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Fair Value Measurements
12 Months Ended
Dec. 31, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
    
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The three levels of inputs that may be used to measure fair value are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of of assets or liabilities

Transfers in and out of Level 1, Level 2 and Level 3 are recognized on the actual transfer date. There were no transfers between fair value hierarchy levels during the years ended December 31, 2016 and 2015.

The methodologies used by the Company in determining the fair values of each class of financial instruments are based primarily on the use of independent, market-based data to reflect a value that would be reasonably expected in an orderly transaction between market participants at the measurement date. There have been no significant changes in the valuation techniques during the periods ended December 31, 2016 and 2015. Further details on the methods used to estimate the fair value of each class of financial instruments above are discussed below:

Investment Securities Available-for-Sale. The methodologies used by the Company in determining the fair values of each class of financial instruments are based primarily on the use of independent, market-based data to reflect a value that would be reasonably expected in an orderly transaction between market participants at the measurement date, and therefore as classified within Level 2 of the valuation hierarchy. The Company obtains fair value measurements for investment securities from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the investment's terms and conditions, among other things. Vendors chosen by the Company are widely recognized vendors whose evaluations support the pricing functions of financial institutions, investment and mutual funds, and portfolio managers. The Company has documented and evaluated the pricing methodologies used by the vendors and maintains internal processes that regularly test valuations. These internal processes include obtaining and reviewing available reports on internal controls, evaluating the prices for reasonableness given market changes, obtaining and evaluating the inputs used in the model for a sample of securities, investigating anomalies and confirming determinations through discussions with the vendor. For investment securities, if needed, a broker may be utilized to determine the reported fair value.

Loans Held for Sale. Beginning January 1, 2016, the Company elected to account for loans held for sale using the fair value option. Prior to 2016, the Company carried loans held for sale at the lower of aggregate cost or estimated market value. Fair value measurements for loans held for sale are obtained from an independent pricing service. The fair value measurements consider observable data that may include binding contracts or quotes or bids from third party investors as well as loan level pricing adjustments. As of December 31, 2015, all loans held for sale were recorded at cost.

Interest Rate Swap Contracts. Fair values for interest rate swap contracts are based upon the estimated amounts to settle the contracts considering current interest rates and are calculated using discounted cash flows that are observable or that can be corroborated by observable market data and, therefore, are classified within Level 2 of the valuation hierarchy. The inputs used to determine fair value include the 3 month LIBOR forward curve to estimate variable rate cash inflows and the fed funds effective swap rate to estimate the discount rate. The estimated variable rate cash inflows are compared to the fixed rate outflows and such difference is discounted to a present value to estimate the fair value of the interest rate swaps. The change in the value of derivative assets attributable to basis risk, or the risk that offsetting investments in a hedging strategy will not experience price changes in entirely opposite directions from each other, was not significant in the reported periods. The Company also obtains and compares the reasonableness of the pricing from an independent third party.

For purposes of potential valuation adjustments to our derivative positions, we evaluate the credit risk of our counterparties as well as ours. Accordingly, we have considered factors such as the likelihood of our default and the default of our counterparties, our net exposures and remaining contractual life, among other things, in determining if any fair value adjustments related to credit risk are required. The change in value of derivative assets and derivative liabilities attributable to credit risk was not significant during the reported periods.

Interest Rate Lock Commitments. Fair value measurements for interest rate lock commitments are obtained from an independent pricing service. The fair value measurements consider observable data that may include prices available from secondary market investors taking into consideration various characteristics of the loan, including the loan amount, interest rate, value of the servicing and loan to value ratio, among other things. Observable data is then adjusted to reflect changes in interest rates, the Company's estimated pull-through rate and estimated direct costs necessary to complete the commitment into a closed loan net of origination and processing fees collected from the borrower.

Forward Loan Sales Contracts. The fair value measurements for forward loan sales contracts are obtained from an independent pricing service. The fair value measurements consider observable data that includes sales of similar loans.

Deferred Compensation Plan. The fair values of deferred compensation plan assets are based primarily on the use of independent, market-based data to reflect a value that would be reasonably expected in an orderly transaction between market participants at the measurement date, and therefore are classified within Level 2 of the valuation hierarchy. These investments are in the same funds and purchased in the same amounts as the participants’ selected investments, which represent the underlying liabilities to plan participants. Deferred compensation plan liabilities are recorded at amounts due to participants, based on the fair value of participants’ selected investments.
    
