Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Assets and liabilities carried at fair value on a recurring basis at September 30, 2014 are summarized in the following table:



(dollars in thousands)	Total			Level 1		Level 2			Level 3
Assets:
Available-for-sale debt securities:
U.S. government sponsored agencies	$	2,053		$	—	$	2,053		$	—
Residential mortgage-backed securities-GSE	302,447			—		302,447			—
Residential mortgage-backed securities-Private	18,668			—		18,668			—
Commercial mortgage-backed securities-GSE	21,644					21,644
Commercial mortgage-backed securities-Private	10,057			—		10,057			—
Corporate notes	8,427			—		8,427			—
Total available-for-sale debt securities	363,296			—		363,296			—
Mortgage servicing rights	1,679			—		—			1,679
Interest rate swaps	(47		)	—		(47		)	—
Interest rate locks and forward loan sales commitments	55			—		55			—
Total assets at fair value	$	364,983		$	—	$	363,304		$	1,679

Assets and liabilities carried at fair value on a recurring basis at December 31, 2013 are summarized in the following table:



(dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale debt securities:
U.S. government sponsored agencies	$	2,077	$	—	$	2,077	$	—
Residential mortgage-backed securities-GSE	341,147		—		341,147		—
Residential mortgage-backed securities-Private	20,752		—		20,752		—
Commercial mortgage-backed securities-GSE	21,439		—		21,439		—
Commercial mortgage-backed securities-Private	9,585		—		9,585		—
Business Development Company investment	2,737		2,737		—		—
Corporate notes	16,877		—		16,877		—
Total available-for-sale debt securities	414,614		2,737		411,877		—
Mortgage servicing rights	1,552		—		—		1,552
Interest rate locks and forward loan sales commitments	39		—		39		—
Total assets at fair value	$	416,205	$	2,737	$	411,916	$	1,552

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the periods indicated:



	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Servicing Rights
(dollars in thousands)	Three Months Ended September 30,
	2014			2013
Balance, beginning of period	$	1,637		$	1,337
Total gains or losses (realized/unrealized):
Included in earnings, gross	163			235
Less amortization	(121		)	(90		)
Balance, end of period	$	1,679		$	1,482



	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Mortgage Servicing Rights
(dollars in thousands)	Nine Months Ended September 30,
	2014			2013
Beginning balance at January 1,	$	1,552		$	726
Total gains or losses (realized/unrealized):
Included in earnings, gross	473			959
Less amortization	(346		)	(203		)
Balance, end of period	$	1,679		$	1,482

Fair Value Measurements, Nonrecurring

Assets measured at fair value on a non-recurring basis are included in the following table at September 30, 2014:



(dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	7,369	$	—	$	—	$	7,369
Other real estate owned	17,021		—		—		17,021
Total assets at fair value from continuing operations	$	24,390	$	—	$	—	$	24,390

Assets measured at fair value on a non-recurring basis are included in the following table at December 31, 2013:



(dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	2,038	$	—	$	—	$	2,038
Other real estate owned	18,263		—		—		18,263
Total assets at fair value from continuing operations	$	20,301	$	—	$	—	$	20,301

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques



(dollars in thousands)	Fair Value at September 30, 2014		Valuation Techniques	Unobservable Input	Range

Impaired loans, net	$	7,369	Discounted appraisals	Collateral discounts	1.00% - 30.00%
Other real estate owned	17,021		Discounted appraisals	Collateral discounts	1.00% - 30.00%
Mortgage servicing rights	1,679		Discounted cash flows	Prepayment rate	10.00% - 25.00%
Mortgage servicing rights				Discount rate	6.00% - 10.00%



(dollars in thousands)	Fair Value at December 31, 2013		Valuation Techniques	Unobservable Input	Range

Impaired loans, net	$	2,038	Discounted appraisals	Collateral discounts	1.00%-30.00%
Other real estate owned	18,263		Discounted appraisals	Collateral discounts	1.00%-30.00%
Mortgage servicing rights	1,552		Discounted cash flows	Prepayment rate	10.00% - 25.00%
Mortgage servicing rights				Discount rate	6.00% - 10.00%

Fair Value, by Balance Sheet Grouping

The estimated fair values of financial instruments are as follows at the periods indicated:



	At September 30, 2014
(dollars in thousands)	Carrying Value			Estimated Fair Value			Level 1		Level 2			Level 3
Financial Assets:
Cash and cash equivalents	$	60,080		$	60,080		$	60,080	$	—		$	—
Investment securities: Available-for-sale	363,296			363,296			—		363,296			—
Investment securities: Held-to-maturity	144,684			139,582			—		139,582			—
Loans held for sale	2,268			2,268			—		2,268			—
Loans held for investment, net	1,296,592			1,279,253			—		—			1,279,253
Accrued interest receivable	6,104			6,104			—		1,361			4,743
Interest rate swaps	(47		)	(47		)	—		(47		)	—
Interest rate locks and forward loan sale commitments	55			55			—		55			—
Financial Liabilities:
Deposits	1,758,930			1,757,710			—		1,757,710			—
Retail repurchase agreements	12,217			12,217			—		12,217			—
Federal Home Loan Bank advances	73,246			76,368			—		76,368			—
Long-term notes payable	5,319			5,319			—		—			5,319
Junior subordinated debentures	56,702			22,594			—		—			22,594
Accrued interest payable	3,412			3,412			—		379			3,033



	At December 31, 2013
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	67,430	$	67,430	$	67,430	$	—	$	—
Investment securities: Available-for-sale	414,614		414,614		2,737		411,877		—
Investment securities: Held-to-maturity	151,795		141,125				141,125		—
Loans held for sale	1,836		1,836		—		1,836		—
Loans held for investment, net	1,185,463		1,129,826		—		—		1,129,826
Accrued interest receivable	6,283		6,283		—		1,583		4,700
Interest rate locks and forward loan sale commitments	39		39		—		39		—
Financial Liabilities:
Deposits	1,748,705		1,748,685		—		1,748,685		—
Retail repurchase agreements	6,917		6,917		—		6,917		—
Federal Home Loan Bank advances	73,283		75,663		—		75,663		—
Long-term notes payable	5,263		5,263		—		—		5,263
Junior subordinated debentures	56,702		22,316		—		—		22,316
Accrued interest payable	2,624		2,624		—		389		2,235

- 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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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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