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Fair Value Measures and Disclosures | 3 Months Ended
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Sep. 30, 2011
Fair Value Measures and Disclosures |
Fair Value, Measurement Inputs, Disclosure [Table Text Block] | NOTE 13: FAIR VALUE MEASUREMENT ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: · Quoted prices in active markets for identical assets or liabilities (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An active market for the asset is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. · Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means. · Significant unobservable inputs (Level 3): Inputs that reflect assumptions of a source independent of the reporting entity or the reporting entity's own assumptions that are supported by little or no market activity or observable inputs. Financial instruments are broken down as follows by recurring or nonrecurring measurement status. Recurring assets are initially measured at fair value and are required to be remeasured at fair value in the financial statements at each reporting date. Assets measured on a nonrecurring basis are assets that, due to an event or circumstance, were required to be remeasured at fair value after initial recognition in the financial statements at some time during the reporting period. The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a recurring basis and recognized in the accompanying balance sheets at September 30, 2011, as well as the general classification of such assets pursuant to the valuation hierarchy. Securities Available for Sale. Investment securities available for sale are recorded at fair value on a recurring basis. The fair values used by the Company are obtained from an independent pricing service, which represent either quoted market prices for the identical asset or fair values determined by pricing models, or other model-based valuation techniques, that consider observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems. Recurring Level 1 securities include exchange traded equity securities. Recurring Level 2 securities available for sale include U.S. government agency securities, mortgage-backed securities, collateralized mortgage obligations, Small Business Administration (SBA) loan pools, state and municipal bonds, corporate bonds and equity securities. Inputs used for valuing Level 2 securities include observable data that may include dealer quotes, benchmark yields, market spreads, live trading levels and market consensus prepayment speeds, among other things. Additional inputs include indicative values derived from the independent pricing service’s proprietary computerized models. No securities available for sale were included in the category of Recurring Level 3 securities at or for the three and nine months ended September 30, 2011. Mortgage Servicing Rights. Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.
|  |  | Fair value measurements using
|  |  | Quoted prices |  |  |  |
|  |  | in active |  |  |  |
|  |  | markets |  | Other |  | Significant
|  |  | for identical |  | observable |  | unobservable
|  |  | assets |  | inputs |  | inputs
| Fair value |  | (Level 1) |  | (Level 2) |  | (Level 3)
| (In Thousands)
September 30, 2011 |  |  |  |  |  |  |
U.S. government agencies | $24,063 |  | $— |  | $24,063 |  | $—
Collateralized mortgage obligations | 1,392 |  | — |  | 1,392 |  | —
Mortgage-backed securities | 606,312 |  | — |  | 606,312 |  | —
Small Business Administration loan pools | 57,897 |  | — |  | 57,897 |  | —
Corporate bonds | 421 |  | — |  | 421 |  | —
States and political subdivisions | 103,572 |  | — |  | 103,572 |  | —
Equity securities | 1,747 |  | 300 |  | 1,447 |  | —
Mortgage servicing rights | 367 |  | — |  | — |  | 367
December 31, 2010 |  |  |  |  |  |  |
U.S. government agencies | $3,980 |  | $— |  | $3,980 |  | $—
Collateralized mortgage obligations | 7,680 |  | — |  | 7,680 |  | —
Mortgage-backed securities | 599,211 |  | — |  | 599,211 |  | —
Small Business Administration loan pools | 60,914 |  | — |  | 60,914 |  | —
Corporate bonds | 21 |  | — |  | 21 |  | —
States and political subdivisions | 95,617 |  | — |  | 95,617 |  | —
Equity securities | 2,123 |  | 630 |  | 1,493 |  | —
Mortgage servicing rights | 637 |  | — |  | — |  | 637
The Company considers transfers between the levels of the hierarchy to be recognized at the end of related reporting periods. From December 31, 2010 to September 30, 2011, no assets for which fair value is measured on a recurring basis transferred between any levels of the hierarchy. The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs.
