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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2017
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
• | Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
• | Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
• | Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
Fair value on a recurring basis The following table summarizes financial instruments measured at fair value on a recurring basis as of December 31, 2017 and 2016, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.
| December 31, 2017
(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 | $ | — |  |  | $ | 99,224 |  |  | $ | — |  |  | $ | 99,224 |
Obligations of states and political subdivisions | — |  |  | 34,642 |  |  | — |  |  | 34,642 |
Residential mortgage-backed securities | — |  |  | 507,516 |  |  | — |  |  | 507,516 |
Total securities available for sale | — |  |  | 641,382 |  |  | — |  |  | 641,382 |
State tax credits held for sale | — |  |  | — |  |  | 400 |  |  | 400 |
Derivative financial instruments | — |  |  | 3,589 |  |  | — |  |  | 3,589 |
Total assets | $ | — |  |  | $ | 644,971 |  |  | $ | 400 |  |  | $ | 645,371 |
Liabilities |  |  |  |  |  |  |  |  |
Derivative financial instruments | $ | — |  |  | $ | 3,589 |  |  | $ | — |  |  | $ | 3,589 |
Total liabilities | $ | — |  |  | $ | 3,589 |  |  | $ | — |  |  | $ | 3,589 |
| December 31, 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 | $ | — |  |  | $ | 107,660 |  |  | $ | — |  |  | $ | 107,660 |
Obligations of states and political subdivisions | — |  |  | 33,542 |  |  | 3,089 |  |  | 36,631 |
Residential mortgage-backed securities | — |  |  | 316,506 |  |  | — |  |  | 316,506 |
Total securities available for sale | — |  |  | 457,708 |  |  | 3,089 |  |  | 460,797 |
State tax credits held for sale | — |  |  | — |  |  | 3,585 |  |  | 3,585 |
Derivative financial instruments | — |  |  | 4,016 |  |  | — |  |  | 4,016 |
Total assets | $ | — |  |  | $ | 461,724 |  |  | $ | 6,674 |  |  | $ | 468,398 |
Liabilities |  |  |  |  |  |  |
Derivative financial instruments | $ | — |  |  | $ | 4,016 |  |  | $ | — |  |  | $ | 4,016 |
Total liabilities | $ | — |  |  | $ | 4,016 |  |  | $ | — |  |  | $ | 4,016 |
• | 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 December 31, 2017, there were no Level 3 Auction Rate Securities. Auction Rate Securities at December 31, 2017 were valued using a Level 2 pricing source similar to our other securities available for sale.
• | State tax credits held for sale. At December 31, 2017, of the $43.5 million of state tax credits held for sale on the consolidated balance sheet, approximately $0.4 million were carried at fair value. The remaining $43.1 million of state tax credits were accounted for at cost. The Company elected not to account for the state tax credits purchased since 2010 at fair value in order to limit the volatility of the fair value changes in our consolidated statements of operations.
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 December 31, 2017 and 2016.
• | Purchases, sales, issuances and settlements. There were no Level 3 purchases during the years ended December 31, 2017 and 2016.
• | Transfers in and/or out of Level 3. There was $3.1 million in Level 3 transfers to Level 2 for the year ending December 31, 2017 because more observable market data became available for the Auction Rate Securities. The Company's policy is to recognize transfers into or out of a level as of the end of a reporting period. As a result, the transfers occurred on June 30, 2017. There were no transfers in and/or out of Level 3 for the year ending 2016.
| Securities available for sale, at fair value
Years ended December 31,
(in thousands) | 2017 |  | 2016
Beginning balance | $ | 3,089 |  |  | $ | 3,077 |
Total gains: |  |  |
Included in other comprehensive income | 4 |  |  | 12 |
Transfer in and/or out of Level 3 | (3,093 | ) |  | — |
Ending balance | $ | — |  |  | $ | 3,089 |
Change in unrealized gains relating to assets still held at the reporting date | $ | — |  |  | $ | 12 |
| State tax credits held for sale, at fair value
Years ended December 31,
(in thousands) | 2017 |  | 2016
Beginning balance | $ | 3,585 |  |  | $ | 5,941 |
Total gains: |  |  |
Included in earnings | 101 |  |  | 177 |
Purchases, sales, issuances and settlements: |  |  |
Sales | (3,286 | ) |  | (2,533 | )
Ending balance | $ | 400 |  |  | $ | 3,585 |
Change in unrealized losses relating to assets still held at the reporting date | $ | (885 | ) |  | $ | (575 | )
Fair value on a non-recurring basis Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).
