Fair Value | 3 Months Ended |
Mar. 31, 2015 |
Fair Value Disclosures [Abstract] | |
Fair Value | FAIR VALUE |
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Heartland utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, trading securities and derivatives are recorded in the consolidated balance sheets at fair value on a recurring basis. Additionally, from time to time, Heartland may be required to record at fair value other assets on a nonrecurring basis such as loans held for sale, loans held to maturity and certain other assets including, but not limited to, mortgage servicing rights, commercial servicing rights and other real estate owned. These nonrecurring fair value adjustments typically involve application of lower of cost or fair value accounting or write-downs of individual assets. |
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Fair Value Hierarchy |
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Under ASC 820, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: |
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Level 1 — Valuation is based upon quoted prices for identical instruments in active markets. |
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Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, or similar instruments in markets that are not active, and model-based valuation techniques for all significant assumptions are observable in the market. |
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Level 3 — Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
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The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring or non-recurring basis. |
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Assets |
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Securities Available for Sale and Held to Maturity |
Securities available for sale are recorded at fair value on a recurring basis. Securities held to maturity are generally recorded at cost and are recorded at fair value only to the extent a decline in fair value is determined to be other-than-temporary. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury securities. Level 2 securities include U.S. government and agency securities, mortgage-backed securities and private collateralized mortgage obligations, municipal bonds and corporate debt securities. Level 3 securities consist primarily of Z-TRANCHE mortgage-backed securities and corporate debt securities. On a quarterly basis, a secondary independent pricing service is used for a sample of securities to validate the pricing from Heartland's primary pricing service. |
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Trading Assets |
Trading assets are recorded at fair value and consist of securities held for trading purposes. The valuation method for trading securities is the same as the methodology used for securities classified as available for sale. |
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Loans Held for Sale |
Loans held for sale are carried at the lower of cost or fair value on an aggregate basis. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, Heartland classifies loans held for sale subjected to nonrecurring fair value adjustments as Level 2. |
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Loans Held to Maturity |
Heartland does not record loans held to maturity at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is 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 in accordance with ASC 310. The fair value of impaired loans is measured using one of the following impairment methods: 1) the present value of expected future cash flows discounted at the loan's effective interest rate or 2) the observable market price of the loan or 3) the fair value of the collateral if the loan is collateral dependent. In accordance with ASC 820, impaired loans measured at fair value are classified as nonrecurring Level 3 in the fair value hierarchy. |
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Mortgage Servicing Rights |
Mortgage servicing rights assets represent the value associated with servicing residential real estate loans that have been sold to outside investors with servicing retained. Heartland uses the amortization method (i.e., the lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, to determine the carrying value of its mortgage servicing rights. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates, prepayment speeds and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. Mortgage servicing rights are subject to impairment testing. The carrying values of these rights are reviewed quarterly for impairment based upon the calculation of fair value as performed by an outside third party. For purposes of measuring impairment, the rights are stratified into certain risk characteristics including note type and note term. If the valuation model reflects a fair value less than the carrying value, mortgage servicing rights are adjusted to fair value through a valuation allowance. Heartland classifies mortgage servicing rights as nonrecurring with Level 3 measurement inputs. |
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Commercial Servicing Rights |