| Mortgage Servicing Rights
| 2011 |  | 2010
| (In Thousands)
Balance, July 1 | $450 |  | $915
Additions | 4 |  | 4
Amortization | (87) |  | (144)
Balance, September 30 | $367 |  | $775
| Mortgage Servicing Rights
| 2011 |  | 2010
| (In Thousands)
Balance, January 1 | $637 |  | $1,132
Additions | 16 |  | 41
Amortization | (286) |  | (398)
Balance, September 30 | $367 |  | $775
The following is a description of valuation methodologies used for assets measured at fair value on a nonrecurring basis at September 30, 2011, as well as the general classification of such assets pursuant to the valuation hierarchy. Impaired Loans. A loan is considered to be impaired when it is probable that all of the principal and interest due may not be collected according to its contractual terms. Generally, when a loan is considered impaired, the amount of reserve required under FASB ASC 310, Receivables, is measured based on the fair value of the underlying collateral. The Company makes such measurements on all material loans deemed impaired using the fair value of the collateral for collateral dependent loans. The fair value of collateral used by the Company is determined by obtaining an observable market price or by obtaining an appraised value from an independent, licensed or certified appraiser, using observable market data. This data includes information such as selling price of similar properties and capitalization rates of similar properties sold within the market, expected future cash flows or earnings of the subject property based on current market expectations, and other relevant factors. All appraised values are adjusted for market-related trends based on the Company’s experience in sales and other appraisals of similar property types as well as estimated selling costs. Each quarter management reviews all collateral dependent impaired loans on a loan-by-loan basis to determine whether updated appraisals are necessary based on loan performance, collateral type and guarantor support. At times, the Company measures the fair value of collateral dependent impaired loans using appraisals with dates prior to one year from the date of review. These appraisals are discounted by applying current, observable market data about similar property types such as sales contracts, approved foreclosure bids, other appraisals, sales or collateral assessments based on current market activity until updated appraisals are obtained. Depending on the length of time since an appraisal was performed and the data provided through our reviews, these appraisals are typically discounted 10-40%. The policy described above is the same for all types of collateral dependent impaired loans. The Company records impaired loans as Nonrecurring Level 3. If a loan’s fair value as estimated by the Company is less than its carrying value, the Company either records a charge-off of the portion of the loan that exceeds the fair value or establishes a reserve within the allowance for loan losses specific to the loan. Loans for which such charge-offs or reserves were recorded during the nine months ended September 30, 2011 are shown in the table below (net of reserves). Foreclosed Assets Held for Sale. Foreclosed assets held for sale are initially recorded at fair value less estimated cost to sell at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated cost to sell. Foreclosed assets held for sale are classified within Level 3 of the fair value hierarchy. The foreclosed assets represented in the table below were re-measured during the nine months ended September 30, 2011, subsequent to their initial transfer to foreclosed assets. The following tables present the fair value measurements of assets measured at fair value during the periods presented on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2011 and December 31, 2010:
|  |  | Fair Value Measurements Using
|  |  | Quoted prices |  |  |  |
|  |  | in active |  |  |  |
|  |  | markets |  | Other |  | Significant
|  |  | for identical |  | observable |  | unobservable
|  |  | assets |  | inputs |  | inputs
| Fair value |  | (Level 1) |  | (Level 2) |  | (Level 3)
| (In Thousands)
September 30, 2011 |  |  |  |  |  |  |
Impaired loans | $45,857 |  | $— |  | $— |  | $45,857
Foreclosed assets held for sale | 486 |  | — |  | — |  | 486
December 31, 2010 |  |  |  |  |  |  |
Impaired loans | $80,407 |  | $— |  | $— |  | $80,407
Foreclosed assets held for sale | 10,360 |  | — |  | — |  | 10,360
