Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

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
June 30, 2016
Mortgages held for sale reported at fair value	$	15,924	$	15,671	$	253	(1)

December 31, 2015
Mortgages held for sale reported at fair value	$	9,825	$	9,691	$	134	(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
June 30, 2016
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	20,044	$	380,087	$	—	$	400,131
U.S. States and political subdivisions securities	—		124,557		4,661		129,218
Mortgage-backed securities — Federal agencies	—		244,539		—		244,539
Corporate debt securities	—		32,430		—		32,430
Foreign government and other securities	—		—		810		810
Total debt securities	20,044		781,613		5,471		807,128
Marketable equity securities	7,130		—		—		7,130
Total investment securities available-for-sale	27,174		781,613		5,471		814,258
Mortgages held for sale	—		15,924		—		15,924
Accrued income and other assets (interest rate swap agreements)	—		17,012		—		17,012
Total	$	27,174	$	814,549	$	5,471	$	847,194

Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	17,334	$	—	$	17,334
Total	$	—	$	17,334	$	—	$	17,334

December 31, 2015
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	19,879	$	369,790	$	—	$	389,669
U.S. States and political subdivisions securities	—		118,462		4,528		122,990
Mortgage-backed securities — Federal agencies	—		236,297		—		236,297
Corporate debt securities	—		34,383		—		34,383
Foreign government and other securities	—		—		809		809
Total debt securities	19,879		758,932		5,337		784,148
Marketable equity securities	7,579		—		—		7,579
Total investment securities available-for-sale	27,458		758,932		5,337		791,727
Mortgages held for sale	—		9,825		—		9,825
Accrued income and other assets (interest rate swap agreements)	—		9,859		—		9,859
Total	$	27,458	$	778,616	$	5,337	$	811,411

Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	10,044	$	—	$	10,044
Total	$	—	$	10,044	$	—	$	10,044

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 June 30, 2016 and 2015.



(Dollars in thousands)	U.S. States and political subdivisions securities			Foreign government and other securities			Investment securities available-for-sale
Beginning balance April 1, 2016	$	4,810		$	809		$	5,619
Total gains or losses (realized/unrealized):
Included in earnings	—			—			—
Included in other comprehensive income	(4		)	1			(3		)
Purchases	—			—			—
Issuances	—			—			—
Sales	—			—			—
Settlements	—			—			—
Maturities	(145		)	—			(145		)
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Ending balance June 30, 2016	$	4,661		$	810		$	5,471

Beginning balance April 1, 2015	$	5,632		$	808		$	6,440
Total gains or losses (realized/unrealized):
Included in earnings	—			—			—
Included in other comprehensive income	(38		)	(1		)	(39		)
Purchases	—			—			—
Issuances	—			—			—
Sales	—			—			—
Settlements	—			—			—
Maturities	(150		)	—			(150		)
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Ending balance June 30, 2015	$	5,444		$	807		$	6,251

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
June 30, 2016
Impaired loans - collateral based	$	—	$	—	$	915	$	915
Accrued income and other assets (partnership investments)	—		—		24		24
Accrued income and other assets (mortgage servicing rights)	—		—		4,339		4,339
Accrued income and other assets (repossessions)	—		—		7,619		7,619
Accrued income and other assets (other real estate)	—		—		452		452
Total	$	—	$	—	$	13,349	$	13,349

December 31, 2015
Impaired loans - collateral based	$	—	$	—	$	220	$	220
Accrued income and other assets (partnership investments)	—		—		1,000		1,000
Accrued income and other assets (mortgage servicing rights)	—		—		4,608		4,608
Accrued income and other assets (repossessions)	—		—		6,927		6,927
Accrued income and other assets (other real estate)	—		—		736		736
Total	$	—	$	—	$	13,491	$	13,491

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
June 30, 2016
Assets:
Cash and due from banks	$	58,944	$	58,944	$	58,944	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	14,297		14,297		14,297		—		—
Investment securities, available-for-sale	814,258		814,258		27,174		781,613		5,471
Other investments	21,973		21,973		21,973		—		—
Mortgages held for sale	15,924		15,924		—		15,924		—
Loans and leases, net of reserve for loan and lease losses	4,061,305		4,073,538		—		—		4,073,538
Mortgage servicing rights	4,339		5,553		—		—		5,553
Interest rate swaps	17,012		17,012		—		17,012		—
Liabilities:
Deposits	$	4,325,084	$	4,333,142	$	3,116,348	$	1,216,794	$	—
Short-term borrowings	205,976		205,976		163,246		42,730		—
Long-term debt and mandatorily redeemable securities	64,738		64,796		—		64,796		—
Subordinated notes	58,764		49,493		—		49,493		—
Interest rate swaps	17,334		17,334		—		17,334		—
Off-balance-sheet instruments *	—		377		—		377		—

December 31, 2015
Assets:
Cash and due from banks	$	65,171	$	65,171	$	65,171	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	14,550		14,550		14,550		—		—
Investment securities, available-for-sale	791,727		791,727		27,458		758,932		5,337
Other investments	21,973		21,973		21,973		—		—
Mortgages held for sale	9,825		9,825		—		9,825		—
Loans and leases, net of reserve for loan and lease losses	3,906,580		3,927,967		—		—		3,927,967
Mortgage servicing rights	4,608		7,246		—		—		7,246
Interest rate swaps	9,859		9,859		—		9,859		—
Liabilities:
Deposits	$	4,139,186	$	4,139,649	$	2,998,443	$	1,141,206	$	—
Short-term borrowings	233,229		233,229		134,156		99,073		—
Long-term debt and mandatorily redeemable securities	57,379		57,193		—		57,193		—
Subordinated notes	58,764		48,304		—		48,304		—
Interest rate swaps	10,044		10,044		—		10,044		—
Off-balance-sheet instruments *	—		375		—		375		—

* 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.



(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
June 30, 2016
Investment securities available-for sale
Direct placement municipal securities	$	4,661	Discounted cash flows	Credit spread assumption	0.03% - 1.40%

Foreign government	$	801	Discounted cash flows	Market yield assumption	0.49% - 1.56%

December 31, 2015
Investment securities available-for sale
Direct placement municipal securities	$	4,528	Discounted cash flows	Credit spread assumption	1.27% - 2.03%

Foreign government	$	809	Discounted cash flows	Market yield assumption	0.88% - 2.00%

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
June 30, 2016
Impaired loans	$	915	$	915	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	10% - 100%

Mortgage servicing rights	4,339		5,553		Discounted cash flows	Constant prepayment rate (CPR)	14.2% - 20.1%
						Discount rate	9.1% - 12.0%

Repossessions	7,619		7,798		Appraisals, trade publications and auction values	Discount for lack of marketability	0% - 3%

Other real estate	452		481		Appraisals	Discount for lack of marketability	0% - 14%

December 31, 2015
Impaired loans	$	220	$	220	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	20%

Mortgage servicing rights	4,608		7,246		Discounted cash flows	Constant prepayment rate (CPR)	9.4% - 15.0%
						Discount rate	9.8% - 13.3%

Repossessions	6,927		7,104		Appraisals, trade publications and auction values	Discount for lack of marketability	2% - 3%

Other real estate	736		851		Appraisals	Discount for lack of marketability	8% - 35%

- 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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