15.	Fair Value Measurements

The Company adopted ASC Topic

820

January 1, 2008,

and determined the fair values of our financial instruments based on the following:

	●	Level 1 – Quoted prices in active markets for identical assets or liabilities.

	●	Level 2 – Observable prices in active markets for similar assets or liabilities; prices for identical or similar assets or liabilities in markets that are not active; directly observable market inputs for substantially the full term of the asset and liability; market inputs that are not directly observable but are derived from or corroborated by observable market data.

	●	Level 3 – Unobservable inputs based on the Company’s own judgments about the assumptions that a market participant would use.

The Company uses the following methodologies to measure the fair value of its financial assets and liabilities on a recurring basis:

Securities Available for Sale

and Equity Securities

. For certain actively traded agency preferred stocks, mutual funds, U.S. Treasury securities, and other equity securities, the Company measures the fair value based on quoted market prices in active exchange markets at the reporting date, a Level

measurement. The Company also measures securities by using quoted market prices for similar securities or dealer quotes, a Level

measurement. This category generally includes U.S. Government agency securities, state and municipal securities, mortgage-backed securities (“MBS”), commercial MBS, collateralized mortgage obligations, asset-backed securities, corporate bonds and trust preferred securities.

Warrants

. The Company measures the fair value of warrants based on unobservable inputs based on assumption and management judgment, a Level

measurement.

Currency Option Contracts and Foreign Exchange Contracts

. The Company measures the fair value of currency option and foreign exchange contracts based on observable market rates on a recurring basis, a Level

measurement.

Interest Rate Swaps

. The Company measures the fair value of interest rate swaps using

third

party models with observable market data, a Level

measurement.

Assets measured at estimated fair value on a non-recurring basis:

Certain assets or liabilities are required to be measured at estimated fair value on a nonrecurring basis subsequent to initial recognition. Generally, these adjustments are the result of lower-of-cost-or-fair value or other impairment write-downs of individual assets. In determining the estimated fair values during the period, the Company determined that substantially all the changes in estimated fair value were due to declines in market conditions versus instrument specific credit risk. For the year ended

December 31, 2018

and

December 31, 2017,

there were

material adjustments to fair value for the Company’s assets and liabilities measured at fair value on a nonrecurring basis in accordance with GAAP.

The following tables present the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis at

December 31, 2018,

and at

December 31, 2017:

As of December 31, 2018	Fair Value Measurements Using						Total at
	Level 1		Level 2		Level 3		Fair Value
	(In thousands)
Assets

Securities available-for-sale
U.S. Treasury securities	$	124,751	$	-	$	-	$	124,751
U.S. government agency entities		-		5,871		-		5,871
U.S. government sponsored entities		-		388,363		-		388,363
Mortgage-backed securities		-		656,744		-		656,744
Collateralized mortgage obligations		-		977		-		977
Corporate debt securities		-		65,803		-		65,803
Total securities available-for-sale		124,751		1,117,758		-		1,242,509

Equity securities
Mutual funds		6,094		-		-		6,094
Preferred stock of government sponsored entities		7,822		-		-		7,822
Other equity securities		11,182		-		-		11,182
Total equity securities		25,098		-		-		25,098
Warrants		-		-		184		184
Interest rate swaps		-		7,810		-		7,810
Foreign exchange contracts		-		397		-		397
Total assets	$	149,849	$	1,125,965	$	184	$	1,275,998

Liabilities

Option contracts	$	-	$	6	$	-	$	6
Interest rate swaps		-		1,543		-		1,543
Foreign exchange contracts		-		1,763		-		1,763
Total liabilities	$	-	$	3,312	$	-	$	3,312

As of December 31, 2017	Fair Value Measurements Using						Total at
	Level 1		Level 2		Level 3		Fair Value
	(In thousands)
Assets

