—
Interest rate swaps	6,132	—	6,132	—
Interest rate lock commitments	3,248	—	—	3,248
Mortgage servicing rights	13,080	—	—	13,080
Commercial servicing rights	1,278	—	—	1,278
Retail interest rate contracts	126	—	126	—
Total other assets	$23,864	$—	$6,258	$17,606
Liabilities:
Interest rate swaps	$7,032	$—	$7,032	$—

Total other liabilities	$7,032	$—	$7,032	$—
December 31, 2020
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$174,601	$37,548	$137,053	$—
Municipal securities	856	—	856	—

Corporate bonds	30,492	21,317	9,175	—
Collateralized loan obligations	41,684	—	41,684	—
Total available for sale securities	$247,633	$58,865	$188,768	$—
Marketable equity securities	$9,052	$9,052	$—	$—
Total marketable securities	$9,052	$9,052	$—	$—
Interest rate swaps	7,387	—	7,387	—
Interest rate lock commitments	4,034	—	—	4,034
Mortgage servicing rights	11,218	—	—	11,218
Commercial servicing rights	1,310	—	—	1,310
Total other assets	$23,949	$—	$7,387	$16,562
Liabilities:
Interest rate swaps	$9,122	$—	$9,122	$—
Retail interest rate contracts	880	—	880	—
Total other liabilities	$10,002	$—	$10,002	$—

Fair Value, Assets Measured on Recurring Basis using Significant Unobservable Inputs

The following tables provide a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine-month periods ended September 30, 2021 and 2020:


(In Thousands)	Beginning balance	Change included in earnings	Purchases and issuances	Sales and settlements	Ending balance	Net change in unrealized gains (losses) relating to items held at end of period
Three Months Ended September 30, 2021
Interest rate lock commitments	$3,044	($867)	$7,428	($6,357)	$3,248	$3,248
Mortgage servicing rights	12,835	(1,458)	1,703	—	13,080	—
Commercial servicing rights	1,292	(58)	44	—	1,278	—
Total	$17,171	($2,383)	$9,175	($6,357)	$17,606	$3,248
Three Months Ended September 30, 2020
Interest rate lock commitments	$4,653	($1,784)	$15,329	($11,679)	$6,519	$6,519
Mortgage servicing rights	10,721	(1,505)	1,373	—	10,589	—
Commercial servicing rights	1,162	(101)	225	—	1,286	—
Total	$16,536	($3,390)	$16,927	($11,679)	$18,394	$6,519


(In Thousands)	Beginning balance	Change included in earnings	Purchases and issuances	Sales and settlements	Ending balance	Net change in unrealized gains (losses) relating to items held at end of period
Nine Months Ended September 30, 2021
Interest rate lock commitments	$4,034	($2,881)	$23,879	($21,784)	$3,248	$3,248
Mortgage servicing rights	11,218	(3,034)	4,896	—	13,080	—
Commercial servicing rights	1,310	(134)	102	—	1,278	—
Total	$16,562	($6,049)	$28,877	($21,784)	$17,606	$3,248
Nine Months Ended September 30, 2020
Interest rate lock commitments	$810	($4,923)	$40,441	($29,809)	$6,519	$6,519
Mortgage servicing rights	11,920	(4,363)	3,032	—	10,589	—
Commercial servicing rights	1,214	(180)	252	—	1,286	—
Total	$13,944	($9,466)	$43,725	($29,809)	$18,394	$6,519

Fair Value, Assets Measured on Nonrecurring Basis

As of and for the periods ending September 30, 2021 and December 31, 2020, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis. For loans measured for impairment, the Company classifies fair value measurements using observable inputs, such as external appraisals, as Level 2 valuations in the fair value hierarchy, and unobservable inputs, such as in-house evaluations, as Level 3 valuations in the fair value hierarchy.


(In Thousands)	Total	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
September 30, 2021
Loans measured for impairment	$4,282	$—	$—	$4,282


Total	$4,282	$—	$—	$4,282
December 31, 2020
Loans measured for impairment	$308	$—	$—	$308


Total	$308	$—	$—	$308

The following table presents the (gains) losses resulting from nonrecurring fair value adjustments for the three and nine-month periods ended September 30, 2021 and 2020:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In Thousands)	2021	2020	2021	2020
Loans measured for impairment	($122)	$10	$650	$24


Total loss from nonrecurring measurements	($122)	$10	$650	$24

Schedule of Valuation Assumptions

The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and nonrecurring basis at September 30, 2021 and December 31, 2020:


Financial Instrument	Valuation Technique	Unobservable Input	Weighted Average Rate Range
September 30, 2021
Loans measured for impairment	In-house valuation of collateral	Discount rate	10% - 100%


Interest rate lock commitment	External pricing model	Pull through rate	92.46	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	9.93% - 14.02%
		Discount rate	8	%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	7.38% - 9.94%
		Discount rate	9.46	%
December 31, 2020
Loans measured for impairment	In-house valuation of collateral	Discount rate	30	%


Interest rate lock commitment	External pricing model	Pull through rate	90.65	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	7.77% - 13.17%
		Discount rate	0.00% - 7.75%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	7.38% - 9.94%
		Discount rate	9.46	%