XML 128 R23.htm IDEA: XBRL DOCUMENT

Note 16 - Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

16.

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. 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, 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 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 held for sale. The Company records loans held for sale at fair value based on quoted price from third party sources, or appraisal reports adjusted by sales commission assumption, a Level 3 measurement.

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, or management’s judgment and estimation of value reported on old appraisals which are then adjusted based on recent market trends, a Level 3 measurement.

FHLB Stock. These securities can only be redeemed or sold at their par value and only to the respective issuing government-supported institution or to another member institution. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value.

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.

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.

Short-term and 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 observable market rates, a Level 2 measurement.

Interest Rate Swaps. Fair value of interest rate swaps is derived from third party models with observable market data, 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 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. Fair value estimates were made at specific points in time, based on relevant market information and information about the 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.

Fair Value of Financial Instruments

		December 31, 2019								December 31, 2018
		Carrying								Carrying
		Amount				Fair Value				Amount				Fair Value
		(In thousands)
Financial Assets
Cash and due from banks		$	177,240			$	177,240			$	225,333			$	225,333
Short-term investments			416,538				416,538				374,957				374,957
Securities available-for-sale			1,451,842				1,451,842				1,242,509				1,242,509
Loans, net ⁽¹⁾			14,951,631				15,444,752				13,871,832				13,928,162
Equity securities			28,005				28,005				25,098				25,098
Investment in Federal Home Loan Bank stock			18,090				18,090				17,250				17,250
Warrants			39				39				184				184

		Notional								Notional
		Amount				Fair Value				Amount				Fair Value
Foreign exchange contracts		$	146,397			$	2,411			$	86,875			$	397
Interest rate swaps			130,401				2,181				467,410				7,810

Financial Liabilities		Carrying								Carrying
		Amount				Fair Value				Amount				Fair Value
Deposits		$	14,692,308			$	14,719,452			$	13,702,340			$	13,754,028
Short-term borrowings			25,683				25,683				—				—
Advances from Federal Home Loan Bank			670,000				674,530				530,000				529,500
Other borrowings			36,666				30,764				35,756				34,031
Long-term debt			119,136				76,058				189,448				132,615

		Notional								Notional
		Amount				Fair Value				Amount				Fair Value
Option contracts		$	908			$	7			$	1,215			$	6
Foreign exchange contracts			127,003				1,415				94,977				1,763
Interest rate swaps			602,291				14,229				265,166				1,543

		Notional								Notional
		Amount				Fair Value				Amount				Fair Value
Off-Balance Sheet Financial Instruments
Commitments to extend credit		$	3,077,081			$	(9,826	)		$	2,691,579			$	(8,843	)
Standby letters of credit			282,352				(2,431	)			245,087				(2,662	)
Other letters of credit			22,209				(20	)			35,759				(30	)
Bill of lading guarantees			319				(1	)			730				—

(1) In accordance with the prospective adoption of ASU 2016-01, the fair value of loans as of December 31, 2019 & 2018 was measured using an exit price notion.

The following tables present 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 at December 31, 2019, and December 31, 2018.

		As of December 31, 2019
		Estimated
		Fair Value
		Measurements				Level 1				Level 2				Level 3
		(In thousands)
Financial Assets
Cash and due from banks		$	177,240			$	177,240			$	—			$	—
Short-term investments			416,538				416,538				—				—
Securities available-for-sale			1,451,842				74,936				1,376,906				—
Loans, net ⁽¹⁾			15,444,752				—				—				15,444,752
Equity securities			28,005				28,005				—				—
Investment in Federal Home Loan Bank stock			18,090				—				18,090				—
Warrants			39				—				—				39
Financial Liabilities
Deposits			14,719,452				—				—				14,719,452
Short-term borrowings			25,683				—				—				25,683
Advances from Federal Home Loan Bank			674,530				—				674,530				—
Other borrowings			30,764				—				—				30,764
Long-term debt			76,058				—				76,058				—

		As of December 31, 2018
		Estimated
		Fair Value
		Measurements				Level 1				Level 2				Level 3
		(In thousands)
Financial Assets
Cash and due from banks		$	225,333			$	225,333			$	—			$	—
Short-term investments			374,957				374,957				—				—
Securities available-for-sale			1,242,509				124,751				1,117,758				—
Loans, net ⁽¹⁾			13,928,162				—				—				13,928,162
Equity securities			25,098				25,098				—				—
Investment in Federal Home Loan Bank stock			17,250				—				17,250				—
Warrants			184				—				—				184
Financial Liabilities
Deposits			13,754,028				—				—				13,754,028
Advances from Federal Home Loan Bank			529,500				—				529,500				—
Other borrowings			34,031				—				—				34,031
Long-term debt			132,615				—				132,615				—

(1) In accordance with the prospective adoption of ASU 2016-01, the fair value of loans as of December 31, 2019 &2018 was measured using an exit price notion.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details