XML 134 R34.htm IDEA: XBRL DOCUMENT v2.4.0.8
Fair Value
 12 Months Ended
Dec. 31, 2013
Fair Value  
Fair Value

Note 25—Fair Value

        FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States, and enhances disclosures about fair value measurements. FASB ASC 820 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions.

        The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Available for sale securities and derivative contracts are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, impaired loans, OREO, and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

        FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

  Level 1   Observable inputs such as quoted prices in active markets;
  Level 2   Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
  Level 3   Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

        The following is a description of valuation methodologies used for assets recorded at fair value.

Investment Securities

        Securities available for sale are valued on a recurring basis at quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and The NASDAQ Stock Market, or U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities and debentures issued by government sponsored entities, municipal bonds and corporate debt securities. Securities held to maturity are valued at quoted market prices or dealer quotes similar to securities available for sale. The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions. The Level 3 security is an unrated single-issue private placement bond that was acquired in the Savannah transaction. This security is considered a Level 3 because there is not an active market for the security. Management considers the credit quality of the underlying issuer in determining the fair value of the security. During the second quarter of 2013, the issuer redeemed the security for $3.8 million and the Company realized a $31,000 gain on the redemption of the security.

Mortgage Loans Held for Sale

        Mortgage loans held for sale are carried at the lower of cost or fair market value. The fair values of mortgage loans held for sale are based on commitments on hand from investors within the secondary market for loans with similar characteristics. As such, the fair value adjustments for mortgage loans held for sale are nonrecurring Level 2.

Loans

        The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan may be considered impaired and an allowance for loan losses may be established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using estimated fair value methodologies. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2013, substantially all of the impaired loans were evaluated based on the fair value of the collateral because such loans were considered collateral dependent. Impaired loans, where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company considers the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company considers the impaired loan as nonrecurring Level 3.

Other Real Estate Owned ("OREO")

        Typically non-covered OREO, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs (Level 2). However, both non-covered and covered OREO are considered Level 3 in the fair value hierarchy because management has qualitatively applied a discount due to the size, supply of inventory, and the incremental discounts applied to the appraisals. Management also considers other factors, including changes in absorption rates, length of time the property has been on the market, and anticipated sales values, which have resulted in adjustments to the collateral value estimates indicated in certain appraisals. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. Gains or losses on sale and generally any subsequent adjustments to the value are recorded as a component of OREO expense, net of any FDIC indemnification proceeds in the case of covered OREO.

Derivative Financial Instruments

        Fair value is estimated using pricing models of derivatives with similar characteristics; accordingly, the derivatives are classified within Level 2 of the fair value hierarchy. See Note 29—Derivative Financial Instruments for additional information.

Mortgage servicing rights ("MSRs")

        The estimated fair value of MSRs is obtained through an independent derivatives dealer analysis of future cash flows. The evaluation utilizes assumptions market participants would use in determining fair value including market discount rates, prepayment speeds, servicing income, servicing costs, default rates and other market driven data, as well as the market's perception of future interest rate movements. MSRs are classified as Level 3.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

        The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis.

(Dollars in thousands)
   Fair Value   Quoted Prices
In Active
Markets
for Identical
Assets
(Level 1)		   Significant
Other
Observable
Inputs
(Level 2)		   Significant
Unobservable
Inputs
(Level 3)		  

December 31, 2013:

                          

Assets

                          

Derivative financial instruments

   $ 701   $ —   $ 701   $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Securities available for sale:

                          

Government-sponsored entities debt

   $ 142,994   $ —   $ 142,994   $ —  

State and municipal obligations

     140,651     —     140,651     —  

Mortgage-backed securities

     499,479     —     499,479     —  

Corporate stocks

     3,667     3,442     225     —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total securities available for sale

     786,791     3,442     783,349     —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Mortgage servicing rights

     20,729     —     —     20,729  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

 

   $ 807,698   $ 3,442   $ 783,527   $ 20,729  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Liabilities

                          

Derivative financial instruments

   $ 1,857   $ —   $ 1,857   $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

December 31, 2012:

                          

Assets

                          

Derivative financial instruments

   $ 312   $ —   $ 312   $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Securities available for sale:

                          

Government-sponsored entities debt

   $ 88,518   $ —   $ 88,518   $ —  

State and municipal obligations

     152,799     —     148,948     3,851  

Mortgage-backed securities

     293,187     —     293,187     —  

Corporate stocks

     379     354     25     —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total securities available for sale

     534,883     354     530,678     3,851  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

 

   $ 535,195   $ 354   $ 530,990   $ 3,851  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Liabilities

                          

Derivative financial instruments

   $ 1,813   $ —   $ 1,813   $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

        There were no financial instruments transferred between Level 1 and Level 2 of the valuation hierarchy for the years ended December 31, 2013, and 2012.

