Fair Value Measurements (Tables)

6 Months Ended

Mar. 31, 2019

Schedule of fair value measurements of assets and liabilities

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2019 and September 30, 2018.



	Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
As of March 31, 2019
U.S. Treasury securities	$	93,819	$	93,819	$	—	$	—
Mortgage-backed securities	1,605,616		—		1,605,616		—
States and political subdivision securities	62,870		—		61,559		1,311
Other	1,000		—		1,000		—
Total securities available for sale	$	1,763,305	$	93,819	$	1,668,175	$	1,311
Derivatives-assets	$	25,843	$	—	$	25,843	$	—
Derivatives-liabilities	58		—		58		—
Fair value loans	835,822		—		835,822		—
Loan servicing rights	2,674		—		—		2,674
As of September 30, 2018
U.S. Treasury securities	$	167,172	$	167,172	$	—	$	—
Mortgage-backed securities	1,149,707		—		1,149,707		—
States and political subdivision securities	67,775		—		66,805		970
Other	996		—		996		—
Total securities available for sale	$	1,385,650	$	167,172	$	1,217,508	$	970
Derivatives-assets	$	1,911	$	—	$	1,911	$	—
Derivatives-liabilities	2,188		—		2,188		—
Fair value loans	865,386		—		865,386		—
Loan servicing rights	3,087		—		—		3,087

Schedule of changes in Level 3 financial instruments

The following table presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three and six months ended March 31, 2019 and 2018.



	Three Months Ended March 31,						Six Months Ended March 31,
	2019			2018			2019			2018
	(dollars in thousands)
Other securities available for sale
Balance, beginning of period	$	961		$	965		$	970		$	1,069
Additions	350			—			350			—
Principal paydown	—			—			(9		)	(104		)
Balance, end of period	$	1,311		$	965		$	1,311		$	965

Loan servicing rights
Balance, beginning of period	$	2,862		$	3,799		$	3,087		$	4,074
Realized and unrealized loss ¹	(188		)	(213		)	(413		)	(488		)
Balance, end of period	$	2,674		$	3,586		$	2,674		$	3,586
¹ Realized and unrealized loss related to loan servicing rights are reported as a component of mortgage banking income, net on the consolidated statements of income.

Summary of mortgage loans held-for-sale, fair value measurement

The following tables present the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2019 and September 30, 2018.



	Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
As of March 31, 2019
Other repossessed property	$	31,834	$	—	$	—	$	31,834
Impaired loans	200,312		—		—		200,312
Loans held for sale, at lower of cost or fair value	3,648		—		3,648		—
Property held for sale	3,216		—		—		3,216
As of September 30, 2018
Other repossessed property	$	22,225	$	—	$	—	$	22,225
Impaired loans	188,017		—		—		188,017
Loans held for sale, at lower of cost or fair value	5,456		—		5,456		—
Property held for sale	1,104		—		—		1,104

Summary of valuation techniques and significant unobservable inputs used to measure Level 3 fair value measurements

The valuation techniques and significant unobservable inputs used to measure Level 3 fair value measurements at March 31, 2019 were as follows.



	Fair Value of Assets / (Liabilities) at March 31, 2019		Valuation Technique(s)	Unobservable Input	Range	Weighted Average
	(dollars in thousands)
Other repossessed property	$	31,834	Appraisal value	Property specific adjustment	N/A	N/A
Impaired loans	200,312		Appraisal value	Property specific adjustment	N/A	N/A
Property held for sale	3,216		Appraisal value	Property specific adjustment	N/A	N/A

Schedule of fair values for balance sheet instruments

Fair values for on-balance sheet instruments as of March 31, 2019 and September 30, 2018 are as follows.



		March 31, 2019				September 30, 2018
	Level in Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(dollars in thousands)
Assets
Cash and cash equivalents	Level 1	$	282,638	$	282,638	$	298,696	$	298,696
Loans, net, excluding fair valued loans, loans held for sale and impaired loans ¹	Level 3	8,731,128		8,721,910		8,357,065		8,231,829
Liabilities
Time deposits	Level 2	2,087,558		2,086,538		1,847,078		1,848,550
FHLB advances and other borrowings	Level 2	275,000		280,374		275,000		275,797
Securities sold under repurchase agreements	Level 2	62,537		62,537		90,907		90,907
Subordinated debentures and subordinated notes payable	Level 2	108,528		102,285		108,468		107,841
¹ Includes $13.5 million and $13.0 million of net deferred loan fees at March 31, 2019 and September 30, 2018, respectively, of which carrying value approximates fair value.