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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2017
Fair Value Disclosures [Abstract] |
Fair Value Measurements | ous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value. The fair value inputs of the instruments are classified and disclosed in one of the following categories pursuant to ASC 820: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. The quoted price shall not be adjusted for any blockage factor (i.e., size of the position relative to trading volume). Level 2 - Pricing inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Fair value is determined through the use of models or other valuation methodologies, including the use of pricing matrices. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 - Pricing inputs are unobservable for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. The inputs into the determination of fair value require significant management judgment or estimation. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company uses the following methods and assumptions in estimating fair value disclosures for financial instruments. Financial assets and liabilities recorded at fair value on a recurring and non-recurring basis are listed as follows: Securities Available for Sale The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair values of the Company’s Level 3 securities available for sale were measured using an income approach valuation technique. The primary inputs and assumptions used in the fair value measurement were derived from the securities’ underlying collateral, which included discount rates, prepayment speeds, payment delays, and an assessment of the risk of default of the underlying collateral, among other factors. Significant increases or decreases in any of the inputs or assumptions would result in a significant increase or decrease in the fair value measurement. Interest Rate Swaps The Company offers interest rate swaps to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2. Impaired Loans The fair values of impaired loans are generally measured for impairment using the practical expedients permitted by FASB ASC 310-10-35 including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent). Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation, less costs to sell of 8.5%. For commercial and industrial and asset backed loans, independent valuations may be comprised of a 20-60% discount for eligible accounts receivable and a 50-70% discount for inventory. These result in a Level 3 classification. OREO OREO is fair valued at the time the loan is foreclosed upon and the asset is transferred to OREO. The value is based primarily on third party appraisals, less costs to sell of 8.5% and result in a Level 3 classification of the inputs for determining fair value. OREO is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted to lower of cost or market accordingly, based on the same factors identified above. Loans held for sale Loans held for sale are carried at the lower of cost or fair value, as determined by outstanding commitments from investors, or based on recent comparable sales (Level 2 inputs), if available, and if not available, are based on discounted cash flows using current market rates applied to the estimated life and credit risk (Level 3 inputs) or may be assessed based upon the fair value of the collateral, which is obtained from recent real estate appraisals (Level 3 inputs). These appraisals may utilize a single valuation approach or a combination of approaches including the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in Level 3 classification of the inputs for determining fair value. Mortgage banking derivatives Mortgage banking derivative instruments consist of interest rate lock commitments and forward sale contracts that trade in liquid markets. The fair value is based on the prices available from third party investors. Due to the observable nature of the inputs used in deriving the fair value, the valuation of mortgage banking derivatives are classified as Level 2. Assets and liabilities measured at fair value on a recurring basis are summarized below:
|  |  | Fair Value Measurements at the End of the Reporting Period Using
| March 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)
Assets: |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |
GSE debt securities | $ | 9,998 |  |  | $ | — |  |  | $ | 9,998 |  |  | $ | — |
GSE collateralized mortgage obligations (residential) | 726,619 |  |  | — |  |  | 726,619 |  |  | — |
GSE mortgage-backed securities (residential) | 732,692 |  |  | — |  |  | 732,692 |  |  | — |
Corporate securities | 4,313 |  |  | — |  |  | 4,313 |  |  | — |