Financial assets and financial liabilities measured at fair value on a recurring basis are as follows:
 
 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2016
Balance
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Investment securities available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury Notes
$
3,612

 
$

 
$
3,612

 
$

Obligations of U.S. government agencies
391,297

 

 
391,297

 

U.S. agency mortgage-backed securities & collateralized mortgage obligations
1,213,701

 

 
1,213,701

 

Private mortgage-backed securities
116

 

 
116

 

Other investments
2,972

 

 
2,972

 

Loans held for sale
61,794

 

 
61,794

 

Derivative assets:
 
 
 
 
 
 
 
Interest rate swap contracts
1,332

 

 
1,332

 

Interest rate lock commitments
1,131

 

 
1,131

 

Forward loan sales contracts
286

 

 
286

 

Derivative liabilities:


 
 
 
 
 
 
Interest rate swap contracts
1,314

 

 
1,314

 

Deferred compensation plan assets
10,627

 

 
10,627

 

Deferred compensation plan liabilities
10,627

 

 
10,627

 

 
 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2015
Balance
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Investment securities available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury Notes
$
3,911

 
$

 
$
3,911

 
$

Obligations of U.S. government agencies
520,181

 

 
520,181

 

U.S. agency mortgage-backed securities & collateralized mortgage obligations
929,046

 

 
929,046

 

Private mortgage-backed securities
156

 

 
156

 

Other investments
3,546

 

 
3,546

 


Derivative assets:
 
 
 
 
 
 
 
Interest rate swap contracts
953

 

 
953

 

Derivative liabilities:
 
 
 
 
 
 
 
Interest rate swap contracts
829

 

 
829

 

Deferred compensation plan assets
10,149

 

 
10,149

 

Deferred compensation plan liabilities
10,149

 

 
10,149

 



Additionally, from time to time, certain assets are measured at fair value on a non-recurring basis. Adjustments to fair value generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment. The following table presents information about the Company’s assets and liabilities measured at fair value on a non-recurring basis.
 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2016
Total
Quoted Prices
in Active
Markets for
Identical Assets (Level 1)
Significant
Other
Observable
Inputs
 (Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Gains (Losses)
Impaired loans
$
39,344

$

$

$
39,344

$
(25,772
)
Other real estate owned
2,110



2,110

(1,715
)
Long-lived assets to be disposed of by sale
1,335



1,335

(1,028
)
 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2015
Total
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Gains (Losses)
Impaired loans
$
20,875

$

$

$
20,875

$
(21,804
)
Other real estate owned
1,789



1,789

(382
)
Long-lived assets to be disposed of by sale
1,506



1,506

(857
)


Impaired Loans. Collateralized impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from collateral. The impaired loans are reported at fair value through specific valuation allowance allocations. In addition, when it is determined that the fair value of an impaired loan is less than the recorded investment in the loan, the carrying value of the loan is adjusted to fair value through a charge to the allowance for loan losses. Collateral values are estimated using independent appraisals and management estimates of current market conditions. As of December 31, 2016, certain impaired loans with a carrying value of $65,238 were reduced by specific valuation allowance allocations of $13,954 and partial loan charge-offs of $11,941 resulting in a reported fair value of $39,344. As of December 31, 2015, certain impaired loans with a carrying value of $42,679 were reduced by specific valuation allowance allocations of $11,575 and partial loan charge-offs of $10,229 resulting in a reported fair value of $20,875.

OREO. The fair values of OREO are estimated using independent appraisals and management estimates of current market conditions. Upon initial recognition, write-downs based on the foreclosed asset's fair value at foreclosure are reported through charges to the allowance for loan losses. Periodically, the fair value of foreclosed assets is remeasured with any subsequent write-downs charged to OREO expense in the period in which they are identified.

Long-lived Assets to be Disposed of by Sale. Long-lived assets to be disposed of by sale are carried at the lower of carrying value or fair value less estimated costs to sell. The fair values of long-lived assets to be disposed of by sale are based upon observable market data and management estimates of current market conditions. As of December 31, 2016, long-lived assets to be disposed of by sale with carrying values of $2,363 that were reduced by write-downs of $1,028 charged to other expense resulting in a reported fair value of $1,335. As of December 31, 2015, the Company had long-lived assets to be disposed of by sale of $2,363 that were reduced by write-downs of $857 charged to other expense resulting in a reported fair value of $1,506.

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which the Company has utilized Level 3 inputs to determine fair values:
As of December 31, 2016
Fair
Value
Valuation
Technique
Unobservable
Inputs
Range
(Weighted Average)
Impaired loans
$
39,344

Appraisal
Appraisal adjustment
0%
-
66%
(31%)
Other real estate owned
2,110

Appraisal
Appraisal adjustment
8%
-
96%
(18%)
Long-lived assets to be disposed of by sale
1,335

Appraisal
Appraisal adjustment
0%
-
9%
(6%)
 
 
 
 
 
 
 
 
As of December 31, 2015
Fair
Value
Valuation
Technique
Unobservable
Inputs
Range
(Weighted Average)
Impaired loans
$
20,875

Appraisal
Appraisal adjustment
0%
-
53%
(38%)
Other real estate owned
1,789

Appraisal
Appraisal adjustment
2%
-
96%
(19%)
Long-lived assets to be disposed of by sale
1,506

Appraisal
Appraisal adjustment
0%
-
9%
(6%)
 
 
 
 
 
 
 
 

The Company is required to disclose the fair value of financial instruments for which it is practical to estimate fair value. The methodologies for estimating the fair value of financial instruments that are measured at fair value on a recurring or non-recurring basis are discussed above. The methodologies for estimating the fair value of other financial instruments are discussed below. For financial instruments bearing a variable interest rate where no credit risk exists, it is presumed that recorded book values are reasonable estimates of fair value.

