Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Schedule of differences between the fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount

The following table shows the differences between the fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount the Company is contractually entitled to receive at maturity.



(Dollars in thousands)	Fair value carrying amount		Aggregate unpaid principal		Excess of fair value carrying amount over (under) unpaid principal
March 31, 2018
Mortgages held for sale reported at fair value	$	8,626	$	8,611	$	15	(1)

December 31, 2017
Mortgages held for sale reported at fair value	$	13,123	$	12,967	$	156	(1)


(1)	The excess of fair value carrying amount over (under) unpaid principal is included in mortgage banking income and includes changes in fair value at and subsequent to funding and gains and losses on the related loan commitment prior to funding.

Schedule of assets and liabilities measured at fair value on a recurring basis

The following table shows the balance of assets and liabilities measured at fair value on a recurring basis.



(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2018
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	27,726	$	475,271	$	—	$	502,997
U.S. States and political subdivisions securities	—		95,830		2,155		97,985
Mortgage-backed securities — Federal agencies	—		296,330		—		296,330
Corporate debt securities	—		44,056		—		44,056
Foreign government and other securities	—		—		708		708
Total debt securities available-for-sale	27,726		911,487		2,863		942,076
Mortgages held for sale	—		8,626		—		8,626
Accrued income and other assets (interest rate swap agreements)	—		5,342		—		5,342
Total	$	27,726	$	925,455	$	2,863	$	956,044

Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	5,439	$	—	$	5,439
Total	$	—	$	5,439	$	—	$	5,439

December 31, 2017
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	27,971	$	440,148	$	—	$	468,119
U.S. States and political subdivisions securities	—		113,845		2,155		116,000
Mortgage-backed securities — Federal agencies	—		287,910		—		287,910
Corporate debt securities	—		31,294		—		31,294
Foreign government and other securities	—		—		710		710
Total debt securities available-for-sale	27,971		873,197		2,865		904,033
Mortgages held for sale	—		13,123		—		13,123
Accrued income and other assets (interest rate swap agreements)	—		5,167		—		5,167
Total	$	27,971	$	891,487	$	2,865	$	922,323

Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	5,262	$	—	$	5,262
Total	$	—	$	5,262	$	—	$	5,262

Schedule of changes in investment securities available-for-sale Level 3 assets measured at fair value on a recurring basis

The following table shows changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended March 31, 2018 and 2017.



(Dollars in thousands)	U.S. States and political subdivisions securities			Foreign government and other securities			Investment securities available-for-sale
Beginning balance January 1, 2018	$	2,155		$	710		$	2,865
Total gains or losses (realized/unrealized):
Included in earnings	—			—			—
Included in other comprehensive income	—			(2		)	(2		)
Purchases	—			—			—
Issuances	—			—			—
Sales	—			—			—
Settlements	—			—			—
Maturities	—			—			—
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Ending balance March 31, 2018	$	2,155		$	708		$	2,863

Beginning balance January 1, 2017	$	2,699		$	807		$	3,506
Total gains or losses (realized/unrealized):
Included in earnings	—			—			—
Included in other comprehensive income	19			(3		)	16
Purchases	—			—			—
Issuances	—			—			—
Sales	—			—			—
Settlements	—			—			—
Maturities	(700		)	—			(700		)
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Ending balance March 31, 2017	$	2,018		$	804		$	2,822

Schedule of carrying value of assets measured at fair value on a non-recurring basis

The following table shows the carrying value of assets measured at fair value on a non-recurring basis.



(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2018
Impaired loans - collateral based	$	—	$	—	$	4,477	$	4,477
Accrued income and other assets (partnership investments)	—		—		1,000		1,000
Accrued income and other assets (mortgage servicing rights)	—		—		4,356		4,356
Accrued income and other assets (repossessions)	—		—		9,432		9,432
Accrued income and other assets (other real estate)	—		—		1,184		1,184
Total	$	—	$	—	$	20,449	$	20,449

December 31, 2017
Impaired loans - collateral based	$	—	$	—	$	7,994	$	7,994
Accrued income and other assets (partnership investments)	—		—		1,000		1,000
Accrued income and other assets (mortgage servicing rights)	—		—		4,349		4,349
Accrued income and other assets (repossessions)	—		—		10,114		10,114
Accrued income and other assets (other real estate)	—		—		1,312		1,312
Total	$	—	$	—	$	24,769	$	24,769

Schedule of fair values of financial instruments

The following table shows the fair values of the Company’s financial instruments.



