Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2017

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 Unaudited Consolidated Statements of Income.



(Dollars in thousands)
	Three months						Six months
Periods ended June 30,	2017			2016			2017			2016
Mortgage loans held for sale		$323			$659			$774			$495
Interest rate lock commitments	(11		)	501			607			1,746
Commitments to sell mortgage loans	(350		)	(1,174		)	(1,380		)	(2,180		)
Total changes in fair value		($38	)		($14	)		$1			$61

Items Recorded 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, 2017	Total				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Securities available for sale:
Obligations of U.S. government-sponsored enterprises		$128,930		$—		$128,930		$—
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	584,649		—		584,649		—
Obligations of states and political subdivisions	5,484		—		5,484		—
Individual name issuer trust preferred debt securities	26,390		—		26,390		—
Corporate bonds	4,033		—		4,033		—
Mortgage loans held for sale	32,784		—		32,784		—
Derivative assets	4,457		—		4,457		—
Total assets at fair value on a recurring basis		$786,727		$—		$786,727		$—
Liabilities:
Derivative liabilities		$5,487		$—		$5,487		$—
Contingent consideration liability (1)	1,737		—		—		1,737
Total liabilities at fair value on a recurring basis		$7,224		$—		$5,487		$1,737


(1)	The contingent consideration liability is included in other liabilities in the Unaudited 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, 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		$108,440		$—		$108,440		$—
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	588,085		—		588,085		—
Obligations of states and political subdivisions	14,485		—		14,485		—
Individual name issuer trust preferred debt securities	26,736		—		26,736		—
Corporate bonds	2,166		—		2,166		—
Mortgage loans held for sale	29,434		—		29,434		—
Derivative assets	3,582		—		3,582		—
Total assets at fair value on a recurring basis		$772,928		$—		$772,928		$—
Liabilities:
Derivative liabilities		$4,043		$—		$4,043		$—
Contingent Consideration Liability (1)	2,047		—		—		2,047
Total liabilities at fair value on a recurring basis		$6,090		$—		$4,043		$2,047


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

Change in Contingent Consideration Liability

The following table presents the change in the contingent consideration liability, a Level 3 liability measured at fair value on a recurring basis, during the periods indicated:



(Dollars in thousands)
	Three months				Six months
Periods ended June 30,	2017		2016		2017			2016
Balance at beginning of period		$1,737		$2,970		$2,047			$2,945
Change in fair value	—		16		(310		)	41
Payments	—		—		—			—
Balance at end of period		$1,737		$2,986		$1,737			$2,986

Items Recorded at Fair Value on a Nonrecurring Basis

The following table presents the carrying value of assets held at June 30, 2017, which were written down to fair value during the six months ended June 30, 2017:



(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		$3,092		$—		$—		$3,092
Property acquired through foreclosure or repossession	1,081		—		—		1,081
Total assets at fair value on a nonrecurring basis		$4,173		$—		$—		$4,173

The allowance for loan losses on collateral dependent impaired loans amounted to $880 thousand at June 30, 2017.

The following table presents the carrying value of assets held at December 31, 2016, which were written down to fair value during the year ended December 31, 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		$3,828		$—		$—		$3,828
Property acquired through foreclosure or repossession	605		—		—		605
Total assets at fair value on a nonrecurring basis		$4,433		$—		$—		$4,433

The allowance for loan losses on collateral dependent impaired loans amounted to $469 thousand at December 31, 2016.

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, 2017	Fair Value		Valuation Technique	Unobservable Input	Range of Inputs Utilized (Weighted Average)
Collateral dependent impaired loans		$3,092	Appraisals of collateral	Discount for costs to sell	0% - 25% (13%)
				Appraisal adjustments (1)	0% - 85% (17%)

Property acquired through foreclosure or repossession		$1,081	Appraisals of collateral	Discount for costs to sell	10% - 12% (11%)
				Appraisal adjustments (1)	6% - 32% (18%)


(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, 2016	Fair Value		Valuation Technique	Unobservable Input	Range of Inputs Utilized (Weighted Average)
Collateral dependent impaired loans		$3,828	Appraisals of collateral	Discount for costs to sell	10% - 20% (15%)
				Appraisal adjustments (1)	0% - 10% (9%)

Property acquired through foreclosure or repossession		$605	Appraisals of collateral	Discount for costs to sell	10% - 12% (11%)
				Appraisal adjustments (1)	6% - 50% (24%)


(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, 2017	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		$13,942		$14,231		$—		$14,231		$—
Loans, net of allowance for loan losses	3,173,438		3,204,250		—		—		3,204,250

Financial Liabilities:
Time deposits		$954,710		$956,753		$—		$956,753		$—
FHLBB advances	869,733		876,374		—		876,374		—
Junior subordinated debentures	22,681		17,410		—		17,410		—



(Dollars in thousands)
December 31, 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		$15,633		$15,920		$—		$15,920		$—
Loans, net of allowance for loan losses	3,208,367		3,218,651		—		—		3,218,651

Financial Liabilities:
Time deposits		$961,613		$962,374		$—		$962,374		$—
FHLBB advances	848,930		852,888		—		852,888		—
Junior subordinated debentures	22,681		16,970		—		16,970		—