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Fair Value (Tables)

6 Months Ended

Jun. 30, 2019

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 June 30, 2019 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at June 30, 2019
Assets
Investment securities:
Obligations of U.S. Treasury and Other U.S. Government sponsored entities	$	—	$	3,480	$	—	$	3,480
Obligations of states and political subdivisions	—		16,250				16,250
U.S. Government sponsored entities’ asset-backed securities	—		952,784		—		952,784
Other debt securities	—		6,311		—		6,311
Equity securities	1,399		—		433		1,832
Mortgage loans held for sale	—		13,033		—		13,033
Mortgage IRLCs	—		361		—		361

Liabilities
Fair value swap	$	—	$	—	$	226	$	226
Interest rate swap	—		642		—		642



Fair Value Measurements at December 31, 2018 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2018
Assets
Investment securities:
U.S. Government sponsored entities’ asset-backed securities	$	—	$	1,003,421	$	—	$	1,003,421
Equity securities	1,225		—		424		1,649
Mortgage loans held for sale	—		4,158		—		4,158
Mortgage IRLCs	—		87		—		87

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 months ended June 30, 2019 and 2018, for financial instruments measured on a recurring basis and classified as Level 3:

Level 3 Fair Value Measurements

Three months ended June 30, 2019 and 2018



(In thousands)	Equity Securities		Fair value swap
Balance at April 1, 2019	$	433	$	(226	)
Total gains/(losses)
Included in other income	—		—
Balance at June 30, 2019	$	433	$	(226	)

Balance at April 1, 2018	$	420	$	(226	)
Total gains/(losses)
Included in other income	—		—
Balance at June 30, 2018	$	420	$	(226	)

Level 3 Fair Value Measurements

Six months ended June 30, 2019 and 2018



(In thousands)	Equity Securities		Fair value swap
Balance at January 1, 2019	$	424	$	(226	)
Total gains/(losses)
Included in other income	9		—
Balance at June 30, 2019	$	433	$	(226	)

Balance at January 1, 2018	$	417	$	(226	)
Total gains/(losses)
Included in other income	3		—
Balance at June 30, 2018	$	420	$	(226	)

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 June 30, 2019, there were $0.5 million PCI loans carried at fair value. 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 with respect to the property's value subsequent to the initial measurement.



Fair Value Measurements at June 30, 2019 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at June 30, 2019
Impaired loans recorded at fair value:
Commercial real estate	$	—	$	—	$	1,984	$	1,984
Construction real estate	—		—		2,089		2,089
Residential real estate	—		—		139		139
Total impaired loans recorded at fair value	$	—	$	—	$	4,212	$	4,212

Mortgage servicing rights	$	—	$	6,292	$	—	$	6,292

OREO:
Commercial real estate	—		—		2,385		2,385
Residential real estate	—		—		892		892
Total OREO recorded at fair value	$	—	$	—	$	3,277	$	3,277

Other repossessed assets	$	—	$	—	$	3,496	$	3,496



Fair Value Measurements at December 31, 2018 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2018
Impaired loans recorded at fair value:
Commercial real estate	$	—	$	—	$	4,059	$	4,059
Construction real estate	—		—		1,635		1,635
Residential real estate	—		—		705		705
Total impaired loans recorded at fair value	$	—	$	—	$	6,399	$	6,399

Mortgage servicing rights	$	—	$	1,169	$	—	$	1,169

OREO:
Commercial real estate	—		—		2,295		2,295
Construction real estate	—		—		729		729
Residential real estate	—		—		650		650
Total OREO recorded at fair value	$	—	$	—	$	3,674	$	3,674

Other repossessed assets	$	—	$	—	$	3,464	$	3,464

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.



	June 30, 2019
(In thousands)	Recorded Investment		Prior Charge-Offs		Specific Valuation Allowance		Carrying Balance
Impaired loans recorded at fair value	$	4,283	$	3,158	$	71	$	4,212
Remaining impaired loans	45,972		2,955		2,308		43,664
Total impaired loans	$	50,255	$	6,113	$	2,379	$	47,876



	December 31, 2018
(In thousands)	Recorded Investment		Prior Charge-Offs		Specific Valuation Allowance		Carrying Balance
Impaired loans recorded at fair value	$	6,503	$	3,630	$	104	$	6,399
Remaining impaired loans	41,641		7,616		2,169		39,472
Total impaired loans	$	48,144	$	11,246	$	2,273	$	45,871

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 June 30, 2019 and December 31, 2018:



