XML 27 R18.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Fair Value | 6 Months Ended
--- | ---
Jun. 30, 2013
Fair Value |
Note 10. | Fair Value
Financial Instruments Measured at Fair Value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal, or most advantageous, market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. 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 and provide a reasonable basis for fair value determination, such as interest rates, yield curves, volatilities, prepayment speeds, default rates, and credit risks, or inputs that are derived principally from observable market data.
Level 3 Inputs – |  | Unobservable inputs for determining the fair values of assets or liabilities for which there is little, if any, market activity at the measurement date, using reasonable inputs and assumptions based on the best information at the time, to the extent that inputs are available without undue cost and effort. These inputs and assumptions may include model-derived inputs that are not corroborated by observable market data and an entity’s own assumptions.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s assets and liabilities carried at fair value. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon third party models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Securities Available-for-Sale. Securities classified as available-for-sale are reported at fair value utilizing Level 1, Level 2, and Level 3 inputs. Securities are classified as Level 1 within the valuation hierarchy when quoted prices are available in an active market. This includes securities whose value is based on quoted market prices in active markets for identical assets. The Company also uses Level 1 inputs for the valuation of equity securities traded in active markets. Securities are classified as Level 2 within the valuation hierarchy when the Company obtains fair value measurements 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, among other things. Level 2 inputs are used to value U.S. government agency securities, single issue and pooled trust preferred securities, corporate FDIC insured securities, MBS, and certain equity securities that are not actively traded. Securities are classified as Level 3 within the valuation hierarchy in certain cases when there is limited activity or less transparency to the valuation inputs. In the absence of observable or corroborated market data, internally developed estimates that incorporate market-based assumptions are used when such information is available. Fair value models may be required when trading activity has declined significantly or does not exist, prices are not current or pricing variations are significant. The Company’s fair value from third party models utilizes modeling software that uses market participant data and knowledge of the structures of each individual security to develop cash flows specific to each security. The fair values of the securities are determined by using the cash flows developed by the fair value model and applying appropriate market observable discount rates. The discount rates are developed by determining credit spreads above a benchmark rate, such as LIBOR, and adding premiums for illiquidity developed based on a comparison of initial issuance spread to LIBOR versus a financial sector curve for recently issued debt to LIBOR. Specific securities that have increased uncertainty regarding the receipt of cash flows are discounted at higher rates due to the addition of a deal specific credit premium based on assumptions about the performance of the underlying collateral. Finally, internal fair value model pricing and external pricing observations are combined by assigning weights to each pricing observation. Pricing is reviewed for reasonableness based on the direction of the specific markets and the general economic indicators. Other Assets and Associated Liabilities. Securities held for trading purposes are recorded at fair value and included in “other assets” on the consolidated balance sheets. Securities held for trading purposes include assets related to employee deferred compensation plans. The assets associated with these plans are generally invested in equities and classified as Level 1. Deferred compensation liabilities, also classified as Level 1, are carried at the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets. Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. The Company obtains dealer quotations based on observable data to value its derivatives. Impaired Loans. Certain impaired loans are reported on a nonrecurring basis at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on appraisals adjusted for customized discounting criteria. The Company maintains an active and robust problem credit identification system. When a credit is identified as exhibiting characteristics of weakening, the Company will assess the credit for potential impairment. Examples of weakening include delinquency and deterioration of the borrower’s capacity to repay as determined by the Company’s regular credit review function. As part of the impairment review, the Company will evaluate the current collateral value. It is the Company’s standard practice to obtain updated third party collateral valuations to assist management in measuring potential impairment of a credit and the amount of the impairment to be recorded. Internal collateral valuations are generally performed within two to four weeks of the original identification of potential impairment and receipt of the third party valuation. The internal valuation is performed by comparing the original appraisal to current local real estate market conditions and experience and considers liquidation costs. The result of the internal valuation is compared with the outstanding loan balance, and, if warranted, a specific impairment reserve will be established at the completion of the internal evaluation. A third party evaluation is typically received within thirty to forty-five days of the completion of the internal evaluation. Once received, the third party evaluation is reviewed for reasonableness. Once the evaluation is reviewed and accepted, discounts to fair market value are applied based upon such factors as the bank’s historical liquidation experience of like collateral, and an estimated net realizable value is established. That estimated net realizable value is then compared with the outstanding loan balance to determine the amount of specific impairment reserve. The specific impairment reserve, if necessary, is adjusted to reflect the results of the updated evaluation. A specific impairment reserve is generally maintained on impaired loans during the time period while awaiting receipt of the third party evaluation as well as on impaired loans that continue to make some form of payment and liquidation is not imminent. Impaired loans not meeting the aforementioned criteria and that do not have a specific impairment reserve have usually been previously written down through a partial charge-off, to their net realizable value. The Company’s Special Assets staff assumes the management and monitoring of all loans determined to be impaired. While awaiting the completion of the third party appraisal, the Company generally begins to complete the tasks necessary to gain control of the collateral and prepare for liquidation, including, but not limited to engagement of counsel, inspection of collateral, and continued communication with the borrower, if appropriate. Special Assets staff also regularly reviews the relationship to identify any potential adverse developments during this time. Generally, the only difference between current appraised value, adjusted for liquidation costs, and the carrying amount of the loan less the specific reserve is any downward adjustment to the appraised value that the Company determines appropriate. These differences generally consist of costs to sell the property, as well as a deflator for the devaluation of property seen when banks are the sellers, and the Company deemed these adjustments as fair value adjustments. In the Company’s experience, it rarely returns loans to performing status after they have been partially charged off. Generally, credits identified as impaired move quickly through the process towards ultimate resolution. Other Real Estate Owned. The fair value of the Company’s other real estate owned is determined on a nonrecurring basis using Level 3 inputs based on current and prior appraisals, estimates of costs to sell, and proprietary qualitative adjustments. Goodwill. The fair value of the Company’s goodwill is reported on a nonrecurring basis when it has been adjusted to fair value. The values of the Company’s reporting units are determined using Level 3 inputs based on discounted cash flow and market multiple models. Recurring and Nonrecurring Fair Value The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy for the periods indicated:
