ESTIMATED FAIR VALUES

12 Months Ended

Dec. 31, 2011

Estimated Fair Values [Abstract]

Estimated Fair Values

ESTIMATED FAIR VALUES

Fair value estimates are made at a specific point in time based on relevant market information and information about each financial instrument. Where information regarding the fair value of a financial instrument is publicly available, those values are used, as is the case with investment securities, certain closed-end residential mortgage loans and certain long-term obligations. In these cases, an open market exists in which those financial instruments are actively traded.

Because no market exists for many financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. For those financial instruments with a fixed interest rate, an analysis of the related cash flows is the basis for estimating fair values. The expected cash flows are discounted to the valuation date using an appropriate discount rate. The discount rates used represent the rates under which similar transactions would be currently negotiated. For financial instruments with fixed and variable rates, fair value estimates also consider the impact of liquidity discounts appropriate as of the measurement date.

Fair value represents the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, BancShares considers the principal or most advantageous market in which those assets or liabilities could be sold and considers the assumptions that market participants would use when pricing those assets or liabilities. As required under US GAAP, individual fair value estimates are ranked based on the relative reliability of the inputs used in the valuation. Fair values determined using level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities that are not actively traded in observable markets, and for which there is little to no observable data, are based on level 3 inputs, which are considered to be nonobservable. It is BancShares’ policy to recognize transfers between levels of the fair value hierarchy at the end of the respective reporting period.

Estimated fair values of financial assets and financial liabilities are provided in the following table. The methodologies used to estimate the fair value of financial assets and financial liabilities are discussed below:

Loans held for sale. Fair value for loans held for sale is generally based on market prices for loans with similar characteristics or external valuations.

Loans and leases. Fair values for conforming closed-end residential mortgage loans are based on valuations provided by a mortgage broker. For other variable rate loans, carrying value is a reasonable estimate of fair value. For other fixed rate loans, fair values are estimated based on discounted future cash flows using the current interest rates at which loans with similar terms would be made to borrowers of similar credit quality. Additional valuation adjustments are made for liquidity and credit risk.

Receivable from the FDIC for loss share agreements. Fair value is estimated based on discounted future cash flows using current discount rates.

Deposits. For non-time deposits and variable rate time deposits, carrying value is a reasonable estimate of fair value. The fair value of fixed-rate time deposits is estimated by discounting future cash flows using the interest rates currently offered for deposits of similar remaining maturities.

Long-term obligations. For long-term obligations traded in active markets, fair values are determined based on actual market prices. For other long-term obligations, fair values are estimated by discounting future cash flows using current interest rates for similar financial instruments.

For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of December 31, 2011 and 2010.

	December 31, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and due from banks	$	590,801	$	590,801	$	460,178	$	460,178
Overnight investments	434,975		434,975		398,390		398,390
Investment securities available for sale	4,056,423		4,056,423		4,510,076		4,510,076
Investment securities held to maturity	1,822		1,980		2,532		2,741
Loans held for sale	92,539		93,235		88,933		88,933
Loans covered by loss share agreements, net of allowance for loan and lease losses	2,272,891		2,236,343		1,956,205		1,946,423
Loans and leases not covered by loss share agreements, net of allowance for loan and lease losses	11,400,754		11,312,900		11,304,059		10,995,653
Receivable from FDIC for loss share agreements	539,511		537,297		623,261		624,785
Income earned not collected	42,216		42,216		83,644		83,644
Stock issued by:
Federal Home Loan Bank of Atlanta	41,042		41,042		47,123		47,123
Federal Home Loan Bank of San Francisco	12,976		12,976		15,490		15,490
Federal Home Loan Bank of Seattle	4,490		4,490		4,490		4,490
Deposits	17,577,274		17,638,359		17,635,266		17,695,357
Short-term borrowings	615,222		615,222		546,597		546,597
Long-term obligations	687,599		719,999		809,949		826,501
Accrued interest payable	23,719		23,719		37,004		37,004
Interest rate swap	10,714		10,714		9,492		9,492

At December 31, 2011 and 2010, other assets include $58,508 and $67,103 of stock in various Federal Home Loan Banks (FHLB). The FHLB stock, which is generally redeemable at par value only through the issuer, is carried at its par value. The investment in FHLB stock is considered a long-term investment and its value is based on the ultimate recoverability of par value. Management has concluded that the investments in FHLB stock were not other-than-temporarily impaired for any period presented.

For off-balance-sheet commitments and contingencies, carrying amounts are reasonable estimates of the fair values for such financial instruments. Carrying amounts include unamortized fee income and, in some cases, reserves for any credit losses from those financial instruments. These amounts are not material to BancShares’ financial position.

Among BancShares’ assets and liabilities, investment securities available for sale and interest rate swaps accounted for as cash flow hedges are reported at their fair values on a recurring basis. Certain other assets are adjusted to their fair value on a nonrecurring basis, including loans held for sale, which are carried at the lower of cost or market. Impaired loans, OREO, goodwill and other intangible assets are periodically tested for impairment. Loans held for investment, deposits, short-term borrowings and long-term obligations are not reported at fair value. BancShares has not elected to voluntarily report any assets or liabilities at fair value.

