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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2016
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS Below is a description of certain assets and liabilities measured at fair value. The following table summarizes financial instruments measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
| June 30, 2016
(in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
Assets |  |  |  |  |  |  |
Securities available for sale |  |  |  |  |  |  |
Obligations of U.S. Government-sponsored enterprises | $ | — |  |  | $ | 99,686 |  |  | $ | — |  |  | $ | 99,686 |
Obligations of states and political subdivisions | — |  |  | 35,872 |  |  | 3,093 |  |  | 38,965 |
Residential mortgage-backed securities | — |  |  | 339,863 |  |  | — |  |  | 339,863 |
Total securities available for sale | $ | — |  |  | $ | 475,421 |  |  | $ | 3,093 |  |  | $ | 478,514 |
State tax credits held for sale | — |  |  | — |  |  | 4,774 |  |  | 4,774 |
Derivative financial instruments | — |  |  | 2,264 |  |  | — |  |  | 2,264 |
Total assets | $ | — |  |  | $ | 477,685 |  |  | $ | 7,867 |  |  | $ | 485,552 |
Liabilities |  |  |  |  |  |  |  |  |
Derivative financial instruments | $ | — |  |  | $ | 2,264 |  |  | $ | — |  |  | $ | 2,264 |
Total liabilities | $ | — |  |  | $ | 2,264 |  |  | $ | — |  |  | $ | 2,264 |
| December 31, 2015
(in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
Assets |  |  |  |  |  |  |
Securities available for sale |  |  |  |  |  |  |
Obligations of U.S. Government-sponsored enterprises | $ | — |  |  | $ | 99,008 |  |  | $ | — |  |  | $ | 99,008 |
Obligations of states and political subdivisions | — |  |  | 38,624 |  |  | 3,077 |  |  | 41,701 |
Residential mortgage-backed securities | — |  |  | 311,061 |  |  | — |  |  | 311,061 |
Total securities available for sale | $ | — |  |  | $ | 448,693 |  |  | $ | 3,077 |  |  | $ | 451,770 |
State tax credits held for sale | — |  |  | — |  |  | 5,941 |  |  | 5,941 |
Derivative financial instruments | — |  |  | 1,155 |  |  | — |  |  | 1,155 |
Total assets | $ | — |  |  | $ | 449,848 |  |  | $ | 9,018 |  |  | $ | 458,866 |
Liabilities |  |  |  |  |  |  |  |  |
Derivative financial instruments | $ | — |  |  | $ | 1,155 |  |  | $ | — |  |  | $ | 1,155 |
Total liabilities | $ | — |  |  | $ | 1,155 |  |  | $ | — |  |  | $ | 1,155 |
• | Securities available for sale. Securities classified as available for sale are reported at fair value utilizing Level 2 and Level 3 inputs. Fair values for Level 2 securities are based upon dealer quotes, market spreads, the U.S. Treasury yield curve, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions at the security level. At June 30, 2016, Level 3 securities available for sale consist primarily of three Auction Rate Securities that are valued based on the securities' estimated cash flows, yields of comparable securities, and live trading levels.
• | State tax credits held for sale. At June 30, 2016, of the $44.9 million of state tax credits held for sale on the condensed consolidated balance sheet, approximately $4.8 million were carried at fair value. The remaining $40.1 million of state tax credits were accounted for at cost.
The Company is not aware of an active market that exists for the 10-year streams of state tax credit financial instruments. However, the Company’s principal market for these tax credits consists of Missouri state residents who buy these credits and local and regional accounting firms who broker them. As such, the Company employed a discounted cash flow analysis (income approach) to determine the fair value. The fair value measurement is calculated using an internal valuation model with market data including discounted cash flows based upon the terms and conditions of the tax credits. If the underlying project remains in compliance with the various federal and state rules governing the tax credit program, each project will generate about 10 years of tax credits. The inputs to the discounted cash flow calculation include: the amount of tax credits generated each year, the anticipated sale price of the tax credit, the timing of the sale and a discount rate. The discount rate is estimated using the LIBOR swap curve at a point equal to the remaining life in years of credits plus a 205 basis point spread. With the exception of the discount rate, the other inputs to the fair value calculation are observable and readily available. The discount rate is considered a Level 3 input because it is an “unobservable input” and is based on the Company’s assumptions. An increase in the discount rate utilized would generally result in a lower estimated fair value of the tax credits. Alternatively, a decrease in the discount rate utilized would generally result in a higher estimated fair value of the tax credits. Given the significance of this input to the fair value calculation, the state tax credit assets are reported as Level 3 assets.
• | Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. The Company obtains counterparty quotations to value its interest rate swaps and caps. In addition, the Company validates the counterparty quotations with third party valuation sources. Derivatives with negative fair values are included in Other liabilities in the consolidated balance sheets. Derivatives with positive fair value are included in Other assets in the consolidated balance sheets.
Level 3 financial instruments The following table presents the changes in Level 3 financial instruments measured at fair value on a recurring basis as of June 30, 2016 and 2015.
• | Purchases, sales, issuances and settlements. There were no Level 3 purchases during the quarter ended June 30, 2016 or 2015.
• | Transfers in and/or out of Level 3. There were no Level 3 transfers during the quarter ended June 30, 2016 and 2015.
| Securities available for sale, at fair value
Three months ended June 30, |  | Six months ended June 30,
(in thousands) | 2016 |  | 2015 |  | 2016 |  | 2015
Beginning balance | $ | 3,085 |  |  | $ | 3,071 |  |  | $ | 3,077 |  |  | $ | 3,059 |
Total gains: |  |  |  |  |  |  |
Included in other comprehensive income | 8 |  |  | (1 | ) |  | 16 |  |  | 11 |
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |
Purchases | — |  |  | — |  |  | — |  |  | — |
Ending balance | $ | 3,093 |  |  | $ | 3,070 |  |  | $ | 3,093 |  |  | $ | 3,070 |
Change in unrealized gains (losses) relating to assets still held at the reporting date | $ | 8 |  |  | $ | (1 | ) |  | $ | 16 |  |  | $ | 11 |
| State tax credits held for sale
Three months ended June 30, |  | Six months ended June 30,
(in thousands) | 2016 |  | 2015 |  | 2016 |  | 2015
Beginning balance | $ | 4,733 |  |  | $ | 10,286 |  |  | $ | 5,941 |  |  | $ | 11,689 |
Total gains: |  |  |  |  |  |  |
Included in earnings | 41 |  |  | 66 |  |  | 117 |  |  | 194 |
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |
Sales | — |  |  | (387 | ) |  | (1,284 | ) |  | (1,918 | )
Ending balance | $ | 4,774 |  |  | $ | 9,965 |  |  | $ | 4,774 |  |  | $ | 9,965 |
Change in unrealized gains (losses) relating to assets still held at the reporting date | $ | 41 |  |  | $ | (36 | ) |  | $ | (264 | ) |  | $ | (310 | )
From time to time, the Company measures certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or fair value that were recognized at fair value below cost at the end of the period. The following table presents financial instruments and non-financial assets measured at fair value on a non-recurring basis as of June 30, 2016.
| (1) |  | (1) |  | (1) |  | (1) |  |  |  |
(in thousands) | Total Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total gains (losses) for the three months ended June 30, 2016 |  | Total gains (losses) for the six months ended June 30, 2016
Impaired loans | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (163 | ) |  | $ | (236 | )
Other real estate | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1 | )
Total | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (163 | ) |  | $ | (237 | )
(1) The amounts represent only balances measured at fair value during the period and still held as of the reporting date. Impaired loans are reported at the fair value of the underlying collateral for collateral dependent loans. Fair values for impaired loans are obtained from current appraisals by qualified licensed appraisers or independent valuation specialists. Other real estate owned is adjusted to fair value upon foreclosure of the underlying loan. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value less costs to sell. Fair value of other real estate is based upon the current appraised values of the properties as determined by qualified licensed appraisers and the Company’s judgment of other relevant market conditions. Certain state tax credits are reported at cost. Following is a summary of the carrying amounts and fair values of the Company’s financial instruments on the consolidated balance sheets at June 30, 2016 and December 31, 2015.
