CHFC 2018 Annual Report

Disclosure of Nonrecurring Basis Fair Value Measurements Certain assets may be required to be measured at fair value on a nonrecurring basis. The carrying value of these assets represent end of period values, which approximate the fair value measurements that occurred on the various measurement dates during the period. For assets measured at fair value on a nonrecurring basis, quantitative disclosures about fair value measurements for each major category of assets follow: (Dollars in thousands) Significant Unobservable Inputs (Level 3) December 31, 2018 Impaired loans $ 63,247 Other real estate and repossessed assets 883 Total $ 64,130 December 31, 2017 Impaired loans $ 70,619 Other real estate and repossessed assets 2,899 Total $ 73,518 There were no liabilities recorded at fair value on a nonrecurring basis at either December 31, 2018 or 2017. The following table presents additional information about the significant unobservable inputs used in the fair value measurement of financial assets measured on a nonrecurring basis that were categorized within the Level 3 of the fair value hierarchy: (Dollars in thousands) Fair Value at December 31, 2018 Valuation Technique Significant Unobservable Inputs Range Impaired loans $ 63,247 Appraisal of collateral Discount for type of collateral and age of appraisal 20%-30% Other real estate and repossessed assets 883 Appraisal of property Discount for type of property and age of appraisal 20%-30% Disclosures About Fair Value of Financial Instruments GAAP requires disclosures about the estimated fair value of the Corporation's financial instruments, including those financial assets and liabilities that are not measured and reported at fair value on a recurring or nonrecurring basis. The Corporation utilized the fair value hierarchy in computing the fair values of its financial instruments. In cases where quoted market prices were not available, the Corporation employed the exit-price notion following the adoption of ASU 2016-01 on January 1, 2018 and used the present value method prior to the adoption of ASU 2016-01, using unobservable inputs requiring management's judgment to estimate the fair values of its financial instruments, which are considered Level 3 valuations. These Level 3 valuations are affected by the assumptions made and, accordingly, are not necessarily indicative of amounts that would be realized in a current market exchange. It is also the Corporation's general practice and intent to hold the majority of its financial instruments until maturity and, therefore, the Corporation does not expect to realize the estimated amounts disclosed. Chemical Financial Corporation Notes to Consolidated Financial Statements December 31, 2018 111