Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 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
June 30, 2018
Mortgages held for sale reported at fair value	$	8,235	$	8,051	$	184	(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
June 30, 2018
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	33,671	$	490,463	$	—	$	524,134
U.S. States and political subdivisions securities	—		94,261		1,641		95,902
Mortgage-backed securities — Federal agencies	—		302,279		—		302,279
Corporate debt securities	—		45,327		—		45,327
Foreign government and other securities	—		—		707		707
Total debt securities available-for-sale	33,671		932,330		2,348		968,349
Mortgages held for sale	—		8,235		—		8,235
Accrued income and other assets (interest rate swap agreements)	—		7,349		—		7,349
Total	$	33,671	$	947,914	$	2,348	$	983,933

Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	7,480	$	—	$	7,480
Total	$	—	$	7,480	$	—	$	7,480

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 June 30, 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 April 1, 2018	$	2,155		$	708		$	2,863
Total gains or losses (realized/unrealized):
Included in earnings	—			—			—
Included in other comprehensive income	4			(1		)	3
Purchases	—			—			—
Issuances	—			—			—
Sales	—			—			—
Settlements	—			—			—
Maturities	(518		)	—			(518		)
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Ending balance June 30, 2018	$	1,641		$	707		$	2,348

Beginning balance April 1, 2017	$	2,018		$	804		$	2,822
Total gains or losses (realized/unrealized):
Included in earnings	—			—			—
Included in other comprehensive income	11			(2		)	9
Purchases	287			—			287
Issuances	—			—			—
Sales	—			—			—
Settlements	—			—			—
Maturities	(515		)	(500		)	(1,015		)
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Ending balance June 30, 2017	$	1,801		$	302		$	2,103

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
June 30, 2018
Impaired loans - collateral based	$	—	$	—	$	17,602	$	17,602
Accrued income and other assets (partnership investments)	—		—		1,000		1,000
Accrued income and other assets (mortgage servicing rights)	—		—		4,323		4,323
Accrued income and other assets (repossessions)	—		—		9,389		9,389
Accrued income and other assets (other real estate)	—		—		133		133
Total	$	—	$	—	$	32,447	$	32,447

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
June 30, 2018
Assets:
Cash and due from banks	$	71,102	$	71,102	$	71,102	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	73,358		73,358		73,358		—		—
Investment securities, available-for-sale	968,349		968,349		33,671		932,330		2,348
Other investments	28,159		28,159		28,159		—		—
Mortgages held for sale	8,235		8,235		—		8,235		—
Loans and leases, net of reserve for loan and lease losses	4,736,816		4,690,436		—		—		4,690,436
Mortgage servicing rights	4,323		7,536		—		—		7,536
Interest rate swaps	7,349		7,349		—		7,349		—
Liabilities:
Deposits	$	5,108,439	$	5,095,168	$	3,601,586	$	1,493,582	$	—
Short-term borrowings	277,094		277,094		106,268		170,826		—
Long-term debt and mandatorily redeemable securities	71,194		68,373		—		68,373		—
Subordinated notes	58,764		48,956		—		48,956		—
Interest rate swaps	7,480		7,480		—		7,480		—
Off-balance-sheet instruments *	—		294		—		294		—

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
June 30, 2018
Debt securities available-for sale
Direct placement municipal securities	$	1,641	Discounted cash flows	Credit spread assumption	0.11% - 3.02%

Foreign government	$	707	Discounted cash flows	Market yield assumption	0.00% - 1.21%

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
June 30, 2018
Impaired loans	$	17,602	$	17,602	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	10% -30%

Mortgage servicing rights	4,323		7,536		Discounted cash flows	Constant prepayment rate (CPR)	7.1% - 22.5%
						Discount rate	10.1% - 13.0%

Repossessions	9,389		9,875		Appraisals, trade publications and auction values	Discount for lack of marketability	4% - 10%

Other real estate	133		176		Appraisals	Discount for lack of marketability	8% - 61%

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%