Fair Value (Tables)

9 Months Ended

Sep. 30, 2018

Assets And Liabilities Measured At Fair Value On A Recurring Basis

The following table presents assets and liabilities measured at fair value on a recurring basis:



Fair Value Measurements at September 30, 2018 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2018
Assets
Investment securities:
U.S. Government sponsored entities’ asset-backed securities	$	—	$	1,032,265	$	—	$	1,032,265
Equity securities	1,478		—		424		1,902
Mortgage loans held for sale	—		6,441		—		6,441
Mortgage IRLCs	—		128		—		128

Liabilities
Fair value swap	$	—	$	—	$	226	$	226



Fair Value Measurements at December 31, 2017 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2017
Assets
Investment securities:
Obligations of U.S. Treasury and other U.S. Government sponsored entities	$	—	$	242,720	$	—	$	242,720
U.S. Government sponsored entities’ asset-backed securities	—		849,161		—		849,161
Equity securities	1,518		—		417		1,935
Mortgage loans held for sale	—		4,148		—		4,148
Mortgage IRLCs	—		94		—		94

Liabilities
Fair value swap	$	—	$	—	$	226	$	226

Reconciliation Of Level 3 Input For Financial Instruments Measured On Recurring Basis

The table below presents a reconciliation of the beginning and ending balances of the Level 3 inputs for the three and six months ended September 30, 2018 and 2017, for financial instruments measured on a recurring basis and classified as Level 3:

Level 3 Fair Value Measurements

Three months ended September 30, 2018 and 2017



(In thousands)	Equity Securities		Fair value swap
Balance at July 1, 2018	$	420	$	(226	)
Total gains/(losses)
Included in other income	4		—
Balance at September 30, 2018	$	424	$	(226	)

Balance at July 1, 2017	$	458	$	(226	)
Total gains/(losses)
Included in other comprehensive income	37		—
Balance at September 30, 2017	$	495	$	(226	)

Level 3 Fair Value Measurements

Nine months ended September 30, 2018 and 2017



(In thousands)	Equity Securities			Fair value swap
Balance at January 1, 2018	$	417		$	(226	)
Total gains/(losses)
Included in other income	7			—
Balance at September 30, 2018	$	424		$	(226	)

Balance at January 1, 2017	$	790		$	(226	)
Total gains/(losses)
Transfers out of Level 3 ⁽¹⁾	(346		)	—
Included in other comprehensive income	51			—
Balance at September 30, 2017	$	495		$	(226	)

⁽¹⁾ Transfered from Level 3 to Level 1 as the result of a quoted market price becoming available.

Assets And Liabilities Measured At Fair Value On A Nonrecurring Basis

The following tables present assets and liabilities measured at fair value on a nonrecurring basis. Collateral dependent impaired loans are carried at fair value if they have been charged down to fair value or if a specific valuation allowance has been established. As of September 30, 2018, there were no PCI loans considered impaired. A new cost basis is established at the time a property is initially recorded in OREO. OREO properties are carried at fair value if a devaluation has been taken to the property's value subsequent to the initial measurement.



Fair Value Measurements at September 30, 2018 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2018
Impaired loans recorded at fair value:
Commercial real estate	$	—	$	—	$	4,020	$	4,020
Construction real estate	—		—		1,635		1,635
Residential real estate	—		—		592		592
Total impaired loans recorded at fair value	$	—	$	—	$	6,247	$	6,247

Mortgage servicing rights	$	—	$	1,457	$	—	$	1,457

OREO:
Commercial real estate	—		—		2,295		2,295
Construction real estate	—		—		889		889
Residential real estate	—		—		679		679
Total OREO recorded at fair value	$	—	$	—	$	3,863	$	3,863

Other repossessed assets	$	—	$	—	$	7,170	$	7,170



Fair Value Measurements at December 31, 2017 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2017
Impaired loans recorded at fair value:
Commercial real estate	$	—	$	—	$	2,735	$	2,735
Construction real estate	—		—		127		127
Residential real estate	—		—		712		712
Total impaired loans recorded at fair value	$	—	$	—	$	3,574	$	3,574

Mortgage servicing rights	$	—	$	7,316	$	—	$	7,316

OREO:
Commercial real estate	—		—		2,295		2,295
Construction real estate	—		—		3,204		3,204
Residential real estate	—		—		1,021		1,021
Total OREO recorded at fair value	$	—	$	—	$	6,520	$	6,520

Schedule of impaired financing receivables additional info

The table below provides additional detail on those impaired loans which are recorded at fair value as well as the remaining impaired loan portfolio not included above. The remaining impaired loans consist of loans which are not collateral dependent as well as loans carried at cost as the fair value of the underlying collateral or the present value of expected future cash flows on each of the loans exceeded the book value for each respective credit.