|  | June 30, 2013 |
|  | Total |  |  | Fair Value Measurements Using |
(Amounts in thousands) |  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 9,414 |  |  | $ | — |  |  | $ | 9,414 |  |  | $ | — |
Municipal securities |  |  | 151,981 |  |  |  | — |  |  |  | 151,981 |  |  |  | — |
Single issue trust preferred securities |  |  | 46,182 |  |  |  | — |  |  |  | 46,182 |  |  |  | — |
Agency MBS |  |  | 326,266 |  |  |  | — |  |  |  | 326,266 |  |  |  | — |
Non-Agency Alt-A residential MBS |  |  | 10,884 |  |  |  | — |  |  |  | 10,884 |  |  |  | — |
Equity securities |  |  | 5,431 |  |  |  | 5,413 |  |  |  | 18 |  |  |  | — |
Total available-for-sale securities |  | $ | 550,158 |  |  | $ | 5,413 |  |  | $ | 544,745 |  |  | $ | — |
Deferred compensation assets |  | $ | 3,861 |  |  | $ | 3,861 |  |  | $ | — |  |  | $ | — |
Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate lock commitments |  | $ | 17 |  |  | $ | — |  |  | $ | 17 |  |  | $ | — |
Deferred compensation liabilities |  | $ | 3,861 |  |  | $ | 3,861 |  |  | $ | — |  |  | $ | — |
Derivative liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate lock commitments |  | $ | 163 |  |  | $ | — |  |  | $ | 163 |  |  | $ | — |
|  | December 31, 2012 |
|  | Total |  |  | Fair Value Measurements Using |
(Amounts in thousands) |  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal securities |  | $ | 159,217 |  |  | $ | — |  |  | $ | 159,217 |  |  | $ | — |
Single issue trust preferred securities |  |  | 44,646 |  |  |  | — |  |  |  | 44,646 |  |  |  | — |
Agency MBS |  |  | 315,897 |  |  |  | — |  |  |  | 315,897 |  |  |  | — |
Non-Agency Alt-A residential MBS |  |  | 11,067 |  |  |  | — |  |  |  | 11,067 |  |  |  | — |
Equity securities |  |  | 3,531 |  |  |  | 3,511 |  |  |  | 20 |  |  |  | — |
Total available-for-sale securities |  | $ | 534,358 |  |  | $ | 3,511 |  |  | $ | 530,847 |  |  | $ | — |
Deferred compensation assets |  | $ | 3,625 |  |  | $ | 3,625 |  |  | $ | — |  |  | $ | — |
Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate lock commitments |  | $ | 144 |  |  | $ | — |  |  | $ | 144 |  |  | $ | — |
Deferred compensation liabilities |  | $ | 3,625 |  |  | $ | 3,625 |  |  | $ | — |  |  | $ | — |
Derivative liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate lock commitments |  | $ | 16 |  |  | $ | — |  |  | $ | 16 |  |  | $ | — |
The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in certain circumstances such as evidence of impairment. The following tables summarize financial and nonfinancial assets measured at fair value on a nonrecurring basis segregated by the level of the valuation inputs within the fair value hierarchy that were held for the periods indicated.
|  | June 30, 2013 |
|  | Total |  |  | Fair Value Measurements Using |
|  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
(Amounts in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans not covered by loss share agreements |  | $ | 6,176 |  |  |  | — |  |  |  | — |  |  | $ | 6,176 |
OREO not covered by loss share agreements |  |  | 3,941 |  |  |  | — |  |  |  | — |  |  |  | 3,941 |
OREO covered by loss share agreements |  |  | 4,423 |  |  |  | — |  |  |  | — |  |  |  | 4,423 |
There were no transfers between valuation levels for any asset during the three months ended June 30, 2013 or 2012. If valuation techniques are deemed necessary, the Company considers those transfers to occur at the end of the period when the assets are valued. The following table presents quantitative information about financial and nonfinancial assets measured at fair value on a nonrecurring basis using Level 3 valuation inputs:
|  | Fair Value at June 30, 2013 |  |  | Valuation Technique |  | Unobservable Input |  | Range (Weighted Average)
(Amounts in thousands) |  |  |  |  |  |  |  |  |
Impaired loans |  | $ | 6,176 |  |  | Discounted appraisals (1) |  | Appraisal adjustments (2) |  | 1% to 102% (18%)
OREO not covered by loss share agreements |  |  | 3,941 |  |  | Discounted appraisals (1) |  | Appraisal adjustments (2) |  | 0% to 75% (34%)
OREO covered by loss share agreements |  |  | 4,423 |  |  | Discounted appraisals (1) |  | Appraisal adjustments (2) |  | 1% to 70% (31%)
(1) | Fair value is generally based on appraisals of the underlying collateral.
(2) | Appraisals may be adjusted by management for customized discounting criteria, estimated sales costs, and proprietary qualitative adjustments.
