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Fair Value Information

3 Months Ended

Mar. 31, 2019

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, 2019. 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

– Quoted prices in active markets for identical assets or liabilities in active markets that are accessible at the measurement date.

•

Level

– Observable inputs other than Level 1, including quoted prices for similar assets and liabilities in active markets, quoted prices in less active markets, or other observable inputs or model derived valuations that can be corroborated by observable market data, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level

– Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. These valuation methodologies generally include pricing models, discounted cash flow models, or a determination of fair value that requires significant management judgment or estimation.

There were no transfers in and out of Level 1 and Level 2 during the three months ended March 31, 2019 and 2018.

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, 2019		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	$	1,422,504	$	-	$	1,422,504	$	-
CMO/REMIC - residential		205,125		-		205,125		-
Municipal bonds		45,085		-		45,085		-
Other securities		787		-		787		-

Total investment securities - AFS		1,673,501		-		1,673,501		-
Interest rate swaps		4,418		-		4,418		-

Total assets	$	1,677,919	$	-	$	1,677,919	$	-

Description of liability
Interest rate swaps	$	4,418	$	-	$	4,418	$	-

Total liabilities	$	4,418	$	-	$	4,418	$	-


	Carrying Value at December 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	$	1,474,508	$	-	$	1,474,508	$	-
CMO/REMIC - residential		214,051		-		214,051		-
Municipal bonds		44,810		-		44,810		-
Other securities		716		-		716		-

Total investment securities - AFS		1,734,085		-		1,734,085		-
Interest rate swaps		1,938		-		1,938		-

Total assets	$	1,736,023	$	-	$	1,736,023	$	-

Description of liability
Interest rate swaps	$	1,938	$	-	$	1,938	$	-

Total liabilities	$	1,938	$	-	$	1,938	$	-

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.

For assets measured at fair value on a non-recurring basis that were held on the balance sheet at March 31, 2019 and December 31, 2018, respectively, 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 March 31, 2019		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 Three Months Ended March 31, 2019
	(Dollars in thousands)
Description of assets
Impaired loans, excluding PCI loans:
Commercial and industrial	$	116	$	-	$	-	$	116	$	114
SBA		1,377		-		-		1,377		338
Real estate:
Commercial real estate		-		-		-		-		-
Construction		-		-		-		-		-
SFR mortgage		-		-		-		-		-
Dairy & livestock and agribusiness		-		-		-		-		-
Consumer and other loans		-		-		-		-		-
Other real estate owned		-		-		-		-		-
Asset held-for-sale		-		-		-		-		-

Total assets	$	1,493	$	-	$	-	$	1,493	$	452


	Carrying Value at December 31, 2018		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, 2018
	(Dollars in thousands)
Description of assets
Impaired loans, excluding PCI loans:
Commercial and industrial	$	189	$	-	$	-	$	189	$	3
SBA		-		-		-		-		-
Real estate:
Commercial real estate		3,143		-		-		3,143		478
Construction		-		-		-		-		-
SFR mortgage		-		-		-		-		-
Dairy & livestock and agribusiness		78		-		-		78		12
Consumer and other loans		68		-		-		68		68
Other real estate owned		-		-		-		-		-
Asset held-for-sale		-		-		-		-		-

Total assets	$	3,478	$	-	$	-	$	3,478	$	561

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, 2019 and December 31, 2018, respectively. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.


	March 31, 2019
			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Assets
Total cash and cash equivalents	$	172,214	$	172,214	$	-	$	-	$	172,214
Interest-earning balances due from depository institutions		7,420		-		7,228		-		7,228
Investment securities available-for-sale		1,673,501		-		1,673,501		-		1,673,501
Investment securities held-to-maturity		733,464		-		720,651		-		720,651
Total loans, net of allowance for loan losses		7,541,662		-		-		7,506,350		7,506,350
Swaps		4,418		-		4,418		-		4,418
Liabilities
Deposits:
Interest-bearing	$	3,555,298	$	-	$	3,549,970	$	-	$	3,549,970
Borrowings		615,774		-		615,186		-		615,186
Junior subordinated debentures		25,774		-		-		21,016		21,016
Swaps		4,418		-		4,418		-		4,418

	December 31, 2018
			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Assets
Total cash and due from banks	$	163,948	$	163,948	$	-	$	-	$	163,948
Interest-earning balances due from depository institutions		7,670		-		7,339		-		7,339
Investment securities available-for-sale		1,734,085		-		1,734,085		-		1,734,085
Investment securities held-to-maturity		744,440		-		721,537		-		721,537
Total loans, net of allowance for loan losses		7,700,998		-		-		7,514,964		7,514,964
Swaps		1,938		-		1,938		-		1,938
Liabilities
Deposits:
Interest-bearing	$	3,622,703	$	-	$	3,614,682	$	-	$	3,614,682
Borrowings		722,255		-		721,601		-		721,601
Junior subordinated debentures		25,774		-		-		21,176		21,176
Swaps		1,938		-		1,938		-		1,938

The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2019 and December 31, 2018. 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.

- 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.

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