Commercial servicing rights assets represent the value associated with servicing commercial loans that have been sold to Small Business Administration and United States Department of Agriculture with servicing retained. Heartland uses the amortization method (i.e., the lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, to determine the carrying value of its commercial servicing rights. The fair value for servicing assets is determined through market prices for comparable servicing contracts, when available, or through a valuation model that calculates the present value of estimated future net servicing income. Inputs utilized include discount rates, prepayment speeds and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. Commercial servicing rights are subject to impairment testing, and the carrying values of these rights are reviewed quarterly for impairment based upon the calculation of fair value as performed by an outside third party. If the valuation model reflects a fair value less than the carrying value, commercial servicing rights are adjusted to fair value through a valuation allowance. Heartland classifies commercial servicing rights as nonrecurring with Level 3 measurement inputs. |
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Derivative Financial Instruments |
Heartland's current interest rate risk strategy includes interest rate swaps. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. To comply with the provisions of ASC 820, Heartland incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, Heartland has considered the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. |
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Although Heartland has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2015, and December 31, 2014, Heartland has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, Heartland has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. |
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Interest rate lock commitments |
Heartland uses an internal valuation model that relies on internally developed inputs to estimate the fair value of its interest rate lock commitments which is based on unobservable inputs that reflect management's assumptions and specific information about each borrower. Interest rate lock commitments are classified in Level 3 of the fair value hierarchy. |
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Forward commitments |
The fair value of forward commitments are estimated using an internal valuation model, which includes current trade pricing for similar financial instruments in active markets that Heartland has the ability to access and are classified in Level 2 of the fair value hierarchy. |
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Other Real Estate Owned |
Other real estate owned ("OREO") represents property acquired through foreclosures and settlements of loans. Property acquired is carried at the fair value of the property at the time of acquisition (representing the property's cost basis), plus any acquisition costs, or the estimated fair value of the property, less disposal costs. Heartland considers third party appraisals, as well as independent fair value assessments from realtors or persons involved in selling OREO, in determining the fair value of particular properties. Accordingly, the valuation of OREO is subject to significant external and internal judgment. Heartland periodically reviews OREO to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. OREO is classified as nonrecurring Level 3. |
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The table below presents Heartland's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2015, and December 31, 2014, in thousands, aggregated by the level in the fair value hierarchy within which those measurements fall: |
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| Total Fair Value | | Level 1 | | Level 2 | | Level 3 | | | | |
March 31, 2015 | | | | | | | | | | | |
Assets | | | | | | | | | | | |
Securities available for sale | | | | | | | | | | | |
U.S. government corporations and agencies | $ | 45,330 | | | $ | 530 | | | $ | 44,800 | | | $ | — | | | | | |
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Mortgage-backed securities | 1,154,351 | | | — | | | 1,149,268 | | | 5,083 | | | | | |
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Obligations of states and political subdivisions | 148,022 | | | — | | | 148,022 | | | — | | | | | |
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Corporate debt securities | 740 | | | — | | | — | | | 740 | | | | | |
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Equity securities | 5,094 | | | — | | | 5,094 | | | — | | | | | |
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Derivative financial instruments | — | | | — | | | — | | | — | | | | | |
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Interest rate lock commitments | 6,875 | | | — | | | — | | | 6,875 | | | | | |
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Forward commitments | 404 | | | — | | | 404 | | | — | | | | | |
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Total assets at fair value | $ | 1,360,816 | | | $ | 530 | | | $ | 1,347,588 | | | $ | 12,698 | | | | | |
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Liabilities | | | | | | | | | | | |
Derivative financial instruments | $ | 4,536 | | | $ | — | | | $ | 4,536 | | | $ | — | | | | | |
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Forward commitments | 1,873 | | | — | | | 1,873 | | | — | | | | | |
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Total liabilities at fair value | $ | 6,409 | | | $ | — | | | $ | 6,409 | | | $ | — | | | | | |
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December 31, 2014 | | | | | | | | | | | |