Changes in Level 3 Fair Value Measurements

        When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources), the gains and losses below include changes in fair value due in part to observable factors that are part of the valuation methodology.

        A reconciliation of the beginning and ending balances of Level 3 assets and liabilities recorded at fair value on a recurring basis for the years ended December 31, 2013 and 2012 is as follows:

(Dollars in thousands)
   Assets   Liabilities  

Fair value, January 1, 2012

   $ —   $ —  

Change in unrealized loss recognized in other comprehensive income

     —     —  

Total realized losses included in income

     —     —  

Mortgage and other loan income

     —     —  

Other-than-temporary impairment losses recognized in income

     —     —  

Purchases, issuances and settlements, net

     3,851     —  

Transfers in and/or out of level 3

     —     —  
           
​ ​ ​ ​ ​ ​ ​ ​

Fair value, December 31, 2012

   $ 3,851   $ —  

Change in unrealized loss recognized in other comprehensive income

     —     —  

Total realized losses included in income

     —     —  

Mortgage and other loan income

     172     —  

Other-than-temporary impairment losses recognized in income

     —     —  

Acquired in the First Financial acquisition

     19,156     —  

Purchases, issuances and settlements, net

     (3,851 )   —  

Transfers in and/or out of level 3

     1,401     —  
           
​ ​ ​ ​ ​ ​ ​ ​

Fair value, December 31, 2013

   $ 20,729   $ —  
           
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
           

Total unrealized losses, net of tax, included in accumulated other comprehensive income related to level 3 financial assets and liabilities still on the consolidated balance sheet at December 31, 2012

   $ —   $ —  
           
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
           

Total unrealized losses, net of tax, included in accumulated other comprehensive income related to level 3 financial assets and liabilities still on the consolidated balance sheet at December 31, 2013

   $ —   $ —  
           
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
           

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

        The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis:

(Dollars in thousands)
   Fair Value   Quoted Prices
In Active
Markets
for Identical
Assets
(Level 1)		   Significant
Other
Observable
Inputs
(Level 2)		   Significant
Unobservable
Inputs
(Level 3)		  

December 31, 2013:

                          

OREO

   $ 64,918   $ —   $ —   $ 64,918  

Non-acquired impaired loans

     13,129     —     —     13,129  

December 31, 2012:

    
 		    
 		    
 		    
 		  

OREO

   $ 66,505   $ —   $ —   $ 66,505  

Non-acquired impaired loans

     42,356     —     —     42,356  

Quantitative Information about Level 3 Fair Value Measurements

 
   Valuation Technique   Unobservable Input   General
Range

Nonrecurring measurements:

            

OREO

   Discounted appraisals   Collateral discounts and estimated costs to sell   0 - 25% (16.66)%

Non-acquired impaired loans

   Discounted appraisals   Collateral discounts   0 - 25% (6.26)%

Fair Value of Financial Instruments

        The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those models are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The use of different methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2013 and 2012. Such amounts have not been revalued for purposes of these consolidated financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

        The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

        Cash and Cash Equivalents—The carrying amount is a reasonable estimate of fair value.

        Investment Securities—Securities held to maturity are valued at quoted market prices or dealer quotes. The carrying value of FHLB stock approximates fair value based on the redemption provisions. The carrying value of the Company's investment in unconsolidated subsidiaries approximates fair value.

