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Note 14 - Fair Value of Financial Instruments | 6 Months Ended
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Jun. 30, 2020
Notes to Financial Statements |
Fair Value Disclosures [Text Block] | 1 4. Fair Value of Financial Instruments The Company uses the following methods and assumptions to estimate the fair value of each class of financial instruments. Cash and Cash Equivalents - For cash and cash equivalents, the carrying amount is assumed to be a reasonable estimate of fair value, a Level 1 measurement. Short-term Investments and interest-bearing deposits - For short-term investments and interest-bearing deposits, the carrying amount is assumed to be a reasonable estimate of fair value, a Level 1 measurement. Securities Available for Sale - For certain 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, U.S. Government sponsored entities, state and municipal securities, mortgage-backed securities (“MBS”), collateralized mortgage obligations and corporate bonds. 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. Equity securities are comprised of mutual funds, preferred stock of government-sponsored entities and other equity securities. Loans - Fair values are estimated for portfolios of loans with similar financial characteristics. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and non-performing categories. The fair values are based primarily on third-party vendor pricing to determine fair values based on the exit price notion. The fair value of performing loans is 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 is 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 or adjusted appraised value of the collateral, a Level 2 or Level 3 measurement. Loans Held-for-Sale – The Company records loans held for sale at fair value based on quoted prices from third party sale analysis, existing sale agreements, or appraisal reports adjusted by sales commission assumption, 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 is assumed to be the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits with similar remaining maturities, a Level 3 measurement. Advanc es from FHLB - 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 D ebt - 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 is derived from third party models with observable market data, a Level 2 measurement. Off-Balance-Sheet Financi al Instruments - The fair value of commitments to extend credit, standby letters of credit, and financial guarantees written is 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 counterparties. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. The fair value of off-balance-sheet financial instruments is based on the assumptions that a market participant would use, a Level 3 measurement. Fair value is estimated in accordance with ASC Topic 825. Fair value estimates are 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 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. The following table sets forth the carrying and notional amounts and estimated fair value of financial instruments as of June 30, 2020 and December 31, 2019:
|  | June 30, 2020 |  |  | December 31, 2019 |
|  | Carrying |  |  |  |  |  |  | Carrying |  |  |  |  |
|  | Amount |  |  | Fair Value |  |  | Amount |  |  | Fair Value |
|  | (In thousands) |
Financial Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 148,700 |  |  | $ | 148,700 |  |  | $ | 177,240 |  |  | $ | 177,240 |
Short-term investments |  |  | 1,425,001 |  |  |  | 1,425,001 |  |  |  | 416,538 |  |  |  | 416,538 |
Securities available-for-sale |  |  | 1,146,102 |  |  |  | 1,146,102 |  |  |  | 1,451,842 |  |  |  | 1,451,842 |
Loans, net |  |  | 15,434,096 |  |  |  | 15,954,278 |  |  |  | 14,951,631 |  |  |  | 15,444,752 |
Equity securities |  |  | 24,570 |  |  |  | 24,570 |  |  |  | 28,005 |  |  |  | 28,005 |
Investment in Federal Home Loan Bank stock |  |  | 17,250 |  |  |  | 17,250 |  |  |  | 18,090 |  |  |  | 18,090 |
Warrants |  |  | 13 |  |  |  | 13 |  |  |  | 39 |  |  |  | 39 |
|  | Notional |  |  |  |  |  |  | Notional |  |  |  |  |
|  | Amount |  |  | Fair Value |  |  | Amount |  |  | Fair Value |
Foreign exchange contracts |  | $ | 101,020 |  |  | $ | 1,529 |  |  | $ | 146,397 |  |  | $ | 2,411 |
Interest rate swaps |  |  | 50,599 |  |  |  | 3,842 |  |  |  | 130,401 |  |  |  | 2,181 |
|  | Carrying |  |  |  |  |  |  | Carrying |  |  |  |  |
|  | Amount |  |  | Fair Value |  |  | Amount |  |  | Fair Value |
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 16,281,904 |  |  | $ | 16,334,769 |  |  | $ | 14,692,308 |  |  | $ | 14,719,452 |
Short-term borrowings |  |  | — |  |  |  | — |  |  |  | 25,683 |  |  |  | 25,683 |
Advances from Federal Home Loan Bank |  |  | 230,000 |  |  |  | 241,047 |  |  |  | 670,000 |  |  |  | 674,530 |
Other borrowings |  |  | 40,152 |  |  |  | 33,040 |  |  |  | 36,666 |  |  |  | 30,764 |
Long-term debt |  |  | 119,136 |  |  |  | 61,913 |  |  |  | 119,136 |  |  |  | 76,058 |
|  | Notional |  |  |  |  |  |  | Notional |  |  |  |  |
|  | Amount |  |  | Fair Value |  |  | Amount |  |  | Fair Value |
Option contracts |  | $ | 530 |  |  | $ | 6 |  |  | $ | 908 |  |  | $ | 7 |
Foreign exchange contracts |  |  | 179,211 |  |  |  | 531 |  |  |  | 127,003 |  |  |  | 1,415 |
Interest rate swaps |  |  | 697,212 |  |  |  | 33,760 |  |  |  | 602,291 |  |  |  | 14,229 |
|  | Notional |  |  |  |  |  |  | Notional |  |  |  |  |
|  | Amount |  |  | Fair Value |  |  | Amount |  |  | Fair Value |
Off-Balance Sheet Financial Instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commitments to extend credit |  | $ | 3,073,581 |  |  | $ | (9,464 | ) |  | $ | 3,077,081 |  |  | $ | (9,826 | )
Standby letters of credit |  |  | 262,028 |  |  |  | (1,981 | ) |  |  | 282,352 |  |  |  | (2,431 | )
Other letters of credit |  |  | 28,199 |  |  |  | (30 | ) |  |  | 22,209 |  |  |  | (20 | )
Bill of lading guarantees |  |  | 124 |  |  |  | — |  |  |  | 319 |  |  |  | (1 | )
The following tables set forth the level in the fair value hierarchy for the estimated fair values of financial instruments as of June 30, 2020 and December 31, 2019.
|  | As of June 30, 2020 |
|  | Estimated |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Fair Value |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Measurements |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
|  | (In thousands) |
Financial Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 148,700 |  |  | $ | 148,700 |  |  | $ | — |  |  | $ | — |
Short-term investments |  |  | 1,425,001 |  |  |  | 1,425,001 |  |  |  | — |  |  |  | — |
Securities available-for-sale |  |  | 1,146,102 |  |  |  | 99,927 |  |  |  | 1,046,175 |  |  |  | — |
Loans, net |  |  | 15,954,278 |  |  |  | — |  |  |  | — |  |  |  | 15,954,278 |
Equity securities |  |  | 24,570 |  |  |  | 24,570 |  |  |  | — |  |  |  | — |
Investment in Federal Home Loan Bank stock |  |  | 17,250 |  |  |  | — |  |  |  | 17,250 |  |  |  | — |
Warrants |  |  | 13 |  |  |  | — |  |  |  | — |  |  |  | 13 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 16,334,769 |  |  |  | — |  |  |  | — |  |  |  | 16,334,769 |
Advances from Federal Home Loan Bank |  |  | 241,047 |  |  |  | — |  |  |  | 241,047 |  |  |  | — |
Other borrowings |  |  | 33,040 |  |  |  | — |  |  |  | — |  |  |  | 33,040 |
Long-term debt |  |  | 61,913 |  |  |  | — |  |  |  | 61,913 |  |  |  | — |
|  | 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 |  |  | 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 |  |  |  | — |

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- Definition 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 Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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