Financial Assets. Carrying values of cash, cash equivalents and accrued interest receivable approximate fair values due to the liquid and/or short-term nature of these instruments. Fair values for investment securities held-to-maturity are obtained from an independent pricing service, which considers observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the investment’s terms and conditions, among other things. Fair values of fixed rate loans and variable rate loans that reprice on an infrequent basis are estimated by discounting future cash flows using current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality. Carrying values of variable rate loans that reprice frequently, and with no change in credit risk, approximate the fair values of these instruments.
        
Financial Liabilities. The fair values of demand deposits, savings accounts, securities sold under repurchase agreements and accrued interest payable are the amounts payable on demand at the reporting date. The fair values of fixed-maturity certificates of deposit are estimated using external market rates currently offered for deposits with similar remaining maturities. The fair values of derivative liabilities are obtained from an independent pricing service, which considers observable data that may include the three-month LIBOR forward curve, the federal funds effective swap rate and cash flows, among other things. The carrying values of the interest bearing demand notes to the United States Treasury are deemed an approximation of fair values due to the frequent repayment and repricing at market rates. The fixed and floating rate subordinated debentures, floating rate subordinated term loan, notes payable to the FHLB, fixed rate subordinated term debt, and capital lease obligation are estimated by discounting future cash flows using current rates for advances with similar characteristics.

Commitments to Extend Credit and Standby Letters of Credit. The fair value of commitments to extend credit and standby letters of credit, based on fees currently charged to enter into similar agreements, is not significant.    

A summary of the estimated fair values of financial instruments follows:
 
`
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2016
Carrying Amount
Estimated
Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial assets:
 
 
 
 
 

Cash and cash equivalents
$
782,023

$
782,023

$
782,023

$

$

Investment securities available-for-sale
1,611,698

1,611,698


1,611,698


Investment securities held-to-maturity
512,770

513,273


513,273


Accrued interest receivable
29,852

29,852


29,852


Mortgage servicing rights, net
18,457

35,656


35,656


Net loans
5,402,330

5,309,921


5,270,577

39,344

Derivative assets
2,749

2,749


2,749


Deferred compensation plan assets
10,627

10,627


10,627


Total financial assets
$
8,370,506

$
8,295,799

$
782,023

$
7,474,432

$
39,344

 
 
 
 
 
 
Financial liabilities:
 
 
 
 
 
Total deposits, excluding time deposits
$
6,324,512

$
6,324,512

$
6,324,512

$

$

Time deposits
1,051,598

1,044,670


1,044,670


Securities sold under repurchase agreements
537,556

537,556


537,556


Other borrowed funds
6

6


6


Accrued interest payable
5,421

5,421


5,421


Long-term debt
27,970

27,477


27,477


Subordinated debentures held by subsidiary trusts
82,477

73,554


73,554


Derivative liabilities
1,314

1,314


1,314


Deferred compensation plan liabilities
10,627

10,627


10,627


Total financial liabilities
$
8,041,481

$
8,025,137

$
6,324,512

$
1,700,625

$



 
 
 
Fair Value Measurements at Reporting Date Using
As of December 31, 2015
Carrying Amount
Estimated
Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial assets:
 
 
 
 
 
Cash and cash equivalents
$
780,457

$
780,457

$
780,457

$

$

Investment securities available-for-sale
1,456,840

1,456,840


1,456,840


Investment securities held-to-maturity
600,665

607,550


607,550


Accrued interest receivable
27,729

27,729


27,729


Mortgage servicing rights, net
15,621

31,011


31,011


Net loans
5,169,379

5,128,705


5,107,830

20,875

Derivative assets
953

953


953


Deferred compensation plan assets
10,149

10,149


10,149


Total financial assets
$
8,061,793

$
8,043,394

$
780,457

$
7,242,062

$
20,875

 
 
 
 
 
 
Financial liabilities:
 
 
 
 
 
Total deposits, excluding time deposits
$
5,957,345

$
5,975,345

$
5,975,345

$

$

Time deposits
1,131,592

1,137,289


1,137,289


Securities sold under repurchase agreements
510,635

510,635


510,635


Other borrowed funds
2

2


2


Accrued interest payable
4,960

4,960


4,960


Long-term debt
27,885

27,622


27,622


Subordinated debentures held by subsidiary trusts
82,477

74,969


74,969


Derivative liabilities
829

829


829


Deferred compensation plan liabilities
10,149

10,149


10,149


Total financial liabilities
$
7,725,874

$
7,741,800

$
5,975,345

$
1,766,455

$