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Estimated Fair Values | 6 Months Ended
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Jun. 30, 2011
Estimated Fair Values |
Estimated Fair Values | Note G Estimated Fair Values Fair value estimates are made at a specific point in time based on relevant market information and information about each financial instrument. Where information regarding the fair value of a financial instrument is publicly available, those values are used, as is the case with investment securities, residential mortgage loans and certain long-term obligations. In these cases, an open market exists in which those financial instruments are actively traded. Because no market exists for many financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. For financial instruments with a fixed interest rate, an analysis of the related cash flows is the basis for estimating fair values. The expected cash flows are discounted to the valuation date using an appropriate discount rate. The discount rates used represent the rates under which similar transactions would be currently negotiated. For financial instruments with fixed and variable rates, fair value estimates also consider the impact of liquidity discounts appropriate as of the measurement date. Estimated fair values for certain financial assets and financial liabilities are provided in the following table:
|  | June 30, 2011 |  |  | December 31, 2010 |  |  | June 30, 2010 |
| Carrying Value |  |  | Fair Value |  |  | Carrying Value |  |  | Fair Value |  |  | Carrying Value |  |  | Fair Value |
Cash and due from banks |  | $ | 537,717 |  |  | $ | 537,717 |  |  | $ | 460,178 |  |  | $ | 460,178 |  |  | $ | 625,857 |  |  | $ | 625,857 |
Overnight investments |  |  | 741,654 |  |  |  | 741,654 |  |  |  | 398,390 |  |  |  | 398,390 |  |  |  | 736,896 |  |  |  | 736,896 |
Investment securities available for sale |  |  | 4,014,241 |  |  |  | 4,014,241 |  |  |  | 4,510,076 |  |  |  | 4,510,076 |  |  |  | 3,768,777 |  |  |  | 3,768,777 |
Investment securities held to maturity |  |  | 2,098 |  |  |  | 2,278 |  |  |  | 2,532 |  |  |  | 2,741 |  |  |  | 3,084 |  |  |  | 3,334 |
Loans held for sale |  |  | 56,004 |  |  |  | 56,004 |  |  |  | 88,933 |  |  |  | 88,933 |  |  |  | 91,076 |  |  |  | 91,076 |
Loans covered by loss share agreements, net of allowance for loan and lease losses |  |  | 2,330,303 |  |  |  | 2,318,304 |  |  |  | 1,956,204 |  |  |  | 1,946,423 |  |  |  | 2,351,084 |  |  |  | 2,296,345 |
Loans and leases not covered by loss share agreements, net of allowance for loan and lease losses |  |  | 11,348,239 |  |  |  | 11,213,325 |  |  |  | 11,304,060 |  |  |  | 10,995,653 |  |  |  | 11,450,331 |  |  |  | 10,952,196 |
Receivable from FDIC for loss share agreements |  |  | 522,507 |  |  |  | 529,514 |  |  |  | 623,261 |  |  |  | 624,785 |  |  |  | 692,242 |  |  |  | 692,242 |
Income earned not collected |  |  | 50,876 |  |  |  | 50,876 |  |  |  | 83,644 |  |  |  | 83,644 |  |  |  | 77,186 |  |  |  | 77,186 |
Stock issued by: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal Home Loan Bank of Atlanta |  |  | 45,002 |  |  |  | 45,002 |  |  |  | 47,123 |  |  |  | 47,123 |  |  |  | 50,688 |  |  |  | 50,688 |
Federal Home Loan Bank of San Francisco |  |  | 14,238 |  |  |  | 14,238 |  |  |  | 15,490 |  |  |  | 15,490 |  |  |  | 16,781 |  |  |  | 16,781 |
Federal Home Loan Bank of Seattle |  |  | 4,490 |  |  |  | 4,490 |  |  |  | 4,490 |  |  |  | 4,490 |  |  |  | 4,490 |  |  |  | 4,490 |
Deposits |  |  | 17,662,966 |  |  |  | 17,711,225 |  |  |  | 17,635,266 |  |  |  | 17,695,357 |  |  |  | 17,787,241 |  |  |  | 17,855,490 |
Short-term borrowings |  |  | 655,808 |  |  |  | 655,808 |  |  |  | 546,597 |  |  |  | 546,597 |  |  |  | 541,709 |  |  |  | 541,709 |
Long-term obligations |  |  | 792,661 |  |  |  | 807,407 |  |  |  | 809,949 |  |  |  | 826,501 |  |  |  | 918,930 |  |  |  | 933,064 |
Accrued interest payable |  |  | 27,930 |  |  |  | 27,930 |  |  |  | 37,004 |  |  |  | 37,004 |  |  |  | 40,652 |  |  |  | 40,652 |
At June 30, 2011 and 2010, other assets include $63,730 and $71,959 of stock in various Federal Home Loan Banks (FHLB). The FHLB stock, which is redeemable only through the issuer, is carried at its par value. The investment in the FHLB stock is considered a long-term investment and its value is based on the ultimate recoverability of par value. Management has concluded that the investment in FHLB stock was not other-than-temporarily impaired for any period presented. For off-balance sheet commitments and contingencies, carrying amounts are reasonable estimates of the fair values for such financial instruments. Carrying amounts include unamortized fee income and, in some cases, reserves for any credit losses from those financial instruments. These amounts are not material to BancShares' financial position. Fair value represents the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements BancShares considers the principal or most advantageous market in which the specific assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities. As required under US GAAP, individual fair value estimates are ranked based on the relative reliability of the