	September 30, 2018
(In thousands)	Recorded Investment		Prior Charge-Offs		Specific Valuation Allowance		Carrying Balance
Impaired loans recorded at fair value	$	6,377	$	3,708	$	130	$	6,247
Remaining impaired loans	40,383		7,361		1,716		38,667
Total impaired loans	$	46,760	$	11,069	$	1,846	$	44,914



	December 31, 2017
(In thousands)	Recorded Investment		Prior Charge-Offs		Specific Valuation Allowance		Carrying Balance
Impaired loans recorded at fair value	$	3,577	$	2,780	$	3	$	3,574
Remaining impaired loans	52,987		7,260		681		52,306
Total impaired loans	$	56,564	$	10,040	$	684	$	55,880

Qualitative Information about Level 3 Fair Value Measurements Measured on Non-Recurring Basis

The following tables present qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2018 and December 31, 2017:



September 30, 2018
(In thousands)	Fair Value		Valuation Technique	Unobservable Input(s)	Range (Weighted Average)
Impaired loans:
Commercial real estate	$	4,020	Sales comparison approach	Adj to comparables	0.0% - 55.0% (25.4%)
			Income approach	Capitalization rate	10.6% - 11.8% (11.5%)
			Cost approach	Accumulated depreciation	3.7% - 90.1% (12.9%)

Construction real estate	$	1,635	Sales comparison approach	Adj to comparables	5.0% - 90.0% (26.1%)

Residential real estate	$	592	Sales comparison approach	Adj to comparables	1.0% - 40.0% (18.5%)

			Income approach	Capitalization rate	10.5% (10.5%)

Other real estate owned:
Commercial real estate	$	2,295	Sales comparison approach	Adj to comparables	0.9% - 68.4% (34.7%)
			Income approach	Capitalization rate	13.0% (13.0%)
Construction real estate	$	889	Sales comparison approach	Adj to comparables	0.0% - 45.0% (21.9%)

Residential real estate	$	679	Sales comparison approach	Adj to comparables	0.9% - 54.6% (40.7%)



Balance at December 31, 2017
(In thousands)	Fair Value		Valuation Technique	Unobservable Input(s)	Range (Weighted Average)
Impaired loans:
Commercial real estate	$	2,735	Sales comparison approach	Adj to comparables	0.0% - 90.0% (22.7%)
			Income approach	Capitalization rate	9.0% - 11.0% (9.9%)
			Cost approach	Accumulated depreciation	90.1% (90.1%)

Construction real estate	$	127	Sales comparison approach	Adj to comparables	0.0% - 4.8% (2.4%)


Residential real estate	$	712	Sales comparison approach	Adj to comparables	0.3% - 33.0% (12.5%)
			Income approach	Capitalization rate	10.5% (10.5%)

Other real estate owned:
Commercial real estate	$	2,295	Sales comparison approach	Adj to comparables	0.9% - 68.4% (34.7%)
			Income approach	Capitalization rate	13.0% (13.0%)

Construction real estate	$	3,204	Sales comparison approach	Adj to comparables	0.0% - 90.0% (24.5%)
			Bulk sale approach	Discount rate	15.0% (15.0%)

Residential real estate	$	1,021	Sales comparison approach	Adj to comparables	1.2% - 79.7% (31.8%)

Fair Value, by Balance Sheet Grouping

The fair value of certain financial instruments at September 30, 2018 and December 31, 2017, was as follows:



	September 30, 2018
			Fair Value Measurements
(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value
Financial assets:
Cash and money market instruments	$	144,604	$	144,604	$	—	$	—	$	144,604
Investment securities ⁽¹⁾	1,382,907		—		1,376,606		—		1,376,606
Other investment securities ⁽²⁾	1,902		1,478		—		424		1,902

Loans held for sale	6,441		—		6,441		—		6,441
Mortgage IRLCs	128		—		128		—		128
Impaired loans carried at fair value	6,247		—		—		6,247		6,247
Other loans, net ⁽³⁾	5,562,261		—		—		5,493,865		5,493,865
Loans receivable, net	$	5,575,077	$	—	$	6,569	$	5,500,112	$	5,506,681

Financial liabilities:
Time deposits	1,090,117		—		1,089,966		—		1,089,966
Other	5,186		5,186		—		—		5,186
Deposits (excluding demand deposits)	$	1,095,303	$	5,186	$	1,089,966	$	—	$	1,095,152

Short-term borrowings	$	179,818	$	—	$	179,818	$	—	$	179,818
Long-term debt	400,000		—		397,640		—		397,640
Subordinated notes	15,000		—		12,987		—		12,987

Derivative financial instruments:
Fair value swap	$	226	$	—	$	—	$	226	$	226

(1) Includes debt securities AFS and debt securities HTM.

(2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values. Additionally, excludes investment securities accounted for at modified cost, as these investments do not have a readily determinable fair value.

(3) Fair value calculated using an exit price notion consistent with Topic 820, Fair Value Measurement.



	December 31, 2017
			Fair Value Measurements
(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value
Financial assets:
Cash and money market instruments	$	169,112	$	169,112	$	—	$	—	$	169,112
Investment securities ⁽¹⁾	1,449,078		—		1,455,660		—		1,455,660
Other investment securities ⁽²⁾	1,935		1,518		—		417		1,935

Loans held for sale	4,148		—		4,148		—		4,148
Mortgage IRLCs	94		—		94		—		94
Impaired loans carried at fair value	3,574		—		—		3,574		3,574
Other loans, net	5,314,679		—		—		5,247,021		5,247,021
Loans receivable, net	$	5,322,495	$	—	$	4,242	$	5,250,595	$	5,254,837

Financial liabilities:
Time deposits	1,033,476		—		1,035,093		—		1,035,093
Other	1,269		1,269		—		—		1,269
Total deposits	$	1,034,745	$	1,269	$	1,035,093	$	—	$	1,036,362

Short-term borrowings	$	391,289	$	—	$	391,289	$	—	$	391,289
Long-term debt	500,000		—		504,503		—		504,503
Subordinated notes	15,000		—		13,370		—		13,370

Derivative financial instruments:
Fair value swap	$	226	$	—	$	—	$	226	$	226

(1) Includes debt securities AFS and debt securities HTM.

(2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values. Additionally, excludes investment securities carried at their cost basis as these investments do not have a readily determinable fair value.