Fair Value of Financial Instruments Information used to determine fair value is highly subjective and judgmental in nature; therefore, the results may not be precise. Subjective factors may include estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different. The following summary describes the methodologies and assumptions used by the Company to estimate the fair value of certain financial instruments: Cash and Cash Equivalents: The carrying amount of cash and due from banks and federal funds sold/purchased is considered equal to the fair value as a result of the short-term nature of these instruments. Investment Securities: The determination of the fair value of available-for-sale securities is described within “Fair Value Measurements” presented above. The determination of the fair value of held-to-maturity securities is based on quoted market prices or dealer quotes. Loans Held for Sale: Loans held for sale are recorded at the lower of cost or estimated fair value. The determination of the fair value of loans held for sale is based on the market price of similar loans. Loans Held for Investment: The determination of the fair value of loans held for investment is based on discounted future cash flows using current rates for similar loans. FDIC Receivable under Loss Share Agreements: The determination of the fair value is based on discounted future cash flows using current discount rates. Accrued Interest Receivable/Payable: The carrying amount of accrued interest receivable/payable is considered equal to the fair value as a result of the short-term nature of these instruments. Derivative Financial Instruments: The determination of the fair value of derivative financial instruments is described within “Fair Value Measurements” presented above. Deferred Compensation Instruments: The determination of the fair value of deferred compensation instruments is described within “Fair Value Measurements” presented above. Deposits and Securities Sold Under Agreements to Repurchase: The fair value of deposits without a stated maturity, including demand, interest-bearing demand, and savings, is considered equal to the carrying amount which is the amount payable on demand at the reporting date. The fair value of deposits and repurchase agreements with fixed maturities and rates is estimated using discounted future cash flows that apply interest rates currently being offered on instruments with similar characteristics and maturities. FHLB and Other Indebtedness: The determination of the fair value of FHLB and other indebtedness is based on interest rates currently available to the Company for borrowings with similar characteristics and maturities. The determination of fair value for trust preferred obligations is based on credit spreads seen in the marketplace for similar issues. Off-Balance Sheet Instruments: The value of off-balance sheet instruments, including commitments to extend credit, standby letters of credit, and financial guarantees, is considered equal to fair value. Due to the uncertainty involved in assessing the likelihood and timing of commitments being drawn upon, coupled with the lack of an established market and the wide diversity of fee structures, the Company does not believe it is meaningful to provide an estimate of fair value that differs from the given value of the commitment. The following tables summarize the carrying amount and fair value of the Company’s financial instruments for the dates indicated:
|  | June 30, 2013 |
|  | Carrying |  |  |  |  |  | Fair Value Measurements Using |
(Amounts in thousands) |  | Amount |  |  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 82,119 |  |  | $ | 82,119 |  |  | $ | 82,119 |  |  | $ | — |  |  | $ | — |
Available-for-sale securities |  |  | 550,158 |  |  |  | 550,158 |  |  |  | 5,413 |  |  |  | 544,745 |  |  |  | — |
Held-to-maturity securities |  |  | 627 |  |  |  | 639 |  |  |  | — |  |  |  | 639 |  |  |  | — |
Loans held for sale |  |  | 4,621 |  |  |  | 4,640 |  |  |  | — |  |  |  | 4,640 |  |  |  | — |