June 30, 2019
(In thousands)	Fair Value		Valuation Technique	Unobservable Input(s)	Range (Weighted Average)
Impaired loans:
Commercial real estate	$	1,984	Sales comparison approach	Adj to comparables	0.0% - 107.5% (28.1%)
			Cost approach	Accumulated depreciation	93.1% (93.1%)

Construction real estate	$	2,089	Sales comparison approach	Adj to comparables	0.1% - 72.4% (38.5%)

Residential real estate	$	139	Sales comparison approach	Adj to comparables	0.0% - 53.5% (14.6%)

Other real estate owned:
Commercial real estate	$	2,385	Sales comparison approach	Adj to comparables	0.9% - 68.4% (31.1%)
			Income approach	Capitalization rate	10.0 - 13.0% (12.8%)

Residential real estate	$	892	Sales comparison approach	Adj to comparables	0.6% - 54.6% (31.8%)



Balance at December 31, 2018
(In thousands)	Fair Value		Valuation Technique	Unobservable Input(s)	Range (Weighted Average)
Impaired loans:
Commercial real estate	$	4,059	Sales comparison approach	Adj to comparables	0.0% - 107.5% (31.1%)
			Income approach	Capitalization rate	9.5% - 10.8% (10.6%)
			Cost approach	Accumulated depreciation	4.2% - 90.1% (11.0%)

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


Residential real estate	$	705	Sales comparison approach	Adj to comparables	0.0% - 40.0% (13.2%)
			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	$	729	Sales comparison approach	Adj to comparables	0.0% - 45.0% (21.7%)

Residential real estate	$	650	Sales comparison approach	Adj to comparables	30.4% - 54.6% (42.5%)

Fair Value, by Balance Sheet Grouping

The fair value of certain financial instruments at June 30, 2019 and December 31, 2018, was as follows:



	June 30, 2019
			Fair Value Measurements
(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value
Financial assets:
Cash and money market instruments	$	259,505	$	259,505	$	—	$	—	$	259,505
Investment securities ⁽¹⁾	1,329,200		—		1,343,385		—		1,343,385
Other investment securities ⁽²⁾	1,832		1,399		—		433		1,832

Loans held for sale	13,033		—		13,033		—		13,033
Mortgage IRLCs	361		—		361		—		361
Impaired loans carried at fair value	4,212		—		—		4,212		4,212
Other loans, net	6,305,128		—		—		6,294,891		6,294,891
Loans receivable, net	$	6,322,734	$	—	$	13,394	$	6,299,103	$	6,312,497

Financial liabilities:
Time deposits	1,131,310		—		1,133,461		—		1,133,461
Other	3,996		3,996		—		—		3,996
Deposits (excluding demand deposits)	$	1,135,306	$	3,996	$	1,133,461	$	—	$	1,137,457

Short-term borrowings	$	180,578	$	—	$	180,578	$	—	$	180,578
Long-term debt	400,000		—		407,248		—		407,248
Subordinated notes	15,000		—		13,566		—		13,566

Derivative financial instruments:
Fair value swap	$	226	$	—	$	—	$	226	$	226
Interest rate swap	642		—		642		—		642

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

(2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient.



	December 31, 2018
			Fair Value Measurements
(In thousands)	Carrying value		Level 1		Level 2		Level 3		Total fair value
Financial assets:
Cash and money market instruments	$	167,214	$	167,214	$	—	$	—	$	167,214
Investment securities ⁽¹⁾	1,355,229		—		1,354,843		—		1,354,843
Other investment securities ⁽²⁾	1,649		1,225		—		424		1,649

Loans held for sale	4,158		—		4,158		—		4,158
Mortgage IRLCs	87		—		87		—		87
Impaired loans carried at fair value	6,399		—		—		6,399		6,399
Other loans, net	5,629,976		—		—		5,570,136		5,570,136
Loans receivable, net	$	5,640,620	$	—	$	4,245	$	5,576,535	$	5,580,780

Financial liabilities:
Time deposits	$	1,043,177	$	—	$	1,044,620	—		$	1,044,620
Other	1,267		1,267		—		—		1,267
Total deposits (excluding demand deposits)	$	1,044,444	$	1,267	$	1,044,620	$	—	$	1,045,887

Short-term borrowings	$	221,966	$	—	$	221,966	$	—	$	221,966
Long-term debt	400,000		—		400,203		—		400,203
Subordinated notes	15,000		—		12,959		—		12,959

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

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