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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2019
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS The fair value of an asset or liability is the exchange 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. 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, 2019 and 2018, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.
| December 31, 2019
($ 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 | $ | — |  |  | $ | 10,046 |  |  | $ | — |  |  | $ | 10,046 |
Obligations of states and political subdivisions | — |  |  | 213,024 |  |  | — |  |  | 213,024 |
Residential mortgage-backed securities | — |  |  | 902,021 |  |  | — |  |  | 902,021 |
U.S. Treasury Bills | — |  |  | 10,226 |  |  | — |  |  | 10,226 |
Total securities available-for-sale | — |  |  | 1,135,317 |  |  | — |  |  | 1,135,317 |
Derivative financial instruments | — |  |  | 11,055 |  |  | — |  |  | 11,055 |
Total assets | $ | — |  |  | $ | 1,146,372 |  |  | $ | — |  |  | $ | 1,146,372 |
Liabilities |  |  |  |  |  |  |  |  |
Derivative financial instruments | $ | — |  |  | $ | 14,747 |  |  | $ | — |  |  | $ | 14,747 |
Total liabilities | $ | — |  |  | $ | 14,747 |  |  | $ | — |  |  | $ | 14,747 |
| December 31, 2018
($ 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 | $ | — |  |  | $ | 98,498 |  |  | $ | — |  |  | $ | 98,498 |
Obligations of states and political subdivisions | — |  |  | 26,810 |  |  | — |  |  | 26,810 |
Residential mortgage-backed securities | — |  |  | 586,136 |  |  | — |  |  | 586,136 |
U.S. Treasury Bills | — |  |  | 9,925 |  |  | — |  |  | 9,925 |
Total securities available-for-sale | — |  |  | 721,369 |  |  | — |  |  | 721,369 |
Other investments | 121 |  |  | — |  |  | — |  |  | 121 |
Derivative financial instruments | — |  |  | 3,023 |  |  | — |  |  | 3,023 |
Total assets | $ | 121 |  |  | $ | 724,392 |  |  | $ | — |  |  | $ | 724,513 |
Liabilities |  |  |  |  |  |  |
Derivative financial instruments | $ | — |  |  | $ | 3,023 |  |  | $ | — |  |  | $ | 3,023 |
Total liabilities | $ | — |  |  | $ | 3,023 |  |  | $ | — |  |  | $ | 3,023 |
• | 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. Changes in fair value are recognized through accumulated other comprehensive income.
• | 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. Changes in the fair value of client-related derivative instruments are recognized through net income. For the years ended December 31, 2019 and 2018, the gains and losses offset each other due to the Company’s hedging of the client swaps with other bank counterparties.
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, 2019 and 2018.
| December 31, 2019
| (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, 2019
Impaired loans | $ | 2,506 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,506 |  | $ | 2,687 |
Other real estate | 4,944 |  |  | — |  |  | — |  |  | 4,944 |  | — |
Total | $ | 7,450 |  |  | $ | — |  |  | $ | — |  |  | $ | 7,450 |  | $ | 2,687 |
| December 31, 2018
| (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, 2018
Impaired loans | $ | 1,958 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,958 |  | $ | 815 |
Total | $ | 1,958 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,958 |  | $ | 815 |
(1) The amounts represent 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. Carrying amount and fair value at December 31, 2019 and 2018 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, 2019 and 2018. This summary excludes certain financial assets and liabilities for which carrying value approximates fair value and financial instruments that are recorded at fair value on a recurring basis disclosed above. Financial instruments for which carrying values approximate fair value include cash and due from banks, federal funds sold, interest bearing deposits, accrued interest receivable/payable, demand, savings and money market deposits.
| December 31, 2019 |  | December 31, 2018
($ in thousands) | Carrying Amount |  | Estimated fair value |  | Level |  | Carrying Amount |  | Estimated fair value |  | Level
Balance sheet assets |  |  |  |  |  |  |  |  |  |  |
Securities held-to-maturity | $ | 181,166 |  |  | $ | 181,939 |  |  | Level 2 |  | $ | 65,679 |  |  | $ | 63,934 |  |  | Level 2
Other investments | 38,044 |  |  | 38,044 |  |  | Level 2 |  | 26,654 |  |  | 26,654 |  |  | Level 2
Loans held for sale | 5,570 |  |  | 5,570 |  |  | Level 2 |  | 392 |  |  | 392 |  |  | Level 2
Loans, net | 5,271,049 |  |  | 5,205,651 |  |  | Level 3 |  | 4,306,525 |  |  | 4,253,239 |  |  | Level 3
State tax credits, held for sale | 36,802 |  |  | 39,046 |  |  | Level 3 |  | 37,587 |  |  | 39,169 |  |  | Level 3
Balance sheet liabilities |  |  |  |  |  |  |  |  |  |  |
Certificates of deposit | $ | 826,447 |  |  | $ | 825,203 |  |  | Level 3 |  | $ | 684,429 |  |  | $ | 679,491 |  |  | Level 3
Subordinated debentures and notes | 141,258 |  |  | 130,985 |  |  | Level 2 |  | 118,156 |  |  | 106,316 |  |  | Level 2
FHLB advances | 222,406 |  |  | 221,402 |  |  | Level 2 |  | 70,000 |  |  | 70,000 |  |  | Level 2
Other borrowings | 265,172 |  |  | 265,172 |  |  | Level 2 |  | 223,450 |  |  | 223,260 |  |  | Level 2
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/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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