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FAIR VALUE MEASUREMENT (Tables)
 6 Months Ended
Jun. 30, 2016
Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and Liabilities Measured on a Recurring Basis: Assets and liabilities measured at fair value on a recurring basis are summarized below:

 

 

 

 

 

 

Fair Value Measurements at June 30, 2016 Using:

 

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prices in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

Significant

 

 

 

 

 

 

 

 

 

 

Markets for

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

June 30,

 

 

Assets

 

 

Inputs

 

 

Inputs

 

 

2016

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government sponsored entities' securities

$

201,776

 

 

$

—

 

 

$

201,776

 

 

$

—

 

States of the U.S. and political subdivisions

 

52,007

 

 

 

—

 

 

 

52,007

 

 

 

 

 

Mortgage-backed GSE securities: residential

 

113,419

 

 

 

—

 

 

 

113,419

 

 

 

—

 

Loans held for sale, at fair value

 

42,919

 

 

 

—

 

 

 

9,314

 

 

 

33,605

 

Interest rate caps

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Purchased certificate of deposit option

 

879

 

 

 

—

 

 

 

879

 

 

 

—

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Written certificate of deposit option

 

879

 

 

 

—

 

 

 

879

 

 

 

—

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2015 Using:

 

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prices in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

Significant

 

 

 

 

 

 

 

 

 

 

Markets for

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

December 31,

 

 

Assets

 

 

Inputs

 

 

Inputs

 

 

2015

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government sponsored entities' securities

$

218,650

 

 

$

—

 

 

$

218,650

 

 

$

—

 

States of the U.S. and political subdivisions

 

11,040

 

 

 

—

 

 

 

11,040

 

 

 

 

 

Mortgage-backed GSE securities: residential

 

127,980

 

 

 

—

 

 

 

127,980

 

 

 

—

 

Loans held for sale, at fair value

 

26,716

 

 

 

—

 

 

 

—

 

 

 

26,716

 

Interest rate caps

 

3

 

 

 

—

 

 

 

—

 

 

 

3

 

Purchased certificate of deposit option

 

805

 

 

 

—

 

 

 

805

 

 

 

—

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Written certificate of deposit option

 

805

 

 

 

—

 

 

 

805

 

 

 

—

 

 
Reconciliation of All Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2016 and 2015.  

 

 

Loans Held for Sale, At Fair Value

 

 

Loans Held for Sale, At Fair Value

 

 

For the Three Months Ended

June 30,

 

 

For the Six Months Ended

June 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Balance of recurring Level 3 assets at beginning of period

$

26,760

 

 

$

1,608

 

 

$

26,716

 

 

$

—

 

Total gains (losses) for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in change in fair value of loans held for sale

 

622

 

 

 

(146

)

 

 

1,291

 

 

 

415

 

Included in other comprehensive income

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Originations/Draws on construction perm loans

 

19,132

 

 

 

17,888

 

 

 

35,819

 

 

 

24,947

 

Amortization

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Sales

 

(12,909

)

 

 

(9,511

)

 

 

(30,221

)

 

 

(15,523

)

Balance of recurring Level 3 assets at end of period

$

33,605

 

 

$

9,839

 

 

$

33,605

 

 

$

9,839

 

 

 

Interest Rate Caps

 

 

Interest Rate Caps

 

 

For the Three Months Ended

June 30,

 

 

For the Six Months Ended

June 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

(Dollars in thousands)

 

Balance of recurring Level 3 assets at beginning of period

$

—

 

 

$

126

 

 

$

3

 

 

$

180

 

Total gains (losses) for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in other income

 

129

 

 

 

28

 

 

 

256

 

 

 

103

 

Included in other comprehensive income

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Purchases

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Amortization

 

(129

)

 

 

(130

)

 

 

(259

)

 

 

(259

)

Sales

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Balance of recurring Level 3 assets at end of period

$

—

 

 

$

24

 

 

$

—

 

 

$

24

 

 
Assets and Liabilities Measured on Non-recurring Basis

Assets and Liabilities Measured on a Non-Recurring Basis: Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

 

 

 

 

 

 

Fair Value Measurements at June 30, 2016 Using:

 

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prices in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

Significant

 

 

 

 

 

 

 

 

 

 

Markets for

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

June 30,

 

 

Assets

 

 

Inputs

 

 

Inputs

 

 

2016

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential

$

6,355

 

 

$

—

 

 

$

—

 

 

$

6,355

 

Secured

 

519

 

 

 

—

 

 

 

—

 

 

 

519

 

Residential loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to four-family residential

 

748

 

 

 

—

 

 

 

—

 

 

 

748

 

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Equity

 

92

 

 

 

—

 

 

 

—

 

 

 

92

 

Auto

 

3

 

 

 

—

 

 

 

—

 

 

 

3

 

Marine

 

163

 

 

 

—

 

 

 

—

 

 

 

163

 

Recreational vehicle

 

318

 

 

 

—

 

 

 

—

 

 

 

318

 

Mortgage servicing rights

 

2,801

 

 

 

—

 

 

 

2,801

 

 

 

—

 

Other real estate owned, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

749

 

 

