Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2024

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


	September 30, 2024		December 31, 2023
(In Thousands)	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Financial assets:
Level 1 inputs:
Cash, due from banks and deposits in other banks	$102,876	$102,876	$118,530	$118,530
Investment securities available for sale	265,039	265,039	310,896	310,896
Marketable equity securities	12,957	12,957	13,153	13,153

Level 2 inputs:
Investment securities available for sale	280,171	280,171	327,040	327,040
Investment in Federal Home Loan Bank stock	4,318	4,318	2,980	2,980
Loans held for sale	97,937	97,937	31,974	31,974
Accrued interest receivable	12,909	12,909	11,958	11,958
Interest rate swaps	10,568	10,568	11,836	11,836


Level 3 inputs:
Investment securities held to maturity	36,750	34,615	36,750	33,413
Loans	2,007,565	1,827,510	1,789,497	1,686,362
Purchased receivables, net	23,564	23,564	36,842	36,842
Interest rate lock commitments	1,327	1,327	342	342
Mortgage servicing rights	21,570	21,570	19,564	19,564
Commercial servicing rights	2,136	2,136	2,200	2,200

Financial liabilities:
Level 2 inputs:
Deposits	$2,625,567	$2,628,018	$2,485,055	$2,482,937

Accrued interest payable	707	707	202	202
Borrowings	13,354	10,887	13,675	11,872
Interest rate swaps	8,930	8,930	10,470	10,470
Retail interest rate contracts	96	96	13	13

Level 3 inputs:

Junior subordinated debentures	10,310	11,971	10,310	12,030

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, 2024
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$489,923	$256,237	$233,686	$—


Corporate bonds	8,802	8,802	—	—
Collateralized loan obligations	46,485	—	46,485	—
Total available for sale securities	$545,210	$265,039	$280,171	$—
Marketable equity securities	$12,957	$12,957	$—	$—
Total marketable equity securities	$12,957	$12,957	$—	$—
Interest rate swaps	$10,136	$—	$10,136	$—
Interest rate lock commitments	1,327	—	—	1,327
Mortgage servicing rights	21,570	—	—	21,570
Commercial servicing rights	2,136	—	—	2,136

Total other assets	$35,169	$—	$10,136	$25,033
Liabilities:
Interest rate swaps	$8,930	$—	$8,930	$—
Retail interest rate contracts	96	—	96	—
Total other liabilities	$9,026	$—	$9,026	$—
December 31, 2023
Assets:
Available for sale securities
U.S. Treasury and government sponsored entities	$564,125	$300,274	$263,851	$—
Municipal securities	816	—	816	—

Corporate bonds	13,624	10,622	3,002	—
Collateralized loan obligations	59,371	—	59,371	—
Total available for sale securities	$637,936	$310,896	$327,040	$—
Marketable equity securities	$13,153	$13,153	$—	$—
Total marketable securities	$13,153	$13,153	$—	$—
Interest rate swaps	$11,836	$—	$11,836	$—
Interest rate lock commitments	342	—	—	342
Mortgage servicing rights	19,564	—	—	19,564
Commercial servicing rights	2,200	—	—	2,200

Total other assets	$33,942	$—	$11,836	$22,106
Liabilities:
Interest rate swaps	$10,470	$—	$10,470	$—
Retail interest rate contracts	13	—	13	—
Total other liabilities	$10,483	$—	$10,483	$—

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, 2024 and 2023:


(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, 2024
Interest rate lock commitments	$1,059	($647)	$5,173	($4,258)	$1,327	$1,327
Mortgage servicing rights	21,077	(968)	1,461	—	21,570	—
Commercial servicing rights	2,116	(10)	30	—	2,136	—
Total	$24,252	($1,625)	$6,664	($4,258)	$25,033	$1,327
Three Months Ended September 30, 2023
Interest rate lock commitments	$851	($267)	$2,021	($2,087)	$518	$518
Mortgage servicing rights	18,248	(310)	1,458	—	19,396	—
Commercial servicing rights	2,139	(39)	18	—	2,118	—
Total	$21,238	($616)	$3,497	($2,087)	$22,032	$518


(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, 2024
Interest rate lock commitments	$342	($1,375)	$11,102	($8,742)	$1,327	$1,327
Mortgage servicing rights	19,564	(1,074)	3,080	—	21,570	—
Commercial servicing rights	2,200	(155)	91	—	2,136	—
Total	$22,106	($2,604)	$14,273	($8,742)	$25,033	$1,327
Nine Months Ended September 30, 2023
Interest rate lock commitments	$440	($819)	$6,253	($5,356)	$518	$518
Mortgage servicing rights	18,635	(1,679)	2,440	—	19,396	—
Commercial servicing rights	2,129	(144)	133	—	2,118	—
Total	$21,204	($2,642)	$8,826	($5,356)	$22,032	$518

Fair Value, Assets Measured on Nonrecurring Basis

As of and for the periods ending September 30, 2024 and December 31, 2023, 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 individually measured for credit losses, 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, 2024
Loans individually measured for credit losses	$247	$—	$—	$247


Total	$247	$—	$—	$247
December 31, 2023
Loans individually measured for credit losses	$—	$—	$—	$—


Total	$—	$—	$—	$—

The following table presents the (gains) losses resulting from nonrecurring fair value adjustments for the three and nine-month periods ended September 30, 2024 and 2023:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In Thousands)	2024	2023	2024	2023
Loans individually measured for credit losses	$114	$—	$117	$—
Other real estate owned	—	123	—	123

Total loss from nonrecurring measurements	$114	$123	$117	$123

Schedule of Valuation Assumptions

The following tables provide 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, 2024 and December 31, 2023:


Financial Instrument	Valuation Technique - Recurring Basis	Unobservable Input	Weighted Average Rate Range
September 30, 2024



Interest rate lock commitment	External pricing model	Pull through rate	91.42	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	8.41% - 15.59%
		Discount rate	9.50% - 11.00%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	3.99% - 18.90%
		Discount rate	9.50	%
December 31, 2023



Interest rate lock commitment	External pricing model	Pull through rate	89.84	%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	6.13% - 25.33%
		Discount rate	9.50% - 11.00%
Commercial servicing rights	Discounted cash flow	Constant prepayment rate	3.99% - 18.90%
		Discount rate	9.50	%


Financial Instrument	Valuation Technique - Nonrecurring Basis	Unobservable Input	Weighted Average Rate Range
September 30, 2024
Loans individually measured for credit losses	In-house valuation of collateral	Discount rate	47%

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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