For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of December 31, 2011 and 2010:

			Fair value measurements using:
Description	Fair value		Quoted prices in active markets for identical assets and liabilities (Level 1 inputs)		Quoted prices for similar assets and liabilities (Level 2 inputs)		Significant nonobservable inputs (Level 3 inputs)
December 31, 2011
Assets measured at fair value
Investment securities available for sale
U.S. Treasury	$	887,819	$	887,819	$	—	$	—
Government agency	2,592,209		2,592,209		—		—
Corporate bonds	252,820		252,820		—		—
Residential mortgage-backed securities	307,221		—		307,221		—
Equity securities	15,313		15,313		—		—
State, county, municipal	1,041		—		1,041		—
Total	$	4,056,423	$	3,748,161	$	308,262	$	—
Liabilities measured at fair value
Interest rate swaps accounted for as cash flow hedges	$	10,714	$	—	$	10,714	$	—
December 31, 2010
Assets measured at fair value
Investment securities available for sale
U.S. Treasury	$	1,939,400	$	1,939,400	$	—	$	—
Government agency	1,919,986		1,919,986		—		—
Corporate bonds	486,658		486,658		—		—
Residential mortgage-backed securities	143,545		—		143,545		—
Equity securities	19,231		19,231		—		—
State, county, municipal	1,256		—		1,256		—
Total	$	4,510,076	$	4,365,275	$	144,801	$	—
Liabilities measured at fair value
Interest rate swaps accounted for as cash flow hedges	$	9,492	$	—	$	9,492	$	—

Prices for US Treasury securities, government agency securities, corporate bonds and equity securities are readily available in the active markets in which those securities are traded and the resulting fair values are shown in the ‘Level 1 input’ column. Prices for mortgage-backed securities and state, county and municipal securities are obtained using the fair values of similar assets and the resulting fair values are shown in the ‘Level 2 input’ column. There were no assets or liabilities valued based on level 3 inputs at December 31, 2011 and 2010, and there were no transfers between Level 1 and Level 2 inputs during the year ended December 31, 2011 and 2010.

Under the terms of the existing cash flow hedges, BancShares pays a fixed payment to the counterparty in exchange for receipt of a variable payment that is determined based on the 3-month LIBOR rate. The fair value of the cash flow hedges are therefore based on projected LIBOR rates for the duration of the hedges, values that, while observable in the market, are subject to adjustment due to pricing considerations for the specific instrument.

For those investment securities available for sale with fair values that are determined by reliance on significant nonobservable inputs, the following table identifies the factors causing the change in fair values for the years ended December 31, 2011 and 2010:

	Investment securities available for sale with fair values based on significant nonobservable inputs
Description	2011		2010
Balance, January 1	$	—	$	1,287
Total gains (losses), realized or unrealized:
Included in earnings	—		—
Included in other comprehensive income	—		—
Purchases, sales, issuances and settlements, net	—		—
Transfers in/out of Level 3	—		(1,287		)
Balance, December 31	$	—	$	—

There were no investment securities with fair values determined by reliance on significant nonobservable inputs during 2011.

No gains or losses were reported for the years ended December 31, 2011 and 2010 that relate to fair values estimated based on significant nonobservable inputs. The investment securities valued using Level 3 inputs that were transferred out during the first quarter of 2010 result from changes in US GAAP adopted January 1, 2010 related to investments in the retained interest of a residual interest strip that resulted from an asset securitization.

Certain assets and liabilities are carried at fair value on a nonrecurring basis. Loans held for sale are carried at the lower of aggregate cost or fair value, and are therefore carried at fair value only when fair value is less than the asset cost. Certain impaired loans are also carried at fair value. For assets and liabilities carried at fair value on a nonrecurring basis, the following table provides fair value information as of December 31, 2011 and 2010:

			Fair value measurements using:
Description	Fair value		Quoted prices in active markets for identical assets and liabilities (Level 1 inputs)		Quoted prices for similar  assets and liabilities (Level 2 inputs)		Significant nonobservable  inputs (Level 3 inputs)
December 31, 2011
Loans held for sale	$	63,470	$	—	$	63,470	$	—
Impaired loans:
Not covered by loss share agreements	128,365				—		128,365
December 31, 2010
Loans held for sale	88,933		—		88,933		—
Impaired loans:
Not covered by loss share agreements	89,500		—		—		89,500

The values of loans held for sale are based on prices observed for similar pools of loans. The values of impaired loans are determined by either the collateral value or by the discounted present value of expected cash flows. No covered loans are carried at fair value because all covered loans are accounted for as loans acquired with deteriorated credit quality under the expected cash flow model. No financial liabilities were carried at fair value on a nonrecurring basis as of December 31, 2011 and 2010.

Certain non-financial assets and non-financial liabilities are measured at fair value on a nonrecurring basis. OREO is measured and reported at fair value using level 3 inputs for valuations based on nonobservable criteria. The following table provides information regarding OREO for 2011 and 2010.

	Year Ended December 31,
	2011		2010
Current year foreclosures:
Covered under loss share agreements	$	128,178	$	116,590
Not covered under loss share agreements	38,612		40,328
Loan charge-offs recorded due to the measurement and initial recognition of OREO:
Covered under loss share agreements	14,846		62,327
Not covered under loss share agreements	51,136		14,220
Write-downs recorded subsequent to foreclosure for OREO:
Covered under loss share agreements	19,994		9,185
Not covered under loss share agreements	7,486		7,099
Fair value of OREO remeasured in current year:
Covered under loss share agreements	30,008		34,849
Not covered under loss share agreements	14,905		15,069