Municipal securities | 97,254 |  |  | — |  |  | 96,126 |  |  | 1,128 |
Mutual funds | 13,070 |  |  | 13,070 |  |  | — |  |  | — |
Interest rate swaps | (1,623 | ) |  | — |  |  | (1,623 | ) |  | — |
Mortgage banking derivatives | 113 |  |  | — |  |  | 113 |  |  | — |
Liabilities: |  |  |  |  |  |  |
Interest rate swaps | (1,623 | ) |  | — |  |  | (1,623 | ) |  | — |
Mortgage banking derivatives | 40 |  |  | — |  |  | 40 |  |  | — |
|  |  | Fair Value Measurements at the End of the Reporting Period Using
| December 31, 2016 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
| (Dollars in thousands)
Assets: |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |
GSE debt securities | $ | 12,008 |  |  | $ | — |  |  | $ | 12,008 |  |  | $ | — |
GSE collateralized mortgage obligations (residential) | 705,667 |  |  | — |  |  | 705,667 |  |  | — |
GSE mortgage-backed securities (residential) | 728,041 |  |  | — |  |  | 728,041 |  |  | — |
Corporate securities | 11,127 |  |  | — |  |  | 11,127 |  |  | — |
Municipal securities | 86,839 |  |  | — |  |  | 85,700 |  |  | 1,139 |
Mutual funds | 13,058 |  |  | 13,058 |  |  | — |  |  | — |
Interest rate swaps | (1,565 | ) |  | — |  |  | (1,565 | ) |  | — |
Mortgage banking derivatives | 147 |  |  | — |  |  | 147 |  |  | — |
Liabilities: |  |  |  |  |  |  |
Interest rate swaps | (1,565 | ) |  | — |  |  | (1,565 | ) |  | — |
Mortgage banking derivatives | 41 |  |  | — |  |  | 41 |  |  | — |
There were no transfers between Level 1, 2 and 3 during the three months ended March 31, 2017 and 2016. There were no gains or losses recognized in earnings during the three months ended March 31, 2017 and 2016. The following table reflects the notional amount and fair value of mortgage banking derivatives for the date indicated:
| As of March 31, 2017 |  | As of December 31, 2016
| Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
| (Dollars in thousands)
Assets: |  |  |  |  |  |  |
Interest rate lock commitments | $ | 6,801 |  |  | $ | 113 |  |  | $ | 11,168 |  |  | $ | 130 |
Forward sale contracts related to mortgage banking | $ | 626 |  |  | $ | — |  |  | $ | 3,223 |  |  | $ | 17 |
Liabilities: |  |  |  |  |  |  |
Interest rate lock commitments | $ | — |  |  | $ | — |  |  | $ | 1,810 |  |  | $ | (3 | )
Forward sale contracts related to mortgage banking | $ | 6,175 |  |  | $ | (40 | ) |  | $ | 9,755 |  |  | $ | (38 | )
The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2017:
|  | Three Months Ended March 31,
|  | 2017 |  | 2016
|  | (Dollars in thousands)
Beginning Balance, January 1 |  | $ | 1,139 |  |  | $ | 1,166 |
Total (losses) or gains included in other comprehensive income |  | (11 | ) |  | 43 |
Ending Balance, March 31 |  | $ | 1,128 |  |  | $ | 1,209 |
The Company measures certain assets at fair value on a non-recurring basis including impaired loans (excluding PCI loans), loans held for sale, and OREO. These fair value adjustments result from impairments recognized during the period, application of the lower of cost or fair value on loans held for sale, the application of fair value less cost to sell on OREO. Assets measured at fair value on a non-recurring basis are summarized below:
|  |  | Fair Value Measurements at the End of the Reporting Period Using
| March 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)
Assets: |  |  |  |  |  |  |
Impaired loans at fair value: |  |  |  |  |  |  |
Real estate loans | $ | 65,125 |  |  | $ | — |  |  | $ | — |  |  | $ | 65,125 |
Commercial business | 9,407 |  |  | — |  |  | — |  |  | 9,407 |
Trade finance | 4,365 |  |  | — |  |  | — |  |  | 4,365 |
Consumer | 97 |  |  | — |  |  | — |  |  | 97 |
Loans held for sale, net | 6,571 |  |  | — |  |  | 6,571 |  |  | — |
OREO | 19,096 |  |  | — |  |  | — |  |  | 19,096 |
|  |  | Fair Value Measurements at the End of the Reporting Period Using
| December 31, 2016 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
| (Dollars in thousands)
Assets: |  |  |  |  |  |  |
Impaired loans at fair value: |  |  |  |  |  |  |
Real estate loans | $ | 58,882 |  |  | $ | — |  |  | $ | — |  |  | $ | 58,882 |
Commercial business | 6,563 |  |  | — |  |  | — |  |  | 6,563 |
Trade Finance | — |  |  | — |  |  | — |  |  | — |
Consumer | 253 |  |  | — |  |  | — |  |  | 253 |
Impaired loans held for sale, net | 3,788 |  |  | — |  |  | 3,788 |  |  | — |
OREO | 21,990 |  |  | — |  |  | — |  |  | 21,990 |
For assets measured at fair value on a non-recurring basis, the total net gains (losses), which include charge offs, recoveries, specific reserves, and recognized gains and losses on sales are summarized below:
| For the Three Months Ended March 31,
| 2017 |  | 2016