inputs used in the valuation. Fair values determined using level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities that are not actively traded in observable markets are based on level 3 inputs, which are considered to be nonobservable. BancShares recognizes transfers between levels of the fair value hierarchy at the end of the respective reporting period. Among BancShares' assets and liabilities, investment securities available for sale and interest rate swaps accounted for as cash flow hedges are reported at their fair values on a recurring basis. Certain other assets are adjusted to their fair value on a nonrecurring basis, including loans held for sale, which are carried at the lower of cost or market. Impaired loans, OREO, goodwill and other intangible assets are periodically tested for impairment. Loans held for investment, deposits, short-term borrowings and long-term obligations are not reported at fair value. BancShares did not elect to voluntarily report any assets or liabilities at fair value. For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of June 30, 2011, December 31, 2010 and June 30, 2010:
|  |  |  |  | Fair value measurements using: |
Description |  | Fair value |  |  | Quoted prices in active markets for identical assets and liabilities (Level 1 inputs) |  |  | Quoted prices for similar assets and liabilities (Level 2 inputs) |  |  | Significant unobservable inputs (Level 3 inputs) |
June 30, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment securities available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government |  | $ | 1,289,282 |  |  | $ | 1,289,282 |  |  | $ | — |  |  | $ | — |
Government agency |  |  | 1,904,843 |  |  |  | 1,904,843 |  |  |  | — |  |  |  | — |
Corporate bonds |  |  | 466,971 |  |  |  | 466,971 |  |  |  | — |  |  |  | — |
Residential mortgage-backed securities |  |  | 333,483 |  |  |  | — |  |  |  | 333,483 |  |  |  | — |
Equity securities |  |  | 18,609 |  |  |  | 18,609 |  |  |  | — |  |  |  | — |
State, county, municipal |  |  | 1,053 |  |  |  | — |  |  |  | 1,053 |  |  |  | — |
Total |  | $ | 4,014,241 |  |  | $ | 3,679,705 |  |  | $ | 334,536 |  |  | $ | — |
Liabilities measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps accounted for as cash flow hedges |  | $ | 9,800 |  |  | $ | — |  |  | $ | 9,800 |  |  | $ | — |
December 31, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment securities available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government |  | $ | 1,939,400 |  |  | $ | 1,939,400 |  |  | $ | — |  |  | $ | — |
Government agency |  |  | 1,919,986 |  |  |  | 1,919,986 |  |  |  | — |  |  |  | — |
Corporate bonds |  |  | 486,658 |  |  |  | 486,658 |  |  |  | — |  |  |  | — |
Residential mortgage-backed securities |  |  | 143,545 |  |  |  | — |  |  |  | 143,545 |  |  |  | — |
Equity securities |  |  | 19,231 |  |  |  | 19,231 |  |  |  | — |  |  |  | — |
State, county, municipal |  |  | 1,256 |  |  |  | — |  |  |  | 1,256 |  |  |  | — |
Total |  | $ | 4,510,076 |  |  | $ | 4,365,275 |  |  | $ | 144,801 |  |  | $ | — |
Liabilities measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps accounted for as cash flow hedges |  | $ | 9,492 |  |  | $ | — |  |  | $ | 9,492 |  |  | $ | — |
June 30, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment securities available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government |  | $ | 2,182,978 |  |  | $ | 2,182,978 |  |  | $ | — |  |  | $ | — |
Government agency |  |  | 901,739 |  |  |  | 901,739 |  |  |  | — |  |  |  | — |
Corporate bonds |  |  | 489,583 |  |  |  | 489,583 |  |  |  | — |  |  |  | — |
Residential mortgage-backed securities |  |  | 174,516 |  |  |  | — |  |  |  | 174,516 |  |  |  | — |
Equity securities |  |  | 18,691 |  |  |  | 18,691 |  |  |  | — |  |  |  | — |
State, county, municipal |  |  | 1,270 |  |  |  | — |  |  |  | 1,270 |  |  |  | — |
Total |  | $ | 3,768,777 |  |  | $ | 3,592,991 |  |  | $ | 175,786 |  |  | $ | — |
Liabilities measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps accounted for as cash flow hedges |  | $ | 11,309 |  |  | $ | — |  |  | $ | 11,309 |  |  | $ | — |
Prices for US Treasury securities, government agency securities, corporate bonds and equity securities are readily available in the active markets in which those securities are traded and the resulting fair values are shown in the 'Level 1 input' column. Prices for mortgage-backed securities and state, county and municipal securities are obtained using the fair values of similar assets and the resulting fair values are shown in the 'Level 2 input' column. There were no assets or liabilities valued based on level 3 inputs at June 30, 2011, December 31, 2010 or June 30, 2010, and there were no transfers between Level 1 and Level 2 inputs during the six month periods ended June 30, 2011 and 2010. Under the terms of the existing cash flow hedge, BancShares pays a fixed payment to the counterparty in exchange for receipt of a variable payment that is determined based on the 3-month LIBOR rate. The fair value of the cash flow hedge is therefore based on projected LIBOR rates for the duration of the hedge,values that, while observable in the market, are subject to adjustment due to pricing considerations for the specific instrument. For those investment securities available for sale with fair values that are determined by reliance on significant nonobservable inputs, the following table identifies the factors causing the change in fair value during the first six months of 2010:
|  | Investment securities available for sale with fair values based on significant nonobservable inputs |
Description |  | 2010 |
Beginning balance, January 1, |  | $ | 1,287 |
Total gains (losses), realized or unrealized: |  |  |  |
Included in earnings |  |  | — |
Included in other comprehensive income |  |  | — |
Purchases, sales, issuances and settlements, net |  |  | — |
Transfers in/out of Level 3 |  |  | (1,287 | )
Ending balance, June 30 |  | $ | — |
There were no investment securities with fair values determined by reliance on significant nonobservable inputs during 2011. No gains or losses were reported for the six month periods ended June 30, 2011 and 2010 that relate to fair values estimated based on significant nonobservable inputs. The investment securities valued using level 3 inputs that were transferred out during the first quarter of 2010 result from changes in US GAAP adopted January 1, 2010 related to investments in the retained interest of a residual interest strip that resulted from an asset securitization. Certain assets and liabilities are carried at fair value on a nonrecurring basis. Loans held for sale are carried at the lower of aggregate cost or fair value and are therefore carried at fair value only when fair value is less than the asset cost. Certain impaired loans are also carried at fair value. For assets and liabilities carried at fair value on a nonrecurring basis, the following table provides fair value information as of June 30, 2011, December 31, 2010 and June 30, 2010:
|  |  |  |  | Fair value measurements using: |
Description |  | Fair value |  |  | Quoted prices in active markets for identical assets and liabilities (Level 1 inputs) |  |  | Quoted prices for similar assets and liabilities (Level 2 inputs) |  |  | Significant nonobservable inputs (Level 3 inputs) |
June 30, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans held for sale |  | $ | 56,004 |  |  | $ | — |  |  | $ | 56,004 |  |  | $ | — |
Impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Covered by loss share agreements |  |  | 196,759 |  |  |  | — |  |  |  | — |  |  |  | 196,759 |
Not covered by loss share agreements |  |  | 103,546 |  |  |  | — |  |  |  | — |  |  |  | 103,546 |
December 31, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans held for sale |  |  | 88,933 |  |  |  | — |  |  |  | 88,933 |  |  |  | — |
Impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Covered by loss share agreements |  |  | 192,406 |  |  |  | — |  |  |  | — |  |  |  | 192,406 |
Not covered by loss share agreements |  |  | 89,500 |  |  |  | — |  |  |  | — |  |  |  | 89,500 |
June 30, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans held for sale |  |  | 91,076 |  |  |  | — |  |  |  | 91,076 |  |  |  | — |
Impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Covered by loss share agreements |  |  | 356,111 |  |  |  | — |  |  |  | — |  |  |  | 356,111 |
Not covered by loss share agreements |  |  | 50,676 |  |  |  | — |  |  |  | — |  |  |  | 50,676 |
The values of loans held for sale are based on prices observed for similar pools of loans. The values of impaired loans are determined by either the collateral value or the discounted present value of the expected cash flows. No financial liabilities were carried at fair value on a nonrecurring basis as of June 30, 2011, December 31, 2010 or June 30, 2010. OREO is measured and reported at fair value using Level 3 inputs for valuations based on nonobservable criteria. During the six month period ended June 30, 2011, foreclosures of other real estate not covered by loss share agreements totaled $13,636, all of which were valued using Level 3 inputs. Based on updates to Level 3 inputs, noncovered OREO with a fair value of $6,567 as of June 30, 2011 incurred write-downs that totaled $1,684 during the six month period ended June 30, 2011. Foreclosures of other real estate covered by loss share agreements totaled $64,144, all of which were valued using Level 3 inputs. ll During the six month period ended June 30, 2010, foreclosures of other real estate not covered by loss share agreements totaled $16,217, all of which were valued using Level 3 inputs. Based on updates to Level 3 inputs, noncovered OREO with a fair value of $6,006 as of June 30, 2010 incurred write-downs that totaled $1,160 during the six month period ended June 30, 2010. Foreclosures of other real estate covered by loss share agreements totaled $39,342, all of which were valued using Level 3 inputs.

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- Definition This item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, 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 Company 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 risk is 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 Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 + Details
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