• | Impaired loans. Impaired loans are included as Portfolio loans on the Company's consolidated balance sheets with amounts specifically reserved for credit impairment in the Allowance for loan losses. On a quarterly basis, fair value adjustments are recorded on impaired loans to account for (1) partial write-downs that are based on the current appraised or market-quoted value of the underlying collateral or (2) the full charge-off of the loan carrying value. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. In addition, the Company may adjust the valuations based on other relevant market conditions or information. Accordingly, fair value estimates, including those obtained from real estate brokers or other third-party consultants, for collateral-dependent impaired loans are classified in Level 3 of the valuation hierarchy.
• | Other Real Estate. These assets are reported at the lower of the loan carrying amount at foreclosure or fair value. Fair value is based on third party appraisals of each property and the Company's judgment of other relevant market conditions. These are considered Level 3 inputs.
The following table presents financial instruments and non-financial assets measured at fair value on a non-recurring basis as of December 31, 2017 and 2016.
| December 31, 2017
| (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 losses for the year ended December 31, 2017
Impaired loans | $ | 3,200 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,200 |  | $ | 6,599 |
Other real estate | — |  |  | — |  |  | — |  |  | — |  | — |
Total | $ | 3,200 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,200 |  | $ | 6,599 |
| December 31, 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 losses for the year ended December 31, 2016
Impaired loans | $ | 175 |  |  | $ | — |  |  | $ | — |  |  | $ | 175 |  | $ | 4,335 |
Other real estate | — |  |  | — |  |  | — |  |  | — |  | 1 |
Total | $ | 175 |  |  | $ | — |  |  | $ | — |  |  | $ | 175 |  | $ | 4,336 |
(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. 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. Carrying amount and fair value at December 31, 2017 and 2016 Following is a summary of the carrying amounts and fair values of the Company’s financial instruments on the consolidated balance sheets at December 31, 2017 and 2016.
| December 31, 2017 |  | December 31, 2016
(in thousands) | Carrying Amount |  | Estimated fair value |  | Carrying Amount |  | Estimated fair value
Balance sheet assets |  |  |  |  |  |  |
Cash and due from banks | $ | 91,084 |  |  | $ | 91,084 |  |  | $ | 54,288 |  |  | $ | 54,288 |
Federal funds sold | 1,223 |  |  | 1,223 |  |  | 446 |  |  | 446 |
Interest-bearing deposits | 63,661 |  |  | 63,661 |  |  | 145,048 |  |  | 145,048 |
Securities available for sale | 641,382 |  |  | 641,382 |  |  | 460,797 |  |  | 460,797 |
Securities held to maturity | 73,749 |  |  | 73,458 |  |  | 80,463 |  |  | 79,639 |
Other investments, at cost | 26,661 |  |  | 26,661 |  |  | 14,840 |  |  | 14,840 |
Loans held for sale | 3,155 |  |  | 3,155 |  |  | 9,562 |  |  | 9,562 |
Derivative financial instruments | 3,589 |  |  | 3,589 |  |  | 4,016 |  |  | 4,016 |
Portfolio loans, net | 4,054,473 |  |  | 4,096,741 |  |  | 3,114,752 |  |  | 3,125,701 |
State tax credits, held for sale | 43,468 |  |  | 44,271 |  |  | 38,071 |  |  | 41,264 |
Accrued interest receivable | 14,069 |  |  | 14,069 |  |  | 11,117 |  |  | 11,117 |
Balance sheet liabilities |  |  |  |  |  |  |
Deposits | 4,156,414 |  |  | 4,153,323 |  |  | 3,233,361 |  |  | 3,232,414 |
Subordinated debentures and notes | 118,105 |  |  | 105,031 |  |  | 105,540 |  |  | 86,052 |
Federal Home Loan Bank advances | 172,743 |  |  | 172,893 |  |  | — |  |  | — |
Other borrowings | 253,674 |  |  | 253,530 |  |  | 276,980 |  |  | 276,905 |
Derivative financial instruments | 3,589 |  |  | 3,589 |  |  | 4,016 |  |  | 4,016 |
Accrued interest payable | 1,730 |  |  | 1,730 |  |  | 1,105 |  |  | 1,105 |
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 on the consolidated balance sheets at fair value at December 31, 2017, and December 31, 2016.