Assets | | | | | | | | | | | |
Securities available for sale | | | | | | | | | | | |
U.S. government corporations and agencies | $ | 24,093 | | | $ | 2,529 | | | $ | 21,564 | | | $ | — | | | | | |
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Mortgage-backed securities | 1,219,266 | | | — | | | 1,214,319 | | | 4,947 | | | | | |
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Obligations of states and political subdivisions | 153,426 | | | — | | | 153,426 | | | — | | | | | |
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Corporate debt securities | — | | | — | | | — | | | — | | | | | |
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Equity securities | 5,083 | | | — | | | 5,083 | | | — | | | | | |
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Interest rate lock commitments | 2,496 | | | — | | | — | | | 2,496 | | | | | |
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Forward commitments | 275 | | | — | | | 275 | | | — | | | | | |
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Total assets at fair value | $ | 1,404,639 | | | $ | 2,529 | | | $ | 1,394,667 | | | $ | 7,443 | | | | | |
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Liabilities | | | | | | | | | | | |
Derivative financial instruments | $ | 3,646 | | | $ | — | | | $ | 3,646 | | | $ | — | | | | | |
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Forward commitments | 1,619 | | | — | | | 1,619 | | | — | | | | | |
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Total liabilities at fair value | $ | 5,265 | | | $ | — | | | $ | 5,265 | | | $ | — | | | | | |
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The tables below present Heartland's assets that are measured at fair value on a nonrecurring basis, in thousands: |
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| Fair Value Measurements at March 31, 2015 |
| Total | | Quoted Prices in | | Significant Other | | Significant | | Year-to- |
Active Markets for | Observable | Unobservable | Date |
Identical Assets | Inputs | Inputs | Losses |
(Level 1) | (Level 2) | (Level 3) | |
Collateral dependent impaired loans: | | | | | | | | | |
Commercial | $ | 68 | | | $ | — | | | $ | — | | | $ | 68 | | | $ | — | |
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Commercial real estate | 6,285 | | | — | | | — | | | 6,285 | | | 78 | |
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Agricultural and agricultural real estate | 276 | | | — | | | — | | | 276 | | | 276 | |
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Residential real estate | 2,474 | | | — | | | — | | | 2,474 | | | — | |
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Consumer | 1,760 | | | — | | | — | | | 1,760 | | | — | |
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Total collateral dependent impaired loans | $ | 10,863 | | | $ | — | | | $ | — | | | $ | 10,863 | | | $ | 354 | |
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Other real estate owned | $ | 19,097 | | | $ | — | | | $ | — | | | $ | 19,097 | | | $ | 361 | |
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| Fair Value Measurements at December 31, 2014 |
| Total | | Quoted Prices in | | Significant Other | | Significant | | Year-to- |
Active Markets for | Observable | Unobservable | Date |
Identical Assets | Inputs | Inputs | Losses |
(Level 1) | (Level 2) | (Level 3) | |
Collateral dependent impaired loans: | | | | | | | | | |
Commercial | $ | 1,033 | | | $ | — | | | $ | — | | | $ | 1,033 | | | $ | 659 | |
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Commercial real estate | 12,584 | | | — | | | — | | | 12,584 | | | 492 | |
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Agricultural and agricultural real estate | 552 | | | — | | | — | | | 552 | | | 2,229 | |
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Residential real estate | 3,173 | | | — | | | — | | | 3,173 | | | — | |
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Consumer | 2,003 | | | — | | | — | | | 2,003 | | | 22 | |
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Total collateral dependent impaired loans | $ | 19,345 | | | $ | — | | | $ | — | | | $ | 19,345 | | | $ | 3,402 | |
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Other real estate owned | $ | 19,016 | | | $ | — | | | $ | — | | | $ | 19,016 | | | $ | 1,938 | |
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The following tables present additional quantitative information about assets measured at fair value and for which Heartland has utilized Level 3 inputs to determine fair value, in thousands: |
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| Fair Value | | Valuation | | Unobservable | | Range | | | | | | | | | | |
at 3/31/15 | Technique | Input | (Weighted Average) | | | | | | | | | | |
Z-TRANCHE Securities | $ | 5,083 | | | Discounted cash flows | | Pretax discount rate | | 7.00 - 9.00% | | | | | | | | | | |
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| | | | | Actual defaults | | 17.30 - 36.76% (30.07%) | | | | | | | | | | |
| | | | | Actual deferrals | | 5.84 - 27.13% (17.35%) | | | | | | | | | | |
Corporate debt securities | 740 | | | Discounted cash flows | | Bank analysis | | (1) | | | | | | | | | | |
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Interest rate lock commitments | 6,875 | | | Discounted cash flows | | Closing ratio | | (2) | | | | | | | | | | |
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Collateral dependent impaired loans: | | | | | | | | | | | | | | | | | |
