Note 12 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Text Block]

12. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Cash and Cash Equivalents.  For cash and cash equivalents, the carrying amount was assumed to be a reasonable estimate of fair value, a Level 1 measurement.

Short-term Investments.  For short-term investments, the carrying amount was assumed to be a reasonable estimate of fair value, a Level 1 measurement.

Securities Purchased under Agreements to Resell. The fair value of securities purchased under agreements to resell is based on dealer quotes, a Level 2 measurement.

Securities.  For securities, including securities held-to-maturity, available-for-sale and for trading, fair values were based on quoted market prices at the reporting date.  If a quoted market price was not available, fair value was estimated using quoted market prices for similar securities or dealer quotes.  For certain actively traded agency preferred stocks and 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 1 measurement.  The Company also measures securities by using quoted market prices for similar securities or dealer quotes, a Level 2 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, and corporate bonds.

Loans.  Fair values were estimated for portfolios of loans with similar financial characteristics.  Each loan category was further segmented into fixed and adjustable rate interest terms and by performing and non-performing categories.

The fair value of performing loans was calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan, a Level 3 measurement.

The fair value of impaired loans was calculated based on the net realizable fair value of the collateral or the observable market price of the most recent sale or quoted price from loans held for sale.  The Company does not record loans at fair value on a recurring basis.  Nonrecurring fair value adjustments to collateral dependent impaired loans are recorded based on the current appraised value of the collateral, a Level 2 measurement.

Deposit Liabilities.  The fair value of demand deposits, savings accounts, and certain money market deposits was assumed to be the amount payable on demand at the reporting date.  The fair value of fixed-maturity certificates of deposit was estimated using the rates currently offered for deposits with similar remaining maturities, a Level 3 measurement.

Securities Sold under Agreements to Repurchase.  The fair value of securities sold under agreements to repurchase is based on dealer quotes, a Level 2 measurement.

Advances from Federal Home Loan Bank.  The fair value of the advances is based on quotes from the FHLB to settle the advances, a Level 2 measurement.

Other Borrowings.  This category includes borrowings from other financial institutions.  The fair value of other borrowings is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk, a Level 3 measurement. 

Long-term Debt.  The fair value of long-term debt is estimated based on the quoted market prices or dealer quotes, a Level 2 measurement.

Currency Option and Foreign Exchange Contracts. The Company measures the fair value of currency option and foreign exchange contracts based on dealer quotes, a Level 2 measurement.

Interest Rate Swaps. Fair value of interest rate swaps was derived from observable market prices for similar assets, a Level 2 measurement.

Off-Balance-Sheet Financial Instruments.  The fair value of commitments to extend credit, standby letters of credit, and financial guarantees written were estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter parties.  The fair value of guarantees and letters of credit was based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counter parties at the reporting date.  Off-balance-sheet financial instruments were fair valued based on the assumptions that a market participant would use, a Level 3 measurement.

Fair value was estimated in accordance with ASC Topic 825, formerly SFAS 107.  Fair value estimates were made at specific points in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates were based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.  These estimates were subjective in nature and involved uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.  The following table presents the estimated fair value of financial instruments as of March 31, 2013, and as of December 31, 2012:

	March 31, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In thousands)
Financial Assets
Cash and due from banks	$	155,525	$	155,525	$	144,909	$	144,909
Short-term investments		215,794		215,794		411,983		411,983
Securities held-to-maturity		-		-		773,768		823,906
Securities available-for-sale		2,190,296		2,190,296		1,291,480		1,291,480
Trading securities		4,758		4,758		4,703		4,703
Loans, net		7,175,462		7,119,348		7,235,587		7,169,732
Investment in Federal Home Loan Bank stock		37,130		37,130		41,272		41,272
Warrants		98		98		104		104

	Notional Amount		Fair Value		Notional Amount		Fair Value
Option contracts	$	1,113	$	8	$	105	$	-
Foreign exchange contracts		211,674		2,987		188,145		2,924

	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Deposits	$	7,425,674	$	7,431,517	$	7,383,225	$	7,389,015
Securities sold under agreements to repurchase		1,150,000		1,244,735		1,250,000		1,361,585
Advances from Federal Home Loan Bank		126,200		126,962		146,200		146,789
Other borrowings		19,232		16,232		18,713		14,573
Long-term debt		171,136		101,715		171,136		98,392

	Notional Amount		Fair Value		Notional Amount		Fair Value
Option contracts	$	465	$	2	$	104	$	2
Foreign exchange contracts		165,603		1,850		133,669		1,586

	Notional Amount		Fair Value			Notional Amount		Fair Value
Off-Balance Sheet Financial Instruments
Commitments to extend credit	$	1,762,592	$	(1,867	)	$	1,740,463	$	(1,875	)
Standby letters of credit		45,814		(173	)		44,672		(204	)
Other letters of credit		57,750		(33	)		71,073		(34	)
Bill of lading guarantees		128		-			77		-

The following table presents the level in the fair value hierarchy for the estimated fair values of only financial instruments that are not already on the consolidated balance sheets at fair value as of March 31, 2013, and December 31, 2012.

	March 31, 2013
	Estimated Fair Value Measurements		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets
Cash and due from banks	$	155,525	$	155,525	$	-	$	-
Short-term investments		215,794		215,794		-		-
Securities available-for-sale		2,190,296		366,149		1,824,147		-
Trading securities		4,758		-		4,758		-
Loans, net		7,119,348		-		-		7,119,348
Investment in Federal Home Loan Bank stock		37,130		-		37,130		-
Warrants		98		-		-		98
Financial Liabilities
Deposits		7,431,517		-		-		7,431,517
Securities sold under agreements to repurchase		1,244,735		-		1,244,735		-
Advances from Federal Home Loan Bank		126,962		-		126,962		-
Other borrowings		16,232		-		-		16,232
Long-term debt		101,715		-		101,715		-

	December 31, 2012
	Estimated Fair Value Measurements		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets
Cash and due from banks	$	144,909	$	144,909	$	-	$	-
Short-term investments		411,983		411,983		-		-
Securities held-to-maturity		823,906		-		823,906		-
Securities available-for-sale		1,291,480		526,165		765,315		-
Trading securities		4,703		-		4,703		-
Loans, net		7,169,732		-		-		7,169,732
Investment in Federal Home Loan Bank stock		41,272		-		41,272		-
Warrants		104		-		-		104
Financial Liabilities
Deposits		7,389,015		-		-		7,389,015
Securities sold under agreements to repurchase		1,361,585		-		1,361,585		-
Advances from Federal Home Loan Bank		146,789		-		146,789		-
Other borrowings		14,573		-		-		14,573
Long-term debt		98,392		-		98,392		-