Securities available-for-sale
U.S. Treasury securities	$	249,520	$	-	$	-	$	249,520
U.S. government agency entities		-		8,988		-		8,988
U.S. government sponsored entities		-		390,336		-		390,336
State and municipal securities		-		1,914		-		1,914
Mortgage-backed securities		-		571,969		-		571,969
Collateralized mortgage obligations		-		1,516		-		1,516
Corporate debt securities		-		81,281		-		81,281
Mutual funds		6,230		-		-		6,230
Preferred stock of government sponsored entities		10,102		-		-		10,102
Other equity securities		11,770		-		-		11,770
Total securities available-for-sale		277,622		1,056,004		-		1,333,626
Warrants		-		-		91		91
Interest rate swaps		-		5,218		-		5,218
Foreign exchange contracts		-		1,832		-		1,832
Total assets	$	277,622	$	1,063,054	$	91	$	1,340,767

Liabilities

Option contracts	$	-	$	9	$	-	$	9
Interest rate swaps		-		2,699		-		2,699
Foreign exchange contracts		-		453		-		453
Total liabilities	$	-	$	3,161	$	-	$	3,161

For financial assets measured at fair value on a nonrecurring basis that were still reflected in the balance sheet at

December 31, 2018

and

2017,

the following tables provide the level of valuation assumptions used to determine each adjustment and the carrying value of the related individual assets at

December 31, 2018,

and at

December 31, 2017,

and the total losses for the periods indicated:

	As of December 31, 2018								Total Losses/(Gains)
	Fair Value Measurements Using								For the Twelve Months Ended
	Level 1		Level 2		Level 3		Total at Fair Value		December 31, 2018			December 31, 2017
	(In thousands)
Assets

Impaired loans by type:
Commercial loans	$	-	$	-	$	4,733	$	4,733	$	-		$	25
Commercial mortgage loans		-		-		26,186		26,186		-			-
Residential mortgage and equity lines		-		-		6,850		6,850		-			-
Total impaired loans		-		-		37,769		37,769		-			25
Other real estate owned (1)		-		9,023		4,343		13,366		(619	)		457
Investments in venture capital		-		-		2,162		2,162		330			392
Total assets	$	-	$	9,023	$	44,274	$	53,297	$	(289	)	$	874

(

) Other real estate owned balance of

$12.7

million in the Consolidated Balance Sheets is net of estimated disposal costs.

	As of December 31, 2017								Total Losses/(Gains)
	Fair Value Measurements Using								For the Twelve Months Ended
	Level 1		Level 2		Level 3		Total at Fair Value		December 31, 2017		December 31, 2016
	(In thousands)
Assets

Impaired loans by type:
Commercial loans	$	-	$	-	$	18,097	$	18,097	$	25	$	322
Commercial mortgage loans		-		-		31,459		31,459		-		-
Residential mortgage and equity lines		-		-		11,355		11,355		-		-
Total impaired loans		-		-		60,911		60,911		25		322
Other real estate owned (1)		-		5,677		4,322		9,999		457		9
Investments in venture capital		-		-		2,583		2,583		392		976
Total assets	$	-	$	5,677	$	67,816	$	73,493	$	874	$	1,307

(

) Other real estate owned balance of

$9.4

million in the Consolidated Balance Sheets is net of estimated disposal costs.

The significant unobservable (Level

) inputs used in the fair value measurement of collateral for collateral-dependent impaired loans was primarily based on the appraised value of collateral adjusted by estimated sales cost and commissions. The Company generally obtains new appraisal reports every

six

months. As the Company’s primary objective in the event of default would be to monetize the collateral to settle the outstanding balance of the loan, less marketable collateral would receive a larger discount. During the reported periods, collateral discounts ranged from

55%

in the case of accounts receivable collateral to

65%

in the case of inventory collateral.

The significant unobservable inputs used in the fair value measurement of other real estate owned (“OREO”) was primarily based on the appraised value of OREO adjusted by estimated sales cost and commissions.

The Company applies estimated sales cost and commission ranging from

of collateral value of impaired loans, quoted price or loan sale price of loans held for sale, and appraised value of OREOs.

The significant unobservable inputs in the Black-Scholes option pricing model for the fair value of warrants are the expected life of warrant ranging from

years, risk-free interest rate from

2.69%

3.00%,

and stock volatility of the Company from

13.01%

18.04%.