Commercial | 68 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
Commercial real estate | 6,285 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
Agricultural and agricultural real estate | 276 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
Residential real estate | 2,474 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
Consumer | 1,760 | | | Modified appraised value | | Third party valuation | | (3) | | | | | | | | | | |
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| | | | | Valuation discount | | (3) | | | | | | | | | | |
Other real estate owned | 19,097 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
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(1) The unobservable input is the bank analysis market using Moody's Global Bank Rating Methodology. The analysis takes into consideration various performance metrics as well as yield on the debt securities and credit risk analysis. | | | | | | | | | | |
(2) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at March 31, 2015 was 83%. | | | | | | | | | | |
(3) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful. | | | | | | | | | | |
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| Fair Value | | Valuation | | Unobservable | | Range | | | | | | | | | | |
at 12/31/14 | Technique | Input | (Weighted Average) | | | | | | | | | | |
Z-TRANCHE Securities | $ | 4,947 | | | Discounted cash flows | | Pretax discount rate | | 7.00 - 9.00% | | | | | | | | | | |
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| | | | | Actual defaults | | 15.60 - 30.60% (24.50%) | | | | | | | | | | |
| | | | | Actual deferrals | | 7.20 - 17.30% (12.90%) | | | | | | | | | | |
Corporate debt securities | — | | | Discounted cash flows | | Bank analysis | | (1) | | | | | | | | | | |
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Interest rate lock commitments | 2,496 | | | Discounted cash flows | | Closing ratio | | (2) | | | | | | | | | | |
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Collateral dependent impaired loans: | | | | | | | | | | | | | | | | | |
Commercial | 1,033 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
Commercial real estate | 12,584 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
Agricultural and agricultural real estate | 552 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
Residential real estate | 3,173 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
Consumer | 2,003 | | | Modified appraised value | | Third party valuation | | (3) | | | | | | | | | | |
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| | | | | Valuation discount | | (3) | | | | | | | | | | |
Other real estate owned | 19,016 | | | Modified appraised value | | Third party appraisal | | (3) | | | | | | | | | | |
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| | | | | Appraisal discount | | (3) | | | | | | | | | | |
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(1) The unobservable input is the bank analysis market using Moody's Global Bank Rating Methodology. The analysis takes into consideration various performance metrics as well as yield on the debt securities and credit risk analysis. | | | | | | | | | | |
(2) The significant unobservable input used in the fair value measurement is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data; therefore providing a range would not be meaningful. The weighted average closing ratio at December 31, 2014 was 84%. | | | | | | | | | | |
(3) Third party appraisals are obtained as to the value of the underlying asset, but disclosure of this information would not provide meaningful information, as the range will vary widely from loan to loan. Types of discounts considered included age of the appraisal, local market conditions, current condition of the property, and estimated sales costs. These discounts will also vary from loan to loan, thus providing range would not be meaningful. | | | | | | | | | | |
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The changes in fair value of the Z-TRANCHE, a Level 3 asset, that is measured on a recurring basis is summarized in the following table, in thousands: |
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| For the Three Months Ended | | For the Year Ended | | | | | | | | | | | | |
31-Mar-15 | 31-Dec-14 | | | | | | | | | | | | |
Balance at January 1, | $ | 4,947 | | | $ | 3,298 | | | | | | | | | | | | | |
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Total gains (losses): | | | | | | | | | | | | | | | | |
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Included in earnings | — | | | — | | | | | | | | | | | | | |
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Included in other comprehensive income | 239 | | | 1,783 | | | | | | | | | | | | | |
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Purchases, sales and settlements: | | | | | | | | | | | | | | | |
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Purchases | 6 | | | — | | | | | | | | | | | | | |
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Sales | — | | | — | | | | | | | | | | | | | |
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Settlements | (109 | ) | | (134 | ) | | | | | | | | | | | | |
Balance at period end | $ | 5,083 | | | $ | 4,947 | | | | | | | | | | | | | |
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The changes in fair value of the corporate debt securities, Level 3 assets, that are measured on a recurring basis is summarized in the following table, in thousands: |