| (Dollars in thousands)
Assets: |  |  |
Impaired loans at fair value: |  |  |
Real estate loans | $ | (2,002 | ) |  | $ | 309 |
Commercial business | (974 | ) |  | (2,672 | )
Trade Finance | (712 | ) |  | 1,296 |
Consumer | (266 | ) |  | (62 | )
Impaired loans held for sale, net | 420 |  |  | 15 |
OREO | (595 | ) |  | (577 | )
Fair Value of Financial Instruments Carrying amounts and estimated fair values of financial instruments, not previously presented, at March 31, 2017 and December 31, 2016 were as follows:
| March 31, 2017
| Carrying Amount |  | Estimated Fair Value |  | Fair Value Measurement Using
| (Dollars in thousands)
Financial Assets: |  |  |  |  |
Cash and cash equivalents | $ | 461,068 |  |  | $ | 461,068 |  |  | Level 1
Interest bearing deposits in other financial institutions and other investments | 43,958 |  |  | 43,630 |  |  | Level 2/3
Loans held for sale | 19,141 |  |  | 20,291 |  |  | Level 2
Loans receivable—net | 10,471,008 |  |  | 10,633,834 |  |  | Level 3
FHLB stock | 21,203 |  |  | N/A |  |  | N/A
Accrued interest receivable | 25,683 |  |  | 25,683 |  |  | Level 2/3
Customers’ liabilities on acceptances | 2,771 |  |  | 2,771 |  |  | Level 2
Financial Liabilities: |  |  |  |  |
Noninterest bearing deposits | $ | 2,963,947 |  |  | $ | 2,963,947 |  |  | Level 2
Saving and other interest bearing demand deposits | 3,771,155 |  |  | 3,771,155 |  |  | Level 2
Time deposits | 3,968,675 |  |  | 3,963,545 |  |  | Level 2
FHLB advances | 703,850 |  |  | 698,287 |  |  | Level 2
Subordinated debentures | 100,067 |  |  | 100,067 |  |  | Level 2
Accrued interest payable | 10,592 |  |  | 10,592 |  |  | Level 2
Servicing Assets | 25,941 |  |  | 25,941 |  |  | Level 3
Acceptances outstanding | 2,771 |  |  | 2,771 |  |  | Level 2
| December 31, 2016
| Carrying Amount |  | Estimated Fair Value |  | Fair Value Measurement Using
| (Dollars in thousands)
Financial Assets: |  |  |  |  |
Cash and cash equivalents | $ | 437,334 |  |  | $ | 437,334 |  |  | Level 1
Interest bearing deposits in other financial institutions and other investments | 44,202 |  |  | 43,773 |  |  | Level 2/3
Loans held for sale | 22,785 |  |  | 24,492 |  |  | Level 2
Loans receivable—net | 10,463,989 |  |  | 10,666,642 |  |  | Level 3
FHLB stock | 21,964 |  |  | N/A |  |  | N/A
Accrued interest receivable | 26,880 |  |  | 26,880 |  |  | Level 2/3
Customers’ liabilities on acceptances | 2,899 |  |  | 2,899 |  |  | Level 2
Financial Liabilities: |  |  |  |  |
Noninterest bearing deposits | $ | 2,900,241 |  |  | $ | 2,900,241 |  |  | Level 2
Saving and other interest bearing demand deposits | 3,703,352 |  |  | 3,703,352 |  |  | Level 2
Time deposits | 4,038,442 |  |  | 4,036,664 |  |  | Level 2
FHLB advances | 754,290 |  |  | 749,486 |  |  | Level 2
Subordinated debentures | 99,808 |  |  | 99,808 |  |  | Level 2
Accrued interest payable | 10,863 |  |  | 10,863 |  |  | Level 2
Servicing Assets | 26,457 |  |  | 26,457 |  |  | Level 3
Acceptances outstanding | 2,899 |  |  | 2,899 |  |  | Level 2
The methods and assumptions used to estimate fair value are described as follows: The carrying amount is the estimated fair value for cash and cash equivalents, savings and other interest bearing demand deposits, customer’s and Bank’s liabilities on acceptances, noninterest bearing deposits, short-term debt, secured borrowings and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. The allowance for loan losses is considered to be a reasonable estimate of discount for credit quality concerns. Fair value of SBA loans held for sale is based on market quotes. For fair value of non-SBA loans held for sale, see the measurement method discussed previously. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates, prepayment speeds, and delinquency rate assumptions as inputs. Fair value of time deposits and debt is based on current rates for similar financing. It was not practicable to determine the fair value of FRB stock or FHLB stock due to restrictions placed on their transferability. The fair value of commitments to fund loans represents fees currently charged to enter into similar agreements with similar remaining maturities and is not presented herein. The fair value of these financial instruments is not material to the consolidated financial statements.

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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=66048111&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=73719730&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=73719730&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=73719730&loc=d3e13433-108611 + Details
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