Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 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.



(Dollars in thousands)	Fair value carrying amount		Aggregate unpaid principal		Excess of fair value carrying amount over (under) unpaid principal
September 30, 2014
Mortgages held for sale reported at fair value	$	13,070	$	13,126	$	(56	)	(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 (under) 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 measured at fair value on a recurring basis.



(Dollars in thousands)	Level 1		Level 2		Level 3		Total
September 30, 2014
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	19,744	$	374,155	$	—	$	393,899
U.S. States and political subdivisions securities	—		123,093		3,922		127,015
Mortgage-backed securities — Federal agencies	—		253,461		—		253,461
Corporate debt securities	—		31,979		—		31,979
Foreign government and other securities	—		—		808		808
Total debt securities	19,744		782,688		4,730		807,162
Marketable equity securities	6,542		—		—		6,542
Total investment securities available-for-sale	26,286		782,688		4,730		813,704
Trading account securities	196		—		—		196
Mortgages held for sale	—		13,070		—		13,070
Accrued income and other assets (interest rate swap agreements)	—		8,548		—		8,548
Total	$	26,482	$	804,306	$	4,730	$	835,518

Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	8,713	$	—	$	8,713
Total	$	—	$	8,713	$	—	$	8,713

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 September 30, 2014 and 2013.



(Dollars in thousands)	U.S. States and political subdivisions securities			Foreign government and other securities			Investment securities available-for-sale
Beginning balance July 1, 2014	$	4,699		$	905		$	5,604
Total gains or losses (realized/unrealized):
Included in earnings	—			—			—
Included in other comprehensive income	(14		)	3			(11		)
Purchases	—			—			—
Issuances	—			—			—
Sales	—			—			—
Settlements	—			—			—
Maturities	(763		)	(100		)	(863		)
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Ending balance September 30, 2014	$	3,922		$	808		$	4,730

Beginning balance July 1, 2013	$	5,452		$	—		$	5,452
Total gains or losses (realized/unrealized):
Included in earnings	—			—			—
Included in other comprehensive income	56			—			56
Purchases	1,500			—			1,500
Issuances	—			—			—
Sales	—			—			—
Settlements	—			—			—
Maturities	(491		)	—			(491		)
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Ending balance September 30, 2013	$	6,517		$	—		$	6,517

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

The following table shows the carrying value of assets measured at fair value on a non-recurring basis.



(Dollars in thousands)	Level 1		Level 2		Level 3		Total
September 30, 2014
Impaired loans - collateral based	$	—	$	—	$	8,016	$	8,016
Accrued income and other assets (partnership investments)	—		—		1,377		1,377
Accrued income and other assets (mortgage servicing rights)	—		—		4,804		4,804
Accrued income and other assets (repossessions)	—		—		5,421		5,421
Accrued income and other assets (other real estate)	—		—		2,234		2,234
Total	$	—	$	—	$	21,852	$	21,852

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.



(Dollars in thousands)	Carrying or Contract Value		Fair Value		Level 1		Level 2		Level 3
September 30, 2014
Assets:
Cash and due from banks	$	54,542	$	54,542	$	54,542	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	27,169		27,169		27,169		—		—
Investment securities, available-for-sale	813,704		813,704		26,286		782,688		4,730
Other investments and trading account securities	23,213		23,213		23,213		—		—
Mortgages held for sale	13,070		13,070		—		13,070		—
Loans and leases, net of reserve for loan and lease losses	3,567,021		3,591,915		—		—		3,591,915
Cash surrender value of life insurance policies	60,048		60,048		60,048		—		—
Mortgage servicing rights	4,804		7,791		—		—		7,791
Interest rate swaps	8,548		8,548		—		8,548		—
Liabilities:
Deposits	$	3,835,972	$	3,836,542	$	2,775,174	$	1,061,368	$	—
Short-term borrowings	216,722		216,722		111,570		105,152		—
Long-term debt and mandatorily redeemable securities	56,171		55,787		—		55,787		—
Subordinated notes	58,764		66,296		—		66,296		—
Interest rate swaps	8,713		8,713		—		8,713		—
Off-balance-sheet instruments *	—		189		—		189		—

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.

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.



(Dollars in thousands)	Carrying Value		Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
September 30, 2014
Impaired loans	$	8,016	$	8,016	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	10% - 90%

Mortgage servicing rights	4,804		7,791		Discounted cash flows	Constant prepayment rate (CPR)	9.2% - 13.8%
						Discount rate	9.8% - 13.3%

Repossessions	5,421		5,720		Appraisals, trade publications and auction values	Discount for lack of marketability	0% - 11%

Other real estate	2,234		2,741		Appraisals	Discount for lack of marketability	6% - 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%

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.



(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
September 30, 2014
Investment securities available-for sale
Direct placement municipal securities	$	3,922	Discounted cash flows	Credit spread assumption	0.69% - 1.29%

Foreign government	$	808	Discounted cash flows	Market yield assumption	0.42% - 1.57%

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

- 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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