FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2015

Difference Between Fair Value and Principal Balance for Mortgage Loans Held for Sale Measured at Fair Value

The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of September 30, 2015, December 31, 2014 and September 30, 2014:

	September 30, 2015		December 31, 2014		September 30, 2014
	(Dollars in Thousands)
Aggregate Fair Value of Mortgage Loans held for sale	$	111,807	$	94,759	$	110,059

Aggregate Unpaid Principal Balance	$	108,179	$	90,418	$	105,882

Past due loans of 90 days or more	$	-	$	-	$	-

Nonaccrual loans	$	-	$	-	$	-

Fair Value Measurements of Assets and Liabilities Measured on Recurring Basis

The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of September 30, 2015, December 31, 2014 and September 30, 2014 (dollars in thousands):

	Fair Value Measurements on a Recurring Basis As of September 30, 2015
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

U.S. government agencies	$	14,968	$	-	$	14,968	$	-
State, county and municipal securities		164,865		-		164,865		-
Corporate debt securities		6,032		-		3,532		2,500
Mortgage-backed securities		625,520		-		625,520		-
Mortgage loans held for sale		111,807		-		111,807		-
Mortgage banking derivative instruments		3,025		-		3,025		-
Total recurring assets at fair value	$	926,217	$	-	$	923,717	$	2,500

Derivative financial instruments	$	2,028	$	-	$	2,028	$	-
Total recurring liabilities at fair value	$	2,028	$	-	$	2,028	$	-

	Fair Value Measurements on a Recurring Basis As of December 31, 2014
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

U.S. government agencies	$	14,678	$	-	$	14,678	$	-
State, county and municipal securities		141,375		-		141,375		-
Corporate debt securities		11,040		-		8,540		2,500
Mortgage-backed securities		374,712		8,248		366,464		-
Mortgage loans held for sale		94,759		-		94,759		-
Mortgage banking derivative instruments		1,757		-		1,757		-
Total recurring assets at fair value	$	638,321	$	8,248	$	627,573	$	2,500

Derivative financial instruments	$	1,315	$	-	$	1,315	$	-
Mortgage banking derivative instruments		249		-		249		-
Total recurring liabilities at fair value	$	1,564	$	-	$	1,564	$	-

	Fair Value Measurements on a Recurring Basis As of September 30, 2014
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

U.S. government agencies	$	14,460	$	-	$	14,460	$	-
State, county and municipal securities		137,635		-		137,635		-
Corporate debt securities		10,965		-		8,465		2,500
Mortgage-backed securities		366,449		10,273		356,176		-
Mortgage loans held for sale		110,059		-		110,059		-
Mortgage banking derivative instruments		2,295		-		2,295		-
Total recurring assets at fair value	$	641,863	$	10,273	$	629,090	$	2,500

Derivative financial instruments	$	807	$	-	$	807	$	-
Total recurring liabilities at fair value	$	807	$	-	$	807	$	-

Summary of Fair Value Measurements of Assets Measured at Fair Value on Non-Recurring Basis

The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of September 30, 2015, December 31, 2014 and September 30, 2014 (dollars in thousands):

	Fair Value Measurements on a Nonrecurring Basis As of September 30, 2015
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Impaired loans carried at fair value	$	27,859	$	-	$	-	$	27,859
Other real estate owned		5,737		-		-		5,737
Purchased, non-covered other real estate owned		11,538		-		-		11,538
Covered other real estate owned		12,203		-		-		12,203
Total nonrecurring assets at fair value	$	57,337	$	-	$	-	$	57,337

	Fair Value Measurements on a Nonrecurring Basis As of December 31, 2014
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Impaired loans carried at fair value	$	30,479	$	-	$	-	$	30,479
Purchased, non-covered other real estate owned		15,585		-		-		15,585
Covered other real estate owned		19,907		-		-		19,907
Total nonrecurring assets at fair value	$	65,971	$	-	$	-	$	65,971

	Fair Value Measurements on a Nonrecurring Basis As of September 30, 2014
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Impaired loans carried at fair value	$	35,834	$	-	$	-	$	35,834
Purchased, non-covered other real estate owned		13,660		-		-		13,660
Covered other real estate owned		28,883		-		-		28,883
Total nonrecurring assets at fair value	$	99,037	$	-	$	-	$	99,037

Summary of Significant Unobservable Inputs Used in Fair Value Measurement of Level 3 Assets and Liabilities

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets and liabilities:

	Fair Value		Valuation Technique	Unobservable Inputs	Range of Discounts		Weighted Average Discount

