Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Change in Fair Value Mortgage Loans Held For Sale, Interest Rate Lock Commitments and Commitments to Sell Disclosures

The following table presents the changes in fair value related to mortgage loans held for sale, interest rate lock commitments and commitments to sell residential real estate mortgage loans, for which the fair value option was elected. Changes in fair values are reported as a component of mortgage banking revenues in the Consolidated Statements of Income.



(Dollars in thousands)
	Three months						Six months
Periods ended June 30,	2016			2015			2016			2015
Mortgage loans held for sale		$659			($910	)		$495			($569	)
Interest rate lock commitments	501			(432		)	1,746			139
Commitments to sell mortgage loans	(1,174		)	1,410			(2,180		)	470
Total changes in fair value		($14	)		$68			$61			$40

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the balances of assets and liabilities reported at fair value on a recurring basis:



(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2016	Total				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Securities available for sale:
Obligations of U.S. government-sponsored enterprises		$72,823		$—		$72,823		$—
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	276,264		—		276,264		—
Obligations of states and political subdivisions	26,157		—		26,157		—
Individual name issuer trust preferred debt securities	24,494		—		24,494		—
Corporate bonds	2,011		—		2,011		—
Mortgage loans held for sale	38,554		—		38,554		—
Derivative assets (1)	25,452		—		25,452		—
Total assets at fair value on a recurring basis		$465,755		$—		$465,755		$—
Liabilities:
Derivative liabilities (2)		$27,849		$—		$27,849		$—
Contingent consideration liability (3)	2,986		—		—		2,986
Total liabilities at fair value on a recurring basis		$30,835		$—		$27,849		$2,986


(1)	Derivative assets include interest rate risk management agreements, interest rate swap contracts with customers, risk participation-out agreements and forward loan commitments and are included in other assets in the Consolidated Balance Sheets.


(2)	Derivative liabilities include mirror swaps with counterparties, risk participation-in agreements and forward loan commitments and are included in other liabilities in the Consolidated Balance Sheets.


(3)	The contingent consideration liability is included in other liabilities in the Consolidated Balance Sheets.



(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2015	Total				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Securities available for sale:
Obligations of U.S. government-sponsored enterprises		$77,015		$—		$77,015		$—
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	234,856		—		234,856		—
Obligations of states and political subdivisions	36,080		—		36,080		—
Individual name issuer trust preferred debt securities	25,138		—		25,138		—
Corporate bonds	1,955		—		1,955		—
Mortgage loans held for sale	33,969		—		33,969		—
Derivative assets (1)	9,490		—		9,490		—
Total assets at fair value on a recurring basis		$418,503		$—		$418,503		$—
Liabilities:
Derivative liabilities (2)		$10,347		$—		$10,347		$—
Contingent Consideration Liability (3)	2,945		—		—		2,945
Total liabilities at fair value on a recurring basis		$13,292		$—		$10,347		$2,945


(1)	Derivative assets include interest rate risk management agreements, interest rate swap contracts with customers, risk participation-out agreements and forward loan commitments and are included in other assets in the Consolidated Balance Sheets.


(2)	Derivative liabilities include mirror swaps with counterparties, risk participation-in agreements and forward loan commitments and are included in other liabilities in the Consolidated Balance Sheets.


(3)	The contingent consideration liability is included in other liabilities in the Consolidated Balance Sheets.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table presents the carrying value of assets held at June 30, 2016, which were written down to fair value during the six months ended June 30, 2016:



(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(Dollars in thousands)	Total				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Collateral dependent impaired loans		$12,996		$—		$—		$12,996
Loan servicing rights	3,286		—		—		3,286
Property acquired through foreclosure or repossession	1,045		—		—		1,045
Total assets at fair value on a nonrecurring basis		$17,327		$—		$—		$17,327

The allowance for loan losses on collateral dependent impaired loans amounted to $857 thousand at June 30, 2016.

The following table presents the carrying value of assets held at December 31, 2015, which were written down to fair value during the year ended December 31, 2015:



(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(Dollars in thousands)	Total				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Collateral dependent impaired loans		$10,545		$—		$—		$10,545
Property acquired through foreclosure or repossession	270		—		—		270
Total assets at fair value on a nonrecurring basis		$10,815		$—		$—		$10,815

The allowance for loan losses on collateral dependent impaired loans amounted to $2.4 million at December 31, 2015.

Quantitative Information About Level 3 Assets Measured at Fair Value on a Nonrecurring Basis

The following tables present valuation techniques and unobservable inputs for assets measured at fair value on a nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value:



(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range of Inputs Utilized (Weighted Average)
June 30, 2016	Fair Value		Valuation Technique	Unobservable Input	Range of Inputs Utilized (Weighted Average)
Collateral dependent impaired loans		$12,996	Appraisals of collateral	Discount for costs to sell	0% - 20% (6%)

Loan servicing rights		$3,286	Discounted Cash Flow	Discount rates	10% - 14% (11%)
				Prepayment rates	12% - 22% (16%)

Property acquired through foreclosure or repossession		$1,045	Appraisals of collateral	Discount for costs to sell	10% - 12% (11%)
				Appraisal adjustments (1)	6% - 32% (20%)


(1)	Management may adjust appraisal values to reflect market value declines or other discounts resulting from its knowledge of the property.



(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range of Inputs Utilized (Weighted Average)
December 31, 2015	Fair Value		Valuation Technique	Unobservable Input	Range of Inputs Utilized (Weighted Average)
Collateral dependent impaired loans		$10,545	Appraisals of collateral	Discount for costs to sell	0% - 20% (2%)

Property acquired through foreclosure or repossession		$270	Appraisals of collateral	Discount for costs to sell	12%
				Appraisal adjustments (1)	32%


(1)	Management may adjust appraisal values to reflect market value declines or other discounts resulting from its knowledge of the property.

Carrying Amounts and Estimated Fair Values of Financial Instruments

The following tables present the carrying amount, estimated fair value and placement in the fair value hierarchy of the Corporation’s financial instruments. The tables exclude financial instruments for which the carrying value approximates fair value. Financial assets for which the fair value approximates carrying value include cash and cash equivalents, FHLBB stock, accrued interest receivable and bank-owned life insurance. Financial liabilities for which the fair value approximates carrying value include non-maturity deposits and accrued interest payable.



(Dollars in thousands)
June 30, 2016	Carrying Amount		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Securities held to maturity		$17,917		$18,595		$—		$18,595		$—
Loans, net of allowance for loan losses	3,055,058		3,078,244		—		—		3,078,244

Financial Liabilities:
Time deposits		$844,036		$848,525		$—		$848,525		$—
FHLBB advances	640,010		655,330		—		655,330		—
Junior subordinated debentures	22,681		15,877		—		15,877		—



(Dollars in thousands)
December 31, 2015	Carrying Amount		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Securities held to maturity		$20,023		$20,516		$—		$20,516		$—
Loans, net of allowance for loan losses	2,986,058		3,004,782		—		—		3,004,782

Financial Liabilities:
Time deposits		$833,898		$834,574		$—		$834,574		$—
FHLBB advances	378,973		388,275		—		388,275		—
Junior subordinated debentures	22,681		16,468		—		16,468		—