Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

Schedule of differences between the fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount

The following table shows the differences between the fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount the Company is contractually entitled to receive at maturity on March 31, 2014 and December 31, 2013:



(Dollars in thousands)	Fair value carrying amount		Aggregate unpaid principal		Excess of fair value carrying amount over (under) unpaid principal
March 31, 2014
Mortgages held for sale reported at fair value	$	10,961	$	10,717	$	244	(1)

December 31, 2013
Mortgages held for sale reported at fair value	$	6,079	$	5,974	$	105	(1)


(1)	The excess of fair value carrying amount over unpaid principal is included in mortgage banking income and includes changes in fair value at and subsequent to funding and gains and losses on the related loan commitment prior to funding.

Schedule of assets and liabilities measured at fair value on a recurring basis

The following table shows the balance of assets and liabilities at March 31, 2014 and December 31, 2013 measured at fair value on a recurring basis.



(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2014
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	19,681	$	381,709	$	—	$	401,390
U.S. States and political subdivisions securities	—		122,685		4,709		127,394
Mortgage-backed securities — Federal agencies	—		269,520		—		269,520
Corporate debt securities	—		32,140		—		32,140
Foreign government and other securities	—		702		—		702
Total debt securities	19,681		806,756		4,709		831,146
Marketable equity securities	8,451		—		—		8,451
Total investment securities available-for-sale	28,132		806,756		4,709		839,597
Trading account securities	192		—		—		192
Mortgages held for sale	—		10,961		—		10,961
Accrued income and other assets (interest rate swap agreements)	—		9,531		—		9,531
Total	$	28,324	$	827,248	$	4,709	$	860,281

Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	9,719	$	—	$	9,719
Total	$	—	$	9,719	$	—	$	9,719

December 31, 2013
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	19,631	$	375,408	$	—	$	395,039
U.S. States and political subdivisions securities	—		117,741		5,498		123,239
Mortgage-backed securities — Federal agencies	—		275,080		—		275,080
Corporate debt securities	—		31,065		—		31,065
Foreign government and other securities	—		709		—		709
Total debt securities	19,631		800,003		5,498		825,132
Marketable equity securities	7,568		—		—		7,568
Total investment securities available-for-sale	27,199		800,003		5,498		832,700
Trading account securities	192		—		—		192
Mortgages held for sale	—		6,079		—		6,079
Accrued income and other assets (interest rate swap agreements)	—		9,894		—		9,894
Total	$	27,391	$	815,976	$	5,498	$	848,865

Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	10,087	$	—	$	10,087
Total	$	—	$	10,087	$	—	$	10,087

Schedule of changes in investment securities available-for-sale Level 3 assets measured at fair value on a recurring basis

The following table shows changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended March 31, 2014 and 2013.



(Dollars in thousands)	U.S. States and political subdivisions securities
Beginning balance January 1, 2014	$	5,498
Total gains or losses (realized/unrealized):
Included in earnings	—
Included in other comprehensive income	16
Purchases	—
Issuances	—
Sales	—
Settlements	—
Maturities	(805		)
Transfers into Level 3	—
Transfers out of Level 3	—
Ending balance March 31, 2014	$	4,709

Beginning balance January 1, 2013	$	7,701
Total gains or losses (realized/unrealized):
Included in earnings	—
Included in other comprehensive income	(93		)
Purchases	—
Issuances	—
Sales	—
Settlements	—
Maturities	(538		)
Transfers into Level 3	—
Transfers out of Level 3	—
Ending balance March 31, 2013	$	7,070

Schedule of carrying value of assets measured at fair value on a non-recurring basis

The following table shows the carrying value of assets at March 31, 2014 and December 31, 2013 measured at fair value on a non-recurring basis.



(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2014
Impaired loans - collateral based	$	—	$	—	$	996	$	996
Accrued income and other assets (partnership investments)	—		—		2,002		2,002
Accrued income and other assets (mortgage servicing rights)	—		—		4,759		4,759
Accrued income and other assets (repossessions)	—		—		7,998		7,998
Accrued income and other assets (other real estate)	—		—		2,892		2,892
Total	$	—	$	—	$	18,647	$	18,647

December 31, 2013
Impaired loans - collateral based	$	—	$	—	$	670	$	670
Accrued income and other assets (partnership investments)	—		—		2,156		2,156
Accrued income and other assets (mortgage servicing rights)	—		—		4,844		4,844
Accrued income and other assets (repossessions)	—		—		4,262		4,262
Accrued income and other assets (other real estate)	—		—		5,490		5,490
Total	$	—	$	—	$	17,422	$	17,422

Schedule of fair values of financial instruments

The following table shows the fair values of the Company’s financial instruments as of March 31, 2014 and December 31, 2013.



