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Fair Value (Tables)

9 Months Ended

Sep. 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 September 30, 2019 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2019
Assets
Investment securities:
Obligations of states and political subdivisions	—		321,905				321,905
U.S. Government sponsored entities’ asset-backed securities	—		938,381		—		938,381
Equity securities	1,451		—		438		1,889
Mortgage loans held for sale	—		21,986		—		21,986
Mortgage IRLCs	—		422		—		422
Loan interest rate swaps	—		2,506		—		2,506

Liabilities
Fair value swap	$	—	$	—	$	226	$	226
Borrowing interest rate swap	—		704		—		704
Loan interest rate swaps	—		2,506		—		2,506



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 tables below present a reconciliation of the beginning and ending balances of the Level 3 inputs for the three and nine months ended September 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 September 30, 2019 and 2018



(In thousands)	Equity Securities		Fair value swap
Balance at July 1, 2019	$	433	$	(226	)
Total gains/(losses)
Included in other income	5		—
Balance at September 30, 2019	$	438	$	(226	)

Balance at July 1, 2018	$	420	$	(226	)
Total gains/(losses)
Included in other income	4		—
Balance at September 30, 2018	$	424	$	(226	)

Level 3 Fair Value Measurements

Nine months ended September 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	14		—
Balance at September 30, 2019	$	438	$	(226	)

Balance at January 1, 2018	$	417	$	(226	)
Total gains/(losses)
Included in other income	7		—
Balance at September 30, 2018	$	424	$	(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 September 30, 2019, there were no 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 September 30, 2019 using:
(In thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2019
Impaired loans recorded at fair value:
Commercial real estate	$	—	$	—	$	1,862	$	1,862
Construction real estate	—		—		1,635		1,635
Residential real estate	—		—		182		182
Total impaired loans recorded at fair value	$	—	$	—	$	3,679	$	3,679

MSRs	$	—	$	7,462	$	—	$	7,462

OREO:
Commercial real estate	—		—		2,385		2,385
Residential real estate	—		—		779		779
Total OREO recorded at fair value	$	—	$	—	$	3,164	$	3,164

Other repossessed assets	$	—	$	—	$	3,598	$	3,598



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

MSRs	$	—	$	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.



	September 30, 2019
(In thousands)	Recorded Investment		Prior Charge-Offs		Specific Valuation Allowance		Carrying Balance
Impaired loans recorded at fair value	$	3,820	$	3,126	$	141	$	3,679
Remaining impaired loans	70,658		2,507		2,942		67,716
Total impaired loans	$	74,478	$	5,633	$	3,083	$	71,395



	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 September 30, 2019 and December 31, 2018:



September 30, 2019
(In thousands)	Fair Value		Valuation Technique	Unobservable Input(s)	Range (Weighted Average)
Impaired loans:
Commercial real estate	$	1,861	Sales comparison approach	Adj to comparables	0.0% - 89.6% (28.1%)
			Income approach	Capitalization rate	10.6% (10.6%)
			Cost approach	Accumulated depreciation	60.0% - 93.1% (72.4%)

Construction real estate	$	1,635	Sales comparison approach	Adj to comparables	0.1% - 72.4% (38.5%)

Residential real estate	$	182	Sales comparison approach	Adj to comparables	0.0% - 53.5% (13.8%)

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	$	779	Sales comparison approach	Adj to comparables	1.9% - 54.6% (34.6%)



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 September 30, 2019 and December 31, 2018, was as follows:



	September 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	$	372,726	$	372,726	$	—	$	—	$	372,726
Investment securities ⁽¹⁾	1,260,286		—		1,260,286		—		1,260,286
Other investment securities ⁽²⁾	1,889		1,451		—		438		1,889

Loans held for sale	21,986		—		21,986		—		21,986
Mortgage IRLCs	422		—		422		—		422
Impaired loans carried at fair value	3,678		—		—		3,679		3,679
Other loans, net	6,321,708		—		—		6,325,294		6,325,294
Loans receivable, net	$	6,347,794	$	—	$	22,408	$	6,328,973	$	6,351,381

Financial liabilities:
Time deposits	1,127,366		—		1,133,648		—		1,133,648
Other	5,271		5,271		—		—		5,271
Deposits (excluding demand deposits)	$	1,132,637	$	5,271	$	1,133,648	$	—	$	1,138,919

Short-term borrowings	$	185,838	$	—	$	185,838	$	—	$	185,838
Long-term debt	297,500		—		307,047		—		307,047
Subordinated notes	15,000		—		13,810		—		13,810

Derivative financial instruments - assets:
Loan interest rate swaps	$	2,506	$	—	$	2,506	$	—	$	2,506

Derivative financial instruments - liabilities:
Fair value swap	$	226	$	—	$	—	$	226	$	226
Borrowing interest rate swap	704		—		704		—		704
Loan interest rate swaps	2,506		—		2,506		—		2,506

(1) Includes AFS 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
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.