The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheet at amounts other than fair value: Cash and Cash Equivalents and Federal Home Loan Bank Stock. The carrying amount approximates fair value. Loans and Interest Receivable. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics are aggregated for purposes of the calculations. The carrying amount of accrued interest receivable approximates its fair value. Deposits and Accrued Interest Payable. The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date, i.e., their carrying amounts. The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value. Federal Home Loan Bank Advances. Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing advances. Short-Term Borrowings. The carrying amount approximates fair value. Subordinated Debentures Issued to Capital Trusts. The subordinated debentures have floating rates that reset quarterly. The Company can redeem these instruments at par on a quarterly basis beginning in February (with respect to $25.8 million of the subordinated debentures) and October (with respect to $5.2 million of the subordinated debentures) 2012, respectively. The carrying amount of these debentures approximates their fair value. Structured Repurchase Agreements. Structured repurchase agreements are collateralized borrowings from counterparties. In addition to the principal amount owed, the counterparty also determines an amount that would be owed by either party in the event the agreement is terminated prior to maturity by the Company. The fair values of the structured repurchase agreements are estimated based on the amount the Company would be required to pay to terminate the agreement at the balance sheet date. Commitments to Originate Loans, Letters of Credit and Lines of Credit. The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. The following table presents estimated fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which method involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.
| September 30, 2011 |  | December 31, 2010
| Carrying |  | Fair |  | Carrying |  | Fair
| Amount |  | Value |  | Amount |  | Value
| (In Thousands)
Financial assets |  |  |  |  |  |  |
Cash and cash equivalents | $345,300 |  | $345,300 |  | $429,971 |  | $429,971
Available-for-sale securities | 795,404 |  | 795,404 |  | 769,546 |  | 769,546
Held-to-maturity securities | 1,865 |  | 2,142 |  | 1,125 |  | 1,300
Mortgage loans held for sale | 19,969 |  | 19,969 |  | 22,499 |  | 22,499
Loans, net of allowance for loan losses | 1,958,872 |  | 1,959,915 |  | 1,876,887 |  | 1,878,345
Accrued interest receivable | 11,582 |  | 11,582 |  | 12,628 |  | 12,628
Investment in FHLB stock | 11,236 |  | 11,236 |  | 11,572 |  | 11,572
Mortgage servicing rights | 367 |  | 367 |  | 637 |  | 637
| September 30, 2011 |  | December 31, 2010
| Carrying |  | Fair |  | Carrying |  | Fair
| Amount |  | Value |  | Amount |  | Value
| (In Thousands)
Financial liabilities |  |  |  |  |  |  |
Deposits | $2,618,819 |  | $2,622,410 |  | $2,595,893 |  | $2,603,440
FHLB advances | 151,512 |  | 154,374 |  | 153,525 |  | 158,052
Short-term borrowings | 246,383 |  | 246,383 |  | 257,958 |  | 257,958
Structured repurchase agreements | 53,103 |  | 60,886 |  | 53,142 |  | 61,007
Subordinated debentures | 30,929 |  | 30,929 |  | 30,929 |  | 30,929
Accrued interest payable | 2,517 |  | 2,517 |  | 3,765 |  | 3,765
Unrecognized financial instruments |  |  |  |  |  |  |
(net of contractual value) |  |  |  |  |  |  |
Commitments to originate loans | — |  | — |  | — |  | —
Letters of credit | 63 |  | 63 |  | 50 |  | 50
Lines of credit | — |  | — |  | — |  | —
The following disclosure relates to financial assets for which it is not practicable for the Company to estimate the fair value at September 30, 2011. FDIC Indemnification Asset: As part of the 2009 purchase and assumption agreements for the TeamBank and Vantus Bank FDIC-assisted transactions, the Bank and the FDIC entered into loss sharing agreements. These agreements cover realized losses on loans and foreclosed real estate. Under the first agreement (TeamBank), the FDIC will reimburse the Bank for 80% of the first $115 million in realized losses. The FDIC will reimburse the Bank 95% on realized losses that exceed $115 million. This agreement extends for ten years for 1-4 family real estate loans and for five years for other loans. This loss sharing asset is measured separately from the loan portfolio because it is not contractually embedded in the loans and is not transferable with the loans or foreclosed assets should the Bank choose to dispose of them. Fair value at the acquisition date (March 20, 2009) was estimated using projected cash flows available for loss sharing based on the credit adjustments estimated for each loan pool and the loss sharing percentages. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC. This loss sharing asset is also separately measured from the related foreclosed real estate. At September 30, 2011, the carrying value of the FDIC indemnification asset was $38.2 million, with $9.9 million of this amount scheduled to be amortized against non-interest income over future periods as a result of the changes in expected losses recognized in the quarter ended September 30, 2011 and in previous periods. Although this asset is a contractual receivable from the FDIC, there is no effective interest rate. The Bank will collect this asset over the next several years. The amount ultimately collected will depend on the timing and amount of collections and charge-offs on the acquired assets covered by the loss sharing agreement. While this asset was recorded at its estimated fair value at March 20, 2009, it is not practicable to complete a fair value analysis of the entire portfolio of loans and foreclosed assets covered by the loss sharing agreement on a quarterly or annual basis in order to estimate the fair value of the FDIC indemnification asset. Under the second agreement (Vantus Bank), the FDIC will reimburse the Bank for 80% of the first $102 million in realized losses. The FDIC will reimburse the Bank 95% on realized losses that exceed $102 million. This agreement extends for ten years for 1-4 family real estate loans and for five years for other loans. This loss sharing asset is measured separately from the loan portfolio because it is not contractually embedded in the loans and is not transferable with the loans or foreclosed assets should the Bank choose to dispose of them. Fair value at the acquisition date (September 4, 2009) was estimated using projected cash flows available for loss sharing based on the credit adjustments estimated for each loan pool and the loss sharing percentages. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC. This loss sharing asset is also separately measured from the related foreclosed real estate. At September 30, 2011, the carrying value of the FDIC indemnification asset was $24.3 million, with $11.0 million of this amount scheduled to be amortized against non-interest income over future periods as a result of the changes in expected losses recognized in the quarter ended September 30, 2011 and in previous periods. Although this asset is a contractual receivable from the FDIC, there is no effective interest rate. The Bank will collect this asset over the next several years. The amount ultimately collected will depend on the timing and amount of collections and charge-offs on the acquired assets covered by the loss sharing agreement. While this asset was recorded at its estimated fair value at September 4, 2009, it is not practicable to complete a fair value analysis of the entire portfolio of loans and foreclosed assets covered by the loss sharing agreement on a quarterly or annual basis in order to estimate the fair value of the FDIC indemnification asset.

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- Definition Tabular disclosure of the fair value measurement of assets and liabilities which includes [financial] instruments measured at fair value that are classified in stockholders' equity. Such assets and liabilities may be measured on a recurring or nonrecurring basis. The disclosures which may be required or desired include: (1) for assets and liabilities measured on a recurring basis, disclosure may include: (a) the fair value measurements at the reporting date; (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3); (c) for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (ii) purchases, sales, issuances, and settlements (net); (iii) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs); (d) the amount of the total gains or losses for the period in subparagraph (c) (i) above included in earnings (or changes in net assets) that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income (or activities); (e) the valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques, if any, during the period and (2) for assets and liabilities that are measured at fair value on a nonrecurring basis (for example, impaired assets) disclosure may include, in addition to (a) above: (a) the reasons for the fair value measurements recorded; (b) the same as (b) above; (c) for fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs; and (d) the valuation technique(s) used to measure fair value and a discussion of changes, if any, in the valuation technique(s) used to measure similar assets and/or liabilities in prior periods. Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19279-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 33 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 10 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 6: 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=6925170&loc=d3e19207-110258 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 6 -Footnote 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19190-110258 + Details
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