(Dollars in thousands)	Carrying or Contract Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2014
Assets:
Cash and due from banks	$	92,465	$	92,465	$	92,465	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	1,362		1,362		1,362		—		—
Investment securities, available-for-sale	839,597		839,597		28,132		806,756		4,709
Other investments and trading account securities	22,592		22,592		22,592		—		—
Mortgages held for sale	10,961		10,961		—		10,961		—
Loans and leases, net of reserve for loan and lease losses	3,492,558		3,501,164		—		—		3,501,164
Cash surrender value of life insurance policies	59,045		59,045		59,045		—		—
Mortgage servicing rights	4,759		7,868		—		—		7,868
Interest rate swaps	9,531		9,531		—		9,531		—
Liabilities:
Deposits	$	3,708,423	$	3,711,388	$	2,716,638	$	994,750	$	—
Short-term borrowings	297,647		297,647		172,366		125,281		—
Long-term debt and mandatorily redeemable securities	59,555		58,324		—		58,324		—
Subordinated notes	58,764		69,706		—		69,706		—
Interest rate swaps	9,719		9,719		—		9,719		—
Off-balance-sheet instruments *	—		178		—		178		—

December 31, 2013
Assets:
Cash and due from banks	$	77,568	$	77,568	$	77,568	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	2,484		2,484		2,484		—		—
Investment securities, available-for-sale	832,700		832,700		27,199		800,003		5,498
Other investments and trading account securities	22,592		22,592		22,592		—		—
Mortgages held for sale	6,079		6,079		—		6,079		—
Loans and leases, net of reserve for loan and lease losses	3,465,819		3,491,718		—		—		3,491,718
Cash surrender value of life insurance policies	58,558		58,558		58,558		—		—
Mortgage servicing rights	4,844		8,127		—		—		8,127
Interest rate swaps	9,894		9,894		—		9,894		—
Liabilities:
Deposits	$	3,653,650	$	3,657,586	$	2,722,804	$	934,782	$	—
Short-term borrowings	314,131		314,131		184,304		129,827		—
Long-term debt and mandatorily redeemable securities	58,335		56,896		—		56,896		—
Subordinated notes	58,764		62,602		—		62,602		—
Interest rate swaps	10,087		10,087		—		10,087		—
Off-balance-sheet instruments *	—		177		—		177		—

* Represents estimated cash outflows required to currently settle the obligations at current market rates.

Recurring

Fair Value Measurements

Schedule of valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis

The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring basis at March 31, 2014 and December 31, 2013.



(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
March 31, 2014
Investment securities available-for sale
Direct placement municipal securities	$	4,709	Discounted cash flows	Credit spread assumption	0.89% - 1.52%

December 31, 2013
Investment securities available-for sale
Direct placement municipal securities	$	5,498	Discounted cash flows	Credit spread assumption	0.90% - 1.52%

Non-recurring

Fair Value Measurements

Schedule of valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis

The following table below shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a non-recurring basis at March 31, 2014 and December 31, 2013.



(Dollars in thousands)	Carrying Value		Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
March 31, 2014
Impaired loans	$	996	$	996	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	20% - 35%

Mortgage servicing rights	4,759		7,868		Discounted cash flows	Constant prepayment rate (CPR)	10.6% - 13.4%
						Discount rate	9.9% - 13.4%

Repossessions	7,998		8,772		Appraisals, trade publications and auction values	Discount for lack of marketability	0% - 16%

Other real estate	2,892		3,392		Appraisals	Discount for lack of marketability	0% - 73%

December 31, 2013
Impaired loans	$	670	$	670	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	20% - 35%

Mortgage servicing rights	4,844		8,127		Discounted cash flows	Constant prepayment rate (CPR)	9.9% - 11.9%
						Discount rate	10.0% - 13.0%

Repossessions	4,262		4,435		Appraisals, trade publications and auction values	Discount for lack of marketability	0% - 16%

Other real estate	5,490		6,606		Appraisals	Discount for lack of marketability	0% - 48%

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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