Fair Value Information

12 Months Ended

Dec. 31, 2011

Fair Value Information [Abstract]

FAIR VALUE INFORMATION

20. FAIR VALUE INFORMATION

Fair Value Hierarchy

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The following disclosure provides the fair value information for financial assets and liabilities as of December 31, 2011. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (Level 1, Level 2, and Level 3).

• Level 1 — Valuation is based upon quoted prices for identical instruments traded in active markets.

• Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

• Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flows and similar techniques.

There were no transfers in and out of Level 1 and Level 2 measurement during 2011 and 2010

Determination of Fair Value

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not recorded at fair value.

Cash and cash equivalents— The carrying amount of cash and cash equivalents is considered to approximate fair value due to the liquidity of these instruments.

Interest-bearing balances due from depository institutions — The carrying value of due from depository institutions is considered to approximate fair value due to the short-term nature of these deposits.

FHLB stock — The carrying amount of FHLB stock approximates fair value, as the stock may be sold back to the FHLB at carrying value.

Investment securities held to maturity — Investment securities held to maturity are valued based upon quotes obtained from an independent third-party pricing service. The Company categorized its held to maturity investment as a level 3 valuation.

Investment securities available-for-sale — Investment securities available-for-sale are valued based upon quotes obtained from an independent third-party pricing service. The service uses evaluated pricing applications and model processes. Market inputs, such as, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data are considered as part of the evaluation. The inputs are related directly to the security being evaluated, or indirectly to a similarly situated security. Market assumptions and market data are utilized in the valuation models. Accordingly, the Company categorized its investment portfolio as a Level 2 valuation.

Loans held for sale — For loans held for sale, carrying value approximated fair value as the loans are recorded at lower of cost or carrying market value.

Non-covered Loans — The carrying amount of loans and lease finance receivables is their contractual amounts outstanding, reduced by deferred net loan origination fees and the allocable portion of the allowance for credit losses.

The fair value of loans, other than loans on nonaccrual status, was estimated by discounting the remaining contractual cash flows using the estimated current rate at which similar loans would be made to borrowers with similar credit risk characteristics and for the same remaining maturities, reduced by deferred net loan origination fees and the allocable portion of the allowance for credit losses. Accordingly, in determining the estimated current rate for discounting purposes, no adjustment has been made for any change in borrowers’ credit risks since the origination of such loans. Rather, the allocable portion of the allowance for credit losses is considered to provide for such changes in estimating fair value. As a result, this fair value is not necessarily the value which would be derived using an exit price.

Non-covered impaired loans and OREO are generally measured using the fair value of the underlying collateral, which is determined based on the most recent appraisal information received, less costs to sell. Appraised values may be adjusted based on factors such as the changes in market conditions from the time of valuation or discounted cash flows of the property. As such, these loans fall within Level 3 of the fair value hierarchy.

The majority of our commitments to extend credit carry current market interest rates if converted to loans. Because these commitments are generally unassignable by either the borrower or us, they only have value to the borrower and us. The estimated fair value approximates the recorded deferred fee amounts and is excluded from the table above because it is not material.

Covered Loans — Covered loans were measured at fair value on the date of acquisition. Thereafter, covered loans are not measured at fair value on a recurring basis. The above valuation discussion for non-covered loans is applicable to covered loans following their acquisition date.

Swaps — The fair value of the interest rate swap contracts are provided by our counterparty using a system that constructs a yield curve based on cash LIBOR rates, Eurodollar futures contracts, and 3-year through 30-year swap rates. The yield curve determines the valuations of the interest rate swaps. Accordingly, the swap is categorized as a Level 2 valuation.

Deposits & Borrowings — The amounts payable to depositors for demand, savings, and money market accounts, and the demand note to the U.S. Treasury, and short-term borrowings are considered to approximate fair value. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value of long-term borrowings and junior subordinated debentures is estimated using the rates currently offered for borrowings of similar remaining maturities.

Accrued Interest Receivable/Payable — The amounts of accrued interest receivable on loans and lease finance receivables and investments and accrued interest payable on deposits and borrowings are considered to approximate fair value.

Assets & Liabilities Measured at Fair Value on a Recurring Basis

(Amounts in thousands)	Carrying Value at December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description of Assets
Residential mortgage-backed securities	$	888,000	$	—	$	888,000	$	—
CMO’s / REMIC’s—Residential		604,508		—		604,508		—
Government agency		46,507		—		46,507		—
Municipal bonds		652,037		—		652,037		—
Other securities		10,474				10,474
Investment Securities-AFS		2,201,526		—		2,201,526		—
Interest Rate Swaps		20,497		—		20,497		—
Total Assets	$	2,222,023	$	—	$	2,222,023	$	—
Description of Liability
Interest Rate Swaps	$	20,497	$	—	$	20,497	$	—
(Amounts in thousands)	Carrying Value at December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description of Assets
Residential mortgage-backed securities	$	808,409	$	—	$	808,409	$	—
CMO’s / REMIC’s—Residential		270,477		—		270,477		—
Government agency		106,273		—		106,273		—
Municipal bonds		606,399		—		606,399		—
Investment Securities-AFS		1,791,558		—		1,791,558		—
Interest Rate Swaps		9,127		—		9,127		—
Total Assets	$	1,800,685	$	—	$	1,800,685	$	—
Description of Liability
Interest Rate Swaps	$	9,127	$	—	$	9,127	$	—

We may be required to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis that were still held in the balance sheet at year end, the following table provides the level of valuation assumptions used to determine each adjustment and the carrying value of the related assets at year end.

Assets & Liabilities Measured at Fair Value on a Non-Recurring Basis

(Dollars in thousands)	Carrying Value at December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		For the year ended  December 31, 2011 Total Losses
Description of Assets
Investment Security-HTM	$	2,383	$	—	$	—	$	2,383	$	(656	)
Covered loans held-for-sale		1,404						1,404		(250	)
Impaired Loans-Noncovered		30,014		—		—		30,014		(6,707	)
OREO-Noncovered		4,866		—		—		4,866		(523	)
OREO-Covered		2,541		—		—		2,541		(2,192	)
Assets & Liabilities Measured at Fair Value on a Non-Recurring Basis
(Dollars in thousands)	Carrying Value at December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		For the year ended December 31, 2010 