Loans held for investment less allowance |  |  | 1,668,376 |  |  |  | 1,658,347 |  |  |  | — |  |  |  | — |  |  |  | 1,658,347 |
FDIC indemnification asset |  |  | 40,389 |  |  |  | 40,389 |  |  |  | — |  |  |  | — |  |  |  | 40,389 |
Accrued interest receivable |  |  | 8,010 |  |  |  | 8,010 |  |  |  | — |  |  |  | 8,010 |  |  |  | — |
Derivative financial assets |  |  | 17 |  |  |  | 17 |  |  |  | — |  |  |  | 17 |  |  |  | — |
Deferred compensation assets |  |  | 3,861 |  |  |  | 3,861 |  |  |  | 3,861 |  |  |  | — |  |  |  | — |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | $ | 349,972 |  |  | $ | 349,972 |  |  | $ | — |  |  | $ | 349,972 |  |  | $ | — |
Interest-bearing demand deposits |  |  | 354,862 |  |  |  | 354,862 |  |  |  | — |  |  |  | 354,862 |  |  |  | — |
Savings deposits |  |  | 513,781 |  |  |  | 513,781 |  |  |  | — |  |  |  | 513,781 |  |  |  | — |
Time deposits |  |  | 770,081 |  |  |  | 775,067 |  |  |  | — |  |  |  | 775,067 |  |  |  | — |
Securities sold under agreements to repurchase |  |  | 121,204 |  |  |  | 124,427 |  |  |  | — |  |  |  | 124,427 |  |  |  | — |
Accrued interest payable |  |  | 2,308 |  |  |  | 2,308 |  |  |  | — |  |  |  | 2,308 |  |  |  | — |
FHLB and other indebtedness |  |  | 165,877 |  |  |  | 179,299 |  |  |  | — |  |  |  | 179,299 |  |  |  | — |
Derivative financial liabilities |  |  | 163 |  |  |  | 163 |  |  |  | — |  |  |  | 163 |  |  |  | — |
Deferred compensation liabilities |  |  | 3,861 |  |  |  | 3,861 |  |  |  | 3,861 |  |  |  | — |  |  |  | — |
|  | December 31, 2012 |
|  | Carrying |  |  |  |  |  | Fair Value Measurements Using |
(Amounts in thousands) |  | Amount |  |  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 144,847 |  |  | $ | 144,847 |  |  | $ | 144,847 |  |  | $ | — |  |  | $ | — |
Available-for-sale securities |  |  | 534,358 |  |  |  | 534,358 |  |  |  | 3,511 |  |  |  | 530,847 |  |  |  | — |
Held-to-maturity securities |  |  | 816 |  |  |  | 832 |  |  |  | — |  |  |  | 832 |  |  |  | — |
Loans held for sale |  |  | 6,672 |  |  |  | 6,774 |  |  |  | — |  |  |  | 6,774 |  |  |  | — |
Loans held for investment less allowance |  |  | 1,698,883 |  |  |  | 1,702,128 |  |  |  | — |  |  |  | — |  |  |  | 1,702,128 |
FDIC receivable under loss share agreements |  |  | 48,149 |  |  |  | 48,149 |  |  |  | — |  |  |  | — |  |  |  | 48,149 |
Accrued interest receivable |  |  | 7,842 |  |  |  | 7,842 |  |  |  | — |  |  |  | 7,842 |  |  |  | — |
Derivative financial assets |  |  | 144 |  |  |  | 144 |  |  |  | — |  |  |  | 144 |  |  |  | — |
Deferred compensation assets |  |  | 3,625 |  |  |  | 3,625 |  |  |  | 3,625 |  |  |  | — |  |  |  | — |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | $ | 343,352 |  |  | $ | 343,352 |  |  | $ | — |  |  | $ | 343,352 |  |  | $ | — |
Interest-bearing demand deposits |  |  | 353,321 |  |  |  | 353,321 |  |  |  | — |  |  |  | 353,321 |  |  |  | — |
Savings deposits |  |  | 500,276 |  |  |  | 500,276 |  |  |  | — |  |  |  | 500,276 |  |  |  | — |
Time deposits |  |  | 833,226 |  |  |  | 842,331 |  |  |  | — |  |  |  | 842,331 |  |  |  | — |
Securities sold under agreements to repurchase |  |  | 136,118 |  |  |  | 142,417 |  |  |  | — |  |  |  | 142,417 |  |  |  | — |
Accrued interest payable |  |  | 2,481 |  |  |  | 2,481 |  |  |  | — |  |  |  | 2,481 |  |  |  | — |
FHLB and other indebtedness |  |  | 177,435 |  |  |  | 200,418 |  |  |  | — |  |  |  | 200,418 |  |  |  | — |
Derivative financial liabilities |  |  | 16 |  |  |  | 16 |  |  |  | — |  |  |  | 16 |  |  |  | — |
Deferred compensation liabilities |  |  | 3,625 |  |  |  | 3,625 |  |  |  | 3,625 |  |  |  | — |  |  |  | — |

X
- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + 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=25499696&loc=d3e19279-110258 Reference 2: 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=25499696&loc=d3e19190-110258 Reference 3: 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=25499696&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueMeasurementInputsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration