13.

Fair Value Measurements

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

●

Level

- Quoted prices in active markets for identical assets or liabilities.

●

Level

- 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

– Unobservable inputs based on the Company’s own judgment 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

- For certain U.S. Treasury 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, U.S. Government sponsored entities, state and municipal securities, mortgage-backed securities (“MBS”), collateralized mortgage obligations and corporate bonds.

Equity Securities –

The Company measures the fair value based on quoted market prices in active exchange markets at the reporting date, a level

measurement. Equity securities are comprised of mutual funds, preferred stock of government-sponsored entities and other equity securities.

Foreign Exchange Contracts

- The Company measures the fair value of foreign exchange contracts based on dealer quotes, a Level

measurement.

Warrants

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

measurement.

Interest Rate Swaps

- Fair value of interest rate swaps is derived from

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

three

months ended

March 31, 2019

and

December 31, 2018,

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 as of

March 31, 2019,

and

December 31, 2018:

	March 31, 2019
	Fair Value Measurements Using						Total Fair Value
	Level 1		Level 2		Level 3		Measurements
	(In thousands)
Assets
Securities available-for-sale
U.S. Treasury securities	$	149,240	$	—	$	—	$	149,240
U.S. government agency entities		—		5,531		—		5,531
U.S. government sponsored entities		—		393,274		—		393,274
Mortgage-backed securities		—		695,961		—		695,961
Collateralized mortgage obligations		—		881		—		881
Corporate debt securities		—		64,966		—		64,966
Total securities available-for-sale	$	149,240	$	1,160,613	$	—	$	1,309,853

Equity securities
Mutual funds	$	6,171	$	—	$	—	$	6,171
Preferred stock of government sponsored entities		11,443		—		—		11,443
Other equity securities		11,647		—		—		11,647
Total equity securities	$	29,261	$	—	$	—	$	29,261

Warrants	$	—	$	—	$	181	$	181
Interest rate swaps		—		4,480		—		4,480
Foreign exchange contracts		—		459		—		459
Total assets	$	178,501	$	1,165,552	$	181	$	1,344,234

Liabilities
Option contracts	$	—	$	12	$	—	$	12
Interest rate swaps		—		5,727		—		5,727
Foreign exchange contracts		—		645		—		645
Total liabilities	$	—	$	6,384	$	—	$	6,384

	December 31, 2018
	Fair Value Measurements Using						Total Fair Value
	Level 1		Level 2		Level 3		Measurements
	(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

The Company measured the fair value of its warrants on a recurring basis using significant unobservable inputs. The fair value adjustment of warrants was included in other operating income in the

first

quarter of

2019.

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

years, risk-free interest rate from

2.41%

2.55%,

and stock volatility from

13.40%

20.58%.

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

March 31, 2019,

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

March 31, 2019,

and

December 31, 2018,

and the total losses for the periods indicated:

	As of March 31, 2019								Total Losses
	Fair Value Measurements Using						Total Fair Value		For the Three Months Ended
	Level 1		Level 2		Level 3		Measurements		March 31, 2019		March 31, 2018
	(In thousands)
Assets
Impaired loans by type:
Commercial loans	$	—	$	—	$	440	$	440	$	—	$	—
Commercial mortgage loans		—		—		19,571		19,571		—		—
Residential mortgage loans and equity lines		—		—		5,973		5,973		—		—
Total impaired loans		—		—		25,984		25,984		—		—
Other real estate owned (1)		—		8,850		4,343		13,193		72		33
Investments in venture capital and private company stock		—		—		2,061		2,061		2		173
Total assets	$	—	$	8,850	$	32,388	$	41,238	$	74	$	206

(

)

Other real estate owned balance of

$12.5

million in the condensed consolidated balance sheet is net of estimated disposal costs.

	As of December 31, 2018								Total Losses/(Gains)
	Fair Value Measurements Using						Total Fair Value		For the Twelve Months Ended
	Level 1		Level 2		Level 3		Measurements		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 loans 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 and private company stock		—		—		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 condensed consolidated balance sheet 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

twelve

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 commissions ranging from

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