As of September 30, 2015
Nonrecurring:
Impaired loans	$	27,859	Third party appraisals and discounted cash flows	Collateral discounts and discount rates		0% - 50%		25	%
Other real estate owned	$	5,737	Third party appraisals, Sales contracts, Broker price opinions	Collateral discounts and estimated costs to sell		0% - 43%		14	%
Purchased non-covered other real estate owned	$	11,538	Third party appraisals	Collateral discounts and estimated costs to sell		0% -75%		20	%
Covered other real estate owned	$	12,203	Third party appraisals	Collateral discounts and estimated costs to sell		0% - 73%		12	%
Recurring:
Investment securities available for sale	$	2,500	Discounted par values	Credit quality of underlying issuer		0%		0	%

As of December 31, 2014
Nonrecurring:
Impaired loans	$	30,479	Third party appraisals and discounted cash flows	Collateral discounts and discount rates		0% - 50%		20	%
Purchased non-covered real estate owned	$	15,585	Third party appraisals	Collateral discounts and estimated costs to sell		10% -96%		20	%
Covered real estate owned	$	19,907	Third party appraisals	Collateral discounts and estimated costs to sell		10% - 90%		11	%
Recurring:
Investment securities available for sale	$	2,500	Discounted par values	Credit quality of underlying issuer		0%		0	%

As of September 30, 2014
Nonrecurring:
Impaired loans	$	35,834	Third party appraisals and discounted cash flows	Collateral discounts and discount rates		4% - 90%		28	%
Purchased non-covered real estate owned	$	13,660	Third party appraisals	Collateral discounts and estimated costs to sell		22% - 94%		18	%
Covered real estate owned	$	28,883	Third party appraisals	Collateral discounts and estimated costs to sell		10% - 90%		12	%
Recurring:
Investment securities available for sale	$	2,500	Discounted par values	Credit quality of underlying issuer		0%		0	%

Carrying Amount and Estimated Fair Value of Financial Instruments

The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial statements, were as follows:

			Fair Value Measurements at September 30, 2015 Using:
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in Thousands)
Financial assets:
Cash and due from banks	$	114,396	$	114,396	$	-	$	-	$	114,396
Federal funds sold and interest-bearing accounts		120,925		120,925		-		-		120,925
Loans, net		3,720,713		-		-		3,711,522		3,711,522
FDIC loss-share receivable		4,506		-		-		(4,042)		(4,042)
Accrued interest receivable		20,062		20,062		-		-		20,062

Financial liabilities:
Deposits	$	4,530,523	$	-	$	4,531,851	$	-	$	4,531,851
Securities sold under agreements to repurchase		51,506		51,506		-		-		51,506
Other borrowings		39,000		-		39,000		-		39,000
Accrued interest payable		1,149		1,149		-		-		1,149
Subordinated deferrable interest debentures		69,600		-		51,617		-		51,617

			Fair Value Measurements at December 31, 2014 Using:
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in Thousands)
Financial assets:
Cash and due from banks	$	78,026	$	78,026	$	-	$	-	$	78,026
Federal funds sold and interest-bearing accounts		92,323		92,323		-		-		92,323
Loans, net		2,783,763		-		-		2,785,627		2,785,627
FDIC loss-share receivable		31,351		-		-		18,764		18,764
Accrued interest receivable		17,023		17,023		-		-		17,023

Financial liabilities:
Deposits	$	3,431,149	$	-	$	3,432,059	$	-	$	3,432,059
Securities sold under agreements to repurchase		73,310		73,310		-		-		73,310
Other borrowings		78,881		-		78,881		-		78,881
Accrued interest payable		1,382		1,382		-		-		1,382
Subordinated deferrable interest debentures		65,325		-		46,564		-		46,564

			Fair Value Measurements at September 30, 2014 Using:
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in Thousands)
Financial assets:
Cash and due from banks	$	69,421	$	69,421	$	-	$	-	$	69,421
Federal funds sold and interest-bearing accounts	$	40,165	$	40,165	$	-	$	-	$	40,165
Loans, net	$	2,778,026	$	-	$	-	$	2,773,291	$	2,773,291
FDIC loss-share receivable	$	38,233	$	-	$	-	$	21,397	$	21,397
Accrued interest receivable	$	17,171	$	17,171	$	-	$	-	$	17,171

Financial liabilities:
Deposits		3,373,119		-		3,374,055		-		3,374,055
Securities sold under agreements to repurchase		32,351		32,351		-		-		32,351
Other borrowings		147,409		-		147,409		-		147,409
Accrued interest payable		1,444		1,444		-		-		1,444
Subordinated deferrable interest debentures		65,084		-		46,214		-		46,214

- 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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