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| For the Three Months Ended | | For the Year Ended | | | | | | | | | | | | |
31-Mar-15 | 31-Dec-14 | | | | | | | | | | | | |
Balance at January 1, | $ | — | | | $ | — | | | | | | | | | | | | | |
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Total gains (losses): | | | | | | | | | | | | | | | | | |
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Included in earnings | — | | | — | | | | | | | | | | | | | |
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Included in other comprehensive income | — | | | — | | | | | | | | | | | | | |
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Purchases, acquired, sales and settlements: | | | | | | | | | | | | | | | |
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Purchases | — | | | — | | | | | | | | | | | | | |
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Acquired | 740 | | | — | | | | | | | | | | | | | |
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Sales | — | | | — | | | | | | | | | | | | | |
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Settlements | — | | | — | | | | | | | | | | | | | |
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Balance at period end | $ | 740 | | | $ | — | | | | | | | | | | | | | |
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The changes in fair value of the interest rate lock commitments, which are Level 3 financial instruments and are measured on a recurring basis, are summarized in the following table, in thousands: |
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| For the Three Months Ended | | For the Year Ended | | | | | | | | | | | | |
31-Mar-15 | 31-Dec-14 | | | | | | | | | | | | |
Balance at January 1, | $ | 2,496 | | | $ | 1,809 | | | | | | | | | | | | | |
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Total gains (losses) included in earnings | 5,544 | | | 2,422 | | | | | | | | | | | | | |
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Issuances | 1,135 | | | 2,038 | | | | | | | | | | | | | |
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Settlements | (2,300 | ) | | (3,773 | ) | | | | | | | | | | | | |
Balance at period end | $ | 6,875 | | | $ | 2,496 | | | | | | | | | | | | | |
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Gains included in net gains on sale of loans held for sale attributable to interest rate lock commitments held at March 31, 2015, and December 31, 2014, were $6.9 million and $2.5 million, respectively. |
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The tables below summarize the estimated fair value of Heartland's financial instruments as defined by ASC 825 as of March 31, 2015, and December 31, 2014, in thousands. The carrying amounts in the following tables are recorded in the consolidated balance sheets under the indicated captions. In accordance with ASC 825, the assets and liabilities that are not financial instruments are not included in the disclosure, such as the value of the mortgage servicing rights, premises, furniture and equipment, goodwill and other intangibles and other liabilities. |
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Heartland does not believe that the estimated information presented herein is representative of the earnings power or value of Heartland. The following analysis, which is inherently limited in depicting fair value, also does not consider any value associated with either existing customer relationships or the ability of Heartland to create value through loan origination, deposit gathering or fee generating activities. Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different. |
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| | | | | Fair Value Measurements at |
31-Mar-15 |
| Carrying | | Estimated | | Quoted Prices in | | Significant Other | | Significant |
Amount | Fair | Active Markets for | Observable | Unobservable |
| Value | Identical Assets | Inputs | Inputs |
| | (Level 1) | (Level 2) | (Level 3) |
Financial assets: | | | | | | | | | |
Cash and cash equivalents | $ | 111,732 | | | $ | 111,732 | | | $ | 111,732 | | | $ | — | | | $ | — | |
|
Time deposits in other financial institutions | 2,605 | | | 2,605 | | | 2,605 | | | — | | | — | |
|
Securities: | | | | | | | | | |
Available for sale | 1,353,537 | | | 1,353,537 | | | 530 | | | 1,347,184 | | | 5,823 | |
|
Held to maturity | 284,030 | | | 297,660 | | | — | | | 297,660 | | | — | |
|
Other investments | 18,297 | | | 18,297 | | | — | | | 18,062 | | | 235 | |
|
Loans held for sale | 105,670 | | | 105,670 | | | — | | | 105,670 | | | — | |
|
Loans, net: | | | | | | | | | |
Commercial | 1,122,604 | | | 1,095,511 | | | — | | | 1,095,443 | | | 68 | |
|
Commercial real estate | 1,915,520 | | | 1,934,635 | | | — | | | 1,928,350 | | | 6,285 | |
|
Agricultural and agricultural real estate | 409,561 | | | 412,624 | | | — | | | 412,348 | | | 276 | |
|
Residential real estate | 408,808 | | | 400,397 | | | — | | | 397,923 | | | 2,474 | |
|
Consumer | 345,342 | | | 350,993 | | | — | | | 349,233 | | | 1,760 | |
|
Total Loans, net | 4,201,835 | | | 4,194,160 | | | — | | | 4,183,297 | | | 10,863 | |
|
Derivative financial instruments | — | | | — | | | — | | | — | | | — | |
|
Interest rate lock commitments | 6,875 | | | 6,875 | | | — | | | — | | | 6,875 | |
|
Forward commitments | 404 | | | 404 | | | — | | | 404 | | | — | |
|
Financial liabilities: | | | | | | | | | |
Deposits | | | | | | | | | |
Demand deposits | 1,515,004 | | | 1,515,004 | | | — | | | 1,515,004 | | | — | |
|