| June 30, 2016 |  | December 31, 2015
(in thousands) | Carrying Amount |  | Estimated fair value |  | Carrying Amount |  | Estimated fair value
Balance sheet assets |  |  |  |  |  |  |
Cash and due from banks | $ | 50,370 |  |  | $ | 50,370 |  |  | $ | 47,935 |  |  | $ | 47,935 |
Federal funds sold | 317 |  |  | 317 |  |  | 91 |  |  | 91 |
Interest-bearing deposits | 60,609 |  |  | 60,609 |  |  | 47,131 |  |  | 47,131 |
Securities available for sale | 478,514 |  |  | 478,514 |  |  | 451,770 |  |  | 451,770 |
Securities held to maturity | 42,514 |  |  | 43,837 |  |  | 43,714 |  |  | 43,441 |
Other investments, at cost | 17,403 |  |  | 17,403 |  |  | 17,455 |  |  | 17,455 |
Loans held for sale | 9,669 |  |  | 9,669 |  |  | 6,598 |  |  | 6,598 |
Derivative financial instruments | 2,264 |  |  | 2,264 |  |  | 1,155 |  |  | 1,155 |
Portfolio loans, net | 2,896,389 |  |  | 2,902,083 |  |  | 2,781,879 |  |  | 2,782,704 |
State tax credits, held for sale | 44,918 |  |  | 49,961 |  |  | 45,850 |  |  | 49,588 |
Accrued interest receivable | 8,123 |  |  | 8,123 |  |  | 8,399 |  |  | 8,399 |
Balance sheet liabilities |  |  |  |  |  |  |
Deposits | 3,028,236 |  |  | 3,030,334 |  |  | 2,784,591 |  |  | 2,784,654 |
Subordinated debentures | 56,807 |  |  | 35,771 |  |  | 56,807 |  |  | 35,432 |
Federal Home Loan Bank advances | 78,000 |  |  | 78,000 |  |  | 110,000 |  |  | 109,994 |
Other borrowings | 200,362 |  |  | 200,332 |  |  | 270,326 |  |  | 270,286 |
Derivative financial instruments | 2,264 |  |  | 2,264 |  |  | 1,155 |  |  | 1,155 |
Accrued interest payable | 625 |  |  | 625 |  |  | 629 |  |  | 629 |
For information regarding the methods and assumptions used to estimate the fair value of each class of financial instruments for which it is practical to estimate such value, refer to Note 19 – Fair Value Measurements in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. The following table presents the level in the fair value hierarchy for the estimated fair values of only the Company’s financial instruments that are not already presented on the condensed consolidated balance sheets at fair value at June 30, 2016, and December 31, 2015.
| Estimated Fair Value Measurement at Reporting Date Using |  | Balance at June 30, 2016
(in thousands) | Level 1 |  | Level 2 |  | Level 3 |
Financial Assets: |  |  |  |  |  |  |
Securities held to maturity | $ | — |  |  | $ | 43,837 |  |  | $ | — |  |  | $ | 43,837 |
Portfolio loans, net | — |  |  | — |  |  | 2,902,083 |  |  | 2,902,083 |
State tax credits, held for sale | — |  |  | — |  |  | 45,187 |  |  | 45,187 |
Financial Liabilities: |  |  |  |  |  |  |
Deposits | 2,506,206 |  |  | — |  |  | 524,128 |  |  | 3,030,334 |
Subordinated debentures | — |  |  | 35,771 |  |  | — |  |  | 35,771 |
Federal Home Loan Bank advances | — |  |  | 78,000 |  |  | — |  |  | 78,000 |
Other borrowings | — |  |  | 200,332 |  |  | — |  |  | 200,332 |
| Estimated Fair Value Measurement at Reporting Date Using |  | Balance at December 31, 2015
(in thousands) | Level 1 |  | Level 2 |  | Level 3 |
Financial Assets: |  |  |  |  |  |  |
Securities held to maturity | $ | — |  |  | $ | 43,441 |  |  | $ | — |  |  | $ | 43,441 |
Portfolio loans, net | — |  |  | — |  |  | 2,782,704 |  |  | 2,782,704 |
State tax credits, held for sale | — |  |  | — |  |  | 43,647 |  |  | 43,647 |
Financial Liabilities: |  |  |  |  |  |  |
Deposits | 2,428,403 |  |  | — |  |  | 356,251 |  |  | 2,784,654 |
Subordinated debentures | — |  |  | 35,432 |  |  | — |  |  | 35,432 |
Federal Home Loan Bank advances | — |  |  | 109,994 |  |  | — |  |  | 109,994 |
Other borrowings | — |  |  | 270,286 |  |  | — |  |  | 270,286 |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13433-108611 + Details
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