(Dollars in thousands)	Carrying or Contract Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2018
Assets:
Cash and due from banks	$	29,404	$	29,404	$	29,404	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	21,748		21,748		21,748		—		—
Investment securities, available-for-sale	942,076		942,076		27,726		911,487		2,863
Other investments	27,265		27,265		27,265		—		—
Mortgages held for sale	8,626		8,626		—		8,626		—
Loans and leases, net of reserve for loan and lease losses	4,592,766		4,565,022		—		—		4,565,022
Mortgage servicing rights	4,356		7,389		—		—		7,389
Interest rate swaps	5,342		5,342		—		5,342		—
Liabilities:
Deposits	$	4,781,325	$	4,769,080	$	3,400,930	$	1,368,150	$	—
Short-term borrowings	355,964		355,964		144,454		211,510		—
Long-term debt and mandatorily redeemable securities	71,335		68,657		—		68,657		—
Subordinated notes	58,764		50,198		—		50,198		—
Interest rate swaps	5,439		5,439		—		5,439		—
Off-balance-sheet instruments *	—		287		—		287		—

December 31, 2017
Assets:
Cash and due from banks	$	73,635	$	73,635	$	73,635	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	4,398		4,398		4,398		—		—
Investment securities, available-for-sale	904,033		904,033		27,971		873,197		2,865
Other investments	25,953		25,953		25,953		—		—
Mortgages held for sale	13,123		13,123		—		13,123		—
Loans and leases, net of reserve for loan and lease losses	4,432,795		4,428,848		—		—		4,428,848
Mortgage servicing rights	4,349		7,187		—		—		7,187
Interest rate swaps	5,167		5,167		—		5,167		—
Liabilities:
Deposits	$	4,752,730	$	4,745,111	$	3,482,757	$	1,262,354	$	—
Short-term borrowings	214,595		214,595		206,862		7,733		—
Long-term debt and mandatorily redeemable securities	70,060		67,857		—		67,857		—
Subordinated notes	58,764		57,103		—		57,103		—
Interest rate swaps	5,262		5,262		—		5,262		—
Off-balance-sheet instruments *	—		286		—		286		—

* Represents estimated cash outflows required to currently settle the obligations at current market rates.

Recurring

Fair value measurements

Schedule of valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis

The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring basis.



(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
March 31, 2018
Debt securities available-for sale
Direct placement municipal securities	$	2,155	Discounted cash flows	Credit spread assumption	2.26% - 3.08%

Foreign government	$	708	Discounted cash flows	Market yield assumption	0.22% - 1.33%

December 31, 2017
Debt securities available-for sale
Direct placement municipal securities	$	2,155	Discounted cash flows	Credit spread assumption	2.21% - 2.93%

Foreign government	$	710	Discounted cash flows	Market yield assumption	0.35% - 1.23%

Non-recurring

Fair value measurements

Schedule of valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis

The following table below shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a non-recurring basis.



(Dollars in thousands)	Carrying Value		Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
March 31, 2018
Impaired loans	$	4,477	$	4,477	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	10%-20%

Mortgage servicing rights	4,356		7,389		Discounted cash flows	Constant prepayment rate (CPR)	7.4% - 23.6%
						Discount rate	10.1% - 13.0%

Repossessions	9,432		9,905		Appraisals, trade publications and auction values	Discount for lack of marketability	4% - 10%

Other real estate	1,184		1,312		Appraisals	Discount for lack of marketability	7% - 9%

December 31, 2017
Impaired loans	$	7,994	$	7,994	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	3% - 20%

Mortgage servicing rights	4,349		7,187		Discounted cash flows	Constant prepayment rate (CPR)	8.6% - 20.7%
						Discount rate	9.6% - 12.5%

Repossessions	10,114		10,493		Appraisals, trade publications and auction values	Discount for lack of marketability	3% - 10%

Other real estate	1,312		1,441		Appraisals	Discount for lack of marketability	7% - 9%

- 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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