Savings deposits | 2,863,744 | | | 2,863,744 | | | — | | | 2,863,744 | | | — | |
|
Time deposits | 887,650 | | | 887,650 | | | — | | | 887,650 | | | — | |
|
Short term borrowings | 259,335 | | | 259,335 | | | — | | | 259,335 | | | — | |
|
Other borrowings | 361,300 | | | 364,534 | | | — | | | 364,534 | | | — | |
|
Derivative financial instruments | 4,536 | | | 4,536 | | | — | | | 4,536 | | | — | |
|
Forward commitments | 1,873 | | | 1,873 | | | — | | | 1,873 | | | — | |
|
|
|
| | | | | | | | | | | | | | | | | | | |
| | | | | Fair Value Measurements at |
31-Dec-14 |
| Carrying | | Estimated | | Quoted Prices in | | Significant Other | | Significant |
Amount | Fair | Active Markets for | Observable | Unobservable |
| Value | Identical Assets | Inputs | Inputs |
| | (Level 1) | (Level 2) | (Level 3) |
Financial assets: | | | | | | | | | |
Cash and cash equivalents | $ | 73,871 | | | $ | 73,871 | | | $ | 73,871 | | | $ | — | | | $ | — | |
|
Time deposits in other financial institutions | 2,605 | | | 2,605 | | | 2,605 | | | — | | | — | |
|
Securities: | | | | | | | | | |
Available for sale | 1,401,868 | | | 1,401,868 | | | 2,529 | | | 1,394,392 | | | 4,947 | |
|
Held to maturity | 284,587 | | | 296,768 | | | — | | | 296,768 | | | — | |
|
Other investments | 20,498 | | | 20,498 | | | — | | | 20,263 | | | 235 | |
|
Loans held for sale | 70,514 | | | 70,514 | | | — | | | 70,514 | | | — | |
|
Loans, net: | | | | | | | | | |
Commercial | 1,024,065 | | | 1,009,802 | | | — | | | 1,008,769 | | | 1,033 | |
|
Commercial real estate | 1,690,899 | | | 1,699,722 | | | — | | | 1,687,138 | | | 12,584 | |
|
Agricultural and agricultural real estate | 420,623 | | | 423,968 | | | — | | | 423,416 | | | 552 | |
|
Residential real estate | 377,094 | | | 370,178 | | | — | | | 367,005 | | | 3,173 | |
|
Consumer | 323,873 | | | 330,211 | | | — | | | 328,208 | | | 2,003 | |
|
Total Loans, net | 3,836,554 | | | 3,833,881 | | | — | | | 3,814,536 | | | 19,345 | |
|
Derivative financial instruments | — | | | — | | | — | | | — | | | — | |
|
Interest rate lock commitments | 2,496 | | | 2,496 | | | — | | | — | | | 2,496 | |
|
Forward commitments | 275 | | | 275 | | | — | | | 275 | | | — | |
|
Financial liabilities: | | | | | | | | | |
Deposits | | | | | | | | | |
Demand deposits | 1,295,193 | | | 1,295,193 | | | — | | | 1,295,193 | | | — | |
|
Savings deposits | 2,687,493 | | | 2,687,493 | | | — | | | 2,687,493 | | | — | |
|
Time deposits | 785,336 | | | 785,336 | | | — | | | 785,336 | | | — | |
|
Short term borrowings | 330,264 | | | 330,264 | | | — | | | 330,264 | | | — | |
|
Other borrowings | 396,255 | | | 401,978 | | | — | | | 401,978 | | | — | |
|
Derivative financial instruments | 3,646 | | | 3,646 | | | — | | | 3,646 | | | — | |
|
Forward commitments | 1,619 | | | 1,619 | | | — | | | 1,619 | | | — | |
|
|
Cash and Cash Equivalents — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments. |
|
Time Deposits in Other Financial Institutions — The carrying amount is a reasonable estimate of fair value due to the short-term nature of these instruments. |
|
Securities — For securities either held to maturity, available for sale or trading, fair value equals quoted market price if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. For Level 3 securities, Heartland utilizes independent pricing provided by third party vendors or brokers. |
|
Other Investments — Fair value measurement of other investments, which consists primarily of FHLB stock, are based on their redeemable value, which is at cost due to the restrictions placed on their transferability. The market for these securities is restricted to the issuer of the stock and subject to impairment evaluation. |
|
Loans and Leases — The fair value of loans is estimated using an entrance price concept by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of impaired loans is measured using the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the underlying collateral. The fair value of loans held for sale is estimated using quoted market prices. |
|
Interest Rate Lock Commitments — The fair value of interest rate lock commitments is estimated using an internal valuation model, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated closing ratio based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment group. |
|
Forward Commitments — The fair value of these instruments is estimated using an internal valuation model, which includes current trade pricing for similar financial instruments. |
|
Derivative Financial Instruments — The fair value of all derivatives is estimated based on the amount that Heartland would pay or would be paid to terminate the contract or agreement, using current rates and, when appropriate, the current creditworthiness of the counter-party. |
|
Deposits — The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. If the fair value of the fixed maturity certificates of deposit is calculated at less than the carrying amount, the carrying value of these deposits is reported as the fair value. |
|
Short-term and Other Borrowings — Rates currently available to Heartland for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. |
|
Commitments to Extend Credit, Unused Lines of Credit and Standby Letters of Credit — Based upon management's analysis of the off balance sheet financial instruments, there are no significant unrealized gains or losses associated with these financial instruments based upon review of 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. |