| Estimated Fair Value Measurement at Reporting Date Using |  | Balance at December 31, 2017
(in thousands) | Level 1 |  | Level 2 |  | Level 3 |
Financial Assets: |  |  |  |  |  |  |
Securities held to maturity | $ | — |  |  | $ | 73,458 |  |  | $ | — |  |  | $ | 73,458 |
Portfolio loans, net | — |  |  | — |  |  | 4,096,741 |  |  | 4,096,741 |
State tax credits, held for sale | — |  |  | — |  |  | 43,871 |  |  | 43,871 |
Financial Liabilities: |  |  |  |  |  |  |
Deposits | 3,577,641 |  |  | — |  |  | 575,682 |  |  | 4,153,323 |
Subordinated debentures and notes | — |  |  | 105,031 |  |  | — |  |  | 105,031 |
Federal Home Loan Bank advances | — |  |  | 172,893 |  |  | — |  |  | 172,893 |
Other borrowings | — |  |  | 253,530 |  |  | — |  |  | 253,530 |
| Estimated Fair Value Measurement at Reporting Date Using |  | Balance at December 31, 2016
(in thousands) | Level 1 |  | Level 2 |  | Level 3 |
Financial Assets: |  |  |  |  |  |  |
Securities held to maturity | $ | — |  |  | $ | 79,639 |  |  | $ | — |  |  | $ | 79,639 |
Portfolio loans, net | — |  |  | — |  |  | 3,125,701 |  |  | 3,125,701 |
State tax credits, held for sale | — |  |  | — |  |  | 37,679 |  |  | 37,679 |
Financial Liabilities: |  |  |  |  |  |  |
Deposits | 2,760,202 |  |  | — |  |  | 472,212 |  |  | 3,232,414 |
Subordinated debentures and notes | — |  |  | 86,052 |  |  | — |  |  | 86,052 |
Federal Home Loan Bank advances | — |  |  | — |  |  | — |  |  | — |
Other borrowings | — |  |  | 276,905 |  |  | — |  |  | 276,905 |
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate such value: Cash, Federal funds sold, and other short-term instruments For cash and due from banks, federal funds purchased, interest-bearing deposits, and accrued interest receivable (payable), the carrying amount is a reasonable estimate of fair value, as such instruments reprice in a short time period (Level 1). Securities available for sale and held to maturity The Company obtains fair value measurements for debt instruments from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions (Level 2). Other investments Other investments, which primarily consists of membership stock in the FHLB, is reported at cost, which approximates fair value (Level 2). Loans held for sale These loans consist of mortgages that are sold on the secondary market generally within three months of origination. They are reported at cost, which approximates fair value (Level 2). Portfolio loans, net The fair value of adjustable-rate loans approximates cost. The fair value of fixed-rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers for the same remaining maturities. The fair value of the acquired loans are based on the present value of expected future cash flows (Level 3). The method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC Topic 820. State tax credits held for sale The fair value of state tax credits held for sale is calculated using an internal valuation model with unobservable market data as discussed in further detail above (Level 3). Derivative financial instruments The fair value of derivative financial instruments is based on quoted market prices by the counterparty and verified by the Company using public pricing information (Level 2). Deposits The fair value of demand deposits, interest-bearing transaction accounts, money market accounts and savings deposits is the amount payable on demand at the reporting date (Level 1). The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities (Level 3). Subordinated debentures and notes Fair value of subordinated debentures and notes is based on discounting the future cash flows using rates currently offered for financial instruments of similar remaining maturities (Level 2). Federal Home Loan Bank advances The fair value of the FHLB advances is based on the discounted value of contractual cash flows. The discount rate is estimated using current rates on borrowed money with similar remaining maturities (Level 2). Other borrowed funds Other borrowed funds include customer repurchase agreements, federal funds purchased, notes payable, and secured borrowings related to loan participations. The fair value of federal funds purchased, customer repurchase agreements and notes payable are assumed to be equal to their carrying amount since they have an adjustable interest rate (Level 2). Commitments to extend credit and letters of credit The fair value of commitments to extend credit and letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the likelihood of the counterparties drawing on such financial instruments, and the present creditworthiness of such counterparties (Level 2). The Company believes such commitments have been made on terms which are competitive in the markets in which it operates; however, no premium or discount is offered thereon and accordingly, the Company has not assigned a value to such instruments for purposes of this disclosure. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore, cannot be determined with precision. Such estimates include the valuation of loans, goodwill, intangible assets, and other long-lived assets, along with assumptions used in the calculation of income taxes, among others. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. Decreasing real estate values, illiquid credit markets, volatile equity markets, and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statement in future periods. In addition, these estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Fair value estimates are based on existing on-balance and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates.

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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 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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