9.	FAIR VALUE INFORMATION

Fair Value Hierarchy

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The following disclosure provides the fair value information for financial assets and liabilities as of March 31, 2018. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (Level 1, Level 2 and Level 3).

Level 1 – includes assets and liabilities that have an active market that provides an objective quoted value for each unit. Here the active market quoted value is used to measure the fair value. Level 1 has the most objective measurement of fair value. Level 2 is less objective and Level 3 is the least objective (most subjective) in estimating fair value.

Level 2 – assets and liabilities are ones where there is no active market in the same assets, but where there are parallel markets or alternative means to estimate fair value using observable information inputs such as the value placed on similar assets or liability that were recently traded.

Level 3 – fair values are based on information from the entity that reports these values in their financial statements. Such data are referred to as unobservable, in that the valuations are not based on data available to parties outside the entity.

Observable and unobservable inputs are the key elements that separate the levels in the fair value hierarchy. Inputs here refer explicitly to the types of information used to obtain the fair value of the asset or liability.

Observable inputs include data sources and market prices available and visible outside of the entity. While there will continue to be judgments required when an active market price is not available, these inputs are external to the entity and observable outside the entity; they are consequently considered more objective than internal unobservable inputs used for Level 3 fair value.

Unobservable inputs are data and analyses that are developed within the entity to assess the fair value, such as management estimates of future benefits from use of assets.

There were no transfers in and out of Level 1 and Level 2 during the three months ended March 31, 2018 and 2017.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present the balances of assets and liabilities measured at fair value on a recurring basis for the periods presented.


	Carrying Value at March 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Description of assets
Investment securities - AFS:
Residential mortgage-backed securities	$	1,631,340	$	-	$	1,631,340	$	-
CMO/REMIC - residential		255,646		-		255,646		-
Municipal bonds		53,868		-		53,868		-
Other securities		738		-		738		-

Total investment securities - AFS		1,941,592		-		1,941,592		-
Interest rate swaps		1,645		-		1,645		-

Total assets	$	1,943,237	$	-	$	1,943,237	$	-

Description of liability
Interest rate swaps	$	1,645	$	-	$	1,645	$	-

Total liabilities	$	1,645	$	-	$	1,645	$	-


	Carrying Value at December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Description of assets
Investment securities - AFS:
Residential mortgage-backed securities	$	1,750,909	$	-	$	1,750,909	$	-
CMO/REMIC - residential		273,829		-		273,829		-
Municipal bonds		55,496		-		55,496		-
Other securities		751		-		751		-

Total investment securities - AFS		2,080,985		-		2,080,985		-
Interest rate swaps		3,211		-		3,211		-

Total assets	$	2,084,196	$	-	$	2,084,196	$	-

Description of liability
Interest rate swaps	$	3,211	$	-	$	3,211	$	-

Total liabilities	$	3,211	$	-	$	3,211	$	-

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We may be required to measure certain assets at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or fair value accounting or impairment write-downs of individual assets.

There were no assets measured at fair value on a non-recurring basis that were held on the balance sheet at March 31, 2018. For assets measured at fair value on a non-recurring basis that were held on the balance sheet at December 31, 2017, the following tables provide the level of valuation assumptions used to determine each adjustment and the carrying value of the related assets that had losses during the period.


	Carrying Value at December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses For the Year Ended December 31, 2017
	(Dollars in thousands)
Description of assets
Impaired loans, excluding PCI loans:
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
SBA		-		-		-		-		-
Real estate:
Commercial real estate		-		-		-		-		-
Construction		-		-		-		-		-
SFR mortgage		-		-		-		-		-
Dairy & livestock and agribusiness		-		-		-		-		-
Consumer and other loans		378		-		-		378		74
Other real estate owned		-		-		-		-		-
Asset held-for-sale		-		-		-		-		-

Total assets	$	378	$	-	$	-	$	378	$	74

Fair Value of Financial Instruments

The following disclosure presents estimated fair value of our financial instruments. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company may realize in a current market exchange as of March 31, 2018 and December 31, 2017, respectively. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.


	March 31, 2018
			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Assets
Total cash and cash equivalents	$	456,238	$	456,238	$	-	$	-	$	456,238
Interest-earning balances due from depository institutions		10,100		-		10,095		-		10,095
FHLB stock		17,688		-		17,688		-		17,688
Investment securities available-for-sale		1,941,592		-		1,941,592		-		1,941,592
Investment securities held-to-maturity		798,284		-		776,130		-		776,130
Total loans, net of allowance for loan losses (1)		4,735,048		-		-		4,555,459		4,555,459
Swaps		1,645		-		1,645		-		1,645
Liabilities
Deposits:
Noninterest-bearing	$	4,062,691	$	4,062,691	$	-	$	-	$	4,062,691
Interest-bearing		2,646,744		-		2,643,627		-		2,643,627
Borrowings		487,277		-		486,924		-		486,924
Junior subordinated debentures		25,774		-		-		19,909		19,909
Swaps		1,645		-		1,645		-		1,645

	December 31, 2017
			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Assets
Total cash and due from banks	$	144,377	$	144,377	$	-	$	-	$	144,377
Interest-earning balances due from depository institutions		17,952		-		17,951		-		17,951
FHLB stock		17,688		-		17,688		-		17,688
Investment securities available-for-sale		2,080,985		-		2,080,985		-		2,080,985
Investment securities held-to-maturity		829,890		-		819,215		-		819,215
Total loans, net of allowance for loan losses		4,771,046		-		-		4,678,402		4,678,402
Swaps		3,211		-		3,211		-		3,211
Liabilities
Deposits:
Noninterest-bearing	$	3,846,436	$	3,846,436	$	-	$	-	$	3,846,436
Interest-bearing		2,700,417		-		2,697,781		-		2,697,781
Borrowings		553,773		-		553,416		-		553,416
Junior subordinated debentures		25,774		-		-		18,070		18,070
Swaps		3,211		-		3,211		-		3,211

(1)

The fair value of loans as of March 31, 2018 was measured using an exit price notion.

The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2018 and December 31, 2017. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented above.