 

—

 

 

 

—

 

 

 

749

 

One-to four-family residential

 

290

 

 

 

—

 

 

 

—

 

 

 

290

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2015 Using:

 

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prices in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

Significant

 

 

 

 

 

 

 

 

 

 

Markets for

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

December 31,

 

 

Assets

 

 

Inputs

 

 

Inputs

 

 

2015

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonresidential

$

2,857

 

 

$

—

 

 

$

—

 

 

$

2,857

 

Land

 

175

 

 

 

—

 

 

 

—

 

 

 

175

 

Residential loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to four-family residential

 

1,493

 

 

 

—

 

 

 

—

 

 

 

1,493

 

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Equity

 

392

 

 

 

—

 

 

 

—

 

 

 

392

 

Auto

 

1

 

 

 

—

 

 

 

—

 

 

 

1

 

Mortgage servicing rights

 

604

 

 

 

—

 

 

 

604

 

 

 

—

 

Other real estate owned, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

785

 

 

 

—

 

 

 

—

 

 

 

785

 

Nonresidential

 

175

 

 

 

—

 

 

 

—

 

 

 

175

 

One-to four-family residential

 

1,088

 

 

 

—

 

 

 

—

 

 

 

1,088

 

 
Fair Value Option for Newly Originated Permanent Construction Loans Held for Sale

The Company has elected the fair value option for newly originated residential mortgage and permanent construction loans held for sale.  These loans are intended for sale and the Company believes that fair value is the best indicator of the resolution of these loans.  Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment.  None of these loans are 90 or more days past due nor on nonaccrual status as of June 30, 2016.  

 

 

 

June 30, 2016

 

 

December 31, 2015

 

 

 

(Dollars in thousands)

 

Aggregate fair value

 

$

42,919

 

 

$

26,716

 

Contractual balance

 

 

39,751

 

 

 

25,197

 

Gain (loss)

 

 

3,168

 

 

 

1,519

 

 
Amount of Gains and Losses from Changes in Fair Value Included in Earnings

The total amount of gains and losses from changes in fair value included in earnings for the three and six months ended June 30, 2016 and 2015 for loans held for sale, at fair value were:

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

June 30, 2016

 

 

June 30, 2015

 

 

June 30, 2016

 

 

June 30, 2015

 

 

 

(Dollars in thousands)

 

Interest  income

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Interest expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Change in fair value

 

 

845

 

 

 

(146

)

 

 

1,649

 

 

 

415

 

Total change in fair value

 

$

845

 

 

$

(146

)

 

$

1,649

 

 

$

415

 

 
Carrying Value and Estimated Fair Values of Financial Instruments

In accordance with U.S. GAAP, the carrying value and estimated fair values of financial instruments at June 30, 2016 and December 31, 2015, were as follows:

 

 

 

 

 

 

Fair Value Measurements at June 30, 2016 Using:

 

 

June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

41,187

 

 

$

41,187

 

 

$

—

 

 

$

—

 

Available for sale securities

 

367,202

 

 

 

—

 

 

 

367,202

 

 

 

—

 

Held to maturity securities

 

107,505

 

 

 

—

 

 

 

105,336

 

 

 

4,326

 

Loans held for sale

 

928

 

 

 

—

 

 

 

991

 

 

 

—

 

Loans held for sale, at fair value

 

42,919

 

 

 

—

 

 

 

9,314

 

 

 

33,605

 

Loans, net

 

1,398,106

 

 

 

—

 

 

 

—

 

 

 

1,408,715

 

FHLB stock

 

18,068

 

 

n/a

 

 

n/a

 

 

n/a

 

Accrued interest receivable

 

6,434

 

 

 

—

 

 

 

2,095

 

 

 

4,339

 

Interest rate caps

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Purchased certificate of deposit option

 

879

 

 

 

—

 

 

 

879

 

 

 

—

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Checking, savings and money market accounts

 

(1,025,199

)

 

 

(1,025,199

)

 

 

—

 

 

 

—

 

Certificates of deposit

 

(430,547

)

 

 

—

 

 

 

(434,078

)

 

 

—

 

FHLB advances

 

(343,365

)

 

 

—

 

 

 

(343,465

)

 

 

—

 

Repurchase agreements and other

 

(523

)

 

 

—

 

 

 

(530

)

 

 

—

 

Advance payments by borrowers for taxes and insurance

 

(19,599

)

 

 

(19,599

)

 

 

—

 

 

 

—

 

Accrued interest payable

 

(99

)

 

 

—

 

 

 

(99

)

 

 

—

 

Written certificate of deposit option

 

(879

)

 

 

—

 

 

 

(879

)

 

 

—

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2015 Using:

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

35,910

 

 

$

35,910

 

 

$

—

 

 

$

—

 

Available for sale securities

 

357,670

 

 

 

—

 

 

 

357,670

 

 

 

—

 

Held to maturity securities

 

110,699

 

 

 

—

 

 

 

108,536

 

 

 

1,108

 

Loans held for sale

 

9,085

 

 

 

—

 

 

 

9,207

 

 

 

—

 

Loans held for sale, at fair value

 

26,716

 

 

 

—

 

 

 

—

 

 

 

26,716

 

Loans, net

 

1,316,192

 

 

 

—

 

 

 

—

 

 

 

1,322,338

 

FHLB stock

 

18,068

 

 

n/a

 

 

n/a

 

 

n/a

 

Accrued interest receivable

 

5,978

 

 

 

—

 

 

 

2,276

 

 

 

3,702

 

Interest rate caps

 

3

 

 

 

—

 

 

 

—

 

 

 

3

 

Purchased certificate of deposit option

 

805

 

 

 

—

 

 

 

805

 

 

 

—

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Checking, savings and money market accounts

 

(980,783

)

 

 

(980,783

)

 

 

—

 

 

 

—

 

Certificates of deposit

 

(454,960

)

 

 

—

 

 

 

(459,433

)

 

 

—

 

FHLB advances

 

(278,975

)

 

 

—

 

 

 

(279,053

)

 

 

—

 

Repurchase agreements and other

 

(535

)

 

 

—

 

 

 

(548

)

 

 

—

 

Advance payments by borrowers for taxes and insurance

 

(21,174

)

 

 

(21,174

)

 

 

—

 

 

 

—

 

Accrued interest payable

 

(53

)

 

 

—

 

 

 

(53

)

 

 

—

 

Written certificate of deposit option

 

(805

)

 

 

—

 

 

 

(805

)

 

 

—

 

 
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member]  
Quantitative Information About Level 3 Fair Value Measurements for Financial Instruments Measured at Fair Value

The following table presents quantitative information about recurring Level 3 fair value measurements at June 30, 2016:

 

 

 

 

 

 

Valuation

 

Unobservable

 

 

 

 

 

Fair Value

 

 

Technique(s)

 

Input(s)

 

Range

 

Loans held for sale, at fair value

$

33,605

 

 

Comparable sales

 

Time discount

 

0.00-1.80%

 

Interest rate caps

 

—

 

 

Discounted cash flow

 

Discount rate

 

 

—

 

 

The following table presents quantitative information about recurring Level 3 fair value measurements at December 31, 2015:

 

 

 

 

 

 

Valuation

 

Unobservable

 

 

 

Fair Value

 

 

Technique(s)

 

Input(s)

 

Range

Loans held for sale, at fair value

$

26,716

 

 

Comparable sales

 

Time discount

 

0.00-1.80%

Interest rate caps

 

3

 

 

Discounted cash flow

 

Discount rate

 

0.49-1.18%

 
Significant Unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Nonrecurring [Member]  
Quantitative Information About Level 3 Fair Value Measurements for Financial Instruments Measured at Fair Value

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at June 30, 2016:

 

 

 

Fair Value

 

 

Valuation Technique(s)

 

Unobservable Input(s)

 

Range     (Weighted Average)

Impaired loans:

 

 

 

 

 

 

 

 

 

 

Commercial loans

 

 

 

 

 

 

 

 

 

 

Nonresidential

 

$

6,355

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-35.00%  (14.14%)

Secured

 

 

519

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-27.47%  (13.74%)

Residential loans

 

 

 

 

 

 

 

 

 

 

One-to four-family residential

 

 

748

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-10.77%  (4.27%)

Consumer loans

 

 

 

 

 

 

 

 

 

 

Home Equity

 

 

92

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-17.85%  (8.93%)

Auto

 

 

3

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-10.00%  (10.00%)

Marine

 

 

163

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-37.00%  (37.00%)

Recreational vehicle

 

 

318

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-37.00%  (37.00%)

Other real estate owned, net

 

 

 

 

 

 

 

 

 

 

Commercial loans

 

 

 

 

 

 

 

 

 

 

Construction loans

 

 

749

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-50.00%  (21.71%)

Residential loans

 

 

 

 

 

 

 

 

 

 

One-to four-family residential

 

 

290

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-40.50%  (15.51%)

 

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at December 31, 2015:

 

 

 

Fair Value

 

 

Valuation Technique(s)

 

Unobservable Input(s)

 

Range     (Weighted Average)

Impaired loans:

 

 

 

 

 

 

 

 

 

 

Commercial loans

 

 

 

 

 

 

 

 

 

 

Nonresidential

 

$

2,857

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

9.19%-12.38%  (10.79%)

Land

 

 

175

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-27.47%  (13.74%)

Residential loans

 

 

 

 

 

 

 

 

 

 

One-to four-family residential

 

 

1,493

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-10.77%  (4.27%)

Consumer loans

 

 

 

 

 

 

 

 

 

 

Home Equity

 

 

392

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-17.85%  (8.93%)

Other real estate owned:

 

 

 

 

 

 

 

 

 

 

Commercial loans

 

 

 

 

 

 

 

 

 

 

Construction loans

 

 

785

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-50.00%  (21.71%)

Nonresidential loans

 

 

175

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

40.00%-60.00%  (50.00%)

Residential loans

 

 

 

 

 

 

 

 

 

 

One-to four-family residential

 

 

1,088

 

 

Sales comparison approach

 

Adjustment for differences between comparable sales

 

0.00%-40.50%  (15.51%)