        Loans—For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for certain mortgage loans (e.g., one-to-four family residential) and other consumer loans are estimated using discounted cash flow analyses based on the Company's current rates offered for new loans of the same type, structure and credit quality. Fair values for other loans (e.g., commercial real estate and investment property mortgage loans, commercial and industrial loans) are estimated using discounted cash flow analyses, using interest rates currently being offered by the Company for loans with similar terms to borrowers of similar credit quality. Fair values for non-performing loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

        FDIC Indemnification Asset—The fair value is estimated based on discounted future cash flows using current discount rates.

        Deposit Liabilities—The fair values disclosed for demand deposits (e.g., interest and non-interest bearing checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts, and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

        Federal Funds Purchased and Securities Sold Under Agreements to Repurchase—The carrying amount of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within ninety days approximate their fair values.

        Other Borrowings—The fair value of other borrowings is estimated using discounted cash flow analysis on the Company's current incremental borrowing rates for similar types of instruments.

        Accrued Interest—The carrying amounts of accrued interest approximate fair value.

        Derivative Financial Instruments—The fair value of derivative financial instruments (including interest rate swaps) is estimated using pricing models of derivatives with similar characteristics.

        Commitments to Extend Credit, Standby Letters of Credit and Financial Guarantees—The fair values of commitments to extend credit are 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 values of guarantees and letters of credit are based on fees currently charged for similar agreements or on the estimated costs to terminate them or otherwise settle the obligations with the counterparties at the reporting date.

        The estimated fair value, and related carrying amount, of the Company's financial instruments are as follows:

(Dollars in thousands)
  Carrying
Amount		   Fair
Value		   Level 1   Level 2   Level 3  

December 31, 2013

                                

Financial assets:

                                

Cash and cash equivalents

   $ 479,461   $ 479,461   $ 479,461   $ —   $ —  

Investment securities

     812,603     813,068     16,828     796,240     —  

Loans, net of allowance for loan losses, and loans held for sale

     5,675,602     5,742,078     —     30,586     5,711,492  

FDIC receivable for loss share agreements

     93,947     48,512     —     —     48,512  

Accrued interest receivable

     15,024     15,024     —     3,482     11,612  

Mortgage servicing rights

     20,729     20,729     —     —     20,729  

Interest rate swap—non-designated hedge

     178     178     —     178     —  

Other derivative financial instruments (mortgage banking related)

     523     523     —     523     —  

Financial liabilities:

                                

Deposits

     6,555,497     6,313,543     —     6,313,543     —  

Federal funds purchased and securities sold under agreements to repurchase

     211,401     211,401     —     211,401     —  

Other borrowings

     102,060     92,751     —     92,751     —  

Accrued interest payable

     5,388     5,388     —     5,388     —  

Interest rate swap—cash flow hedge

     914     914     —     914     —  

Interest rate swap—non-designated hedge

     178     178     —     178     —  

Other derivative financial instruments (mortgage banking related)

     765     765     —     765     —  

Off balance sheet financial instruments:

                                

Commitments to extend credit

     —     15,555     —     15,555     —  

Standby letters of credit and financial guarantees

     —     —     —     —     —  

December 31, 2012

    
 		    
 		    
 		    
 		    
 		  

Financial assets:

                                

Cash and cash equivalents

   $ 380,864   $ 380,864   $ 380,864   $ —   $ —  

Investment securities

     560,091     561,204     10,122     547,231     3,851  

Loans, net of allowance for loan losses, and loans held for sale

     3,634,514     3,665,070     —     65,279     3,599,791  

FDIC receivable for loss share agreements

     146,171     101,898     —     —     101,898  

Accrued interest receivable

     8,190     8,190     —     8,190     —  

Interest rate swap—non-designated hedge

     312     312     —     312     —  

Financial liabilities:

                                

Deposits

     4,298,443     4,216,800     —     4,216,800     —  

Federal funds purchased and securities sold under agreements to repurchase

     238,621     238,621     —     238,621     —  

Other borrowings

     54,897     57,903     —     57,903     —  

Accrued interest payable

     2,045     2,045     —     2,045     —  

Interest rate swap—cash flow hedge

     1,501     1,501     —     1,501     —  

Interest rate swap—non-designated hedge

     312     312     —     312     —  

Off balance sheet financial instruments:

                                

Commitments to extend credit

     —     7,371     —     7,371     —  

Standby letters of credit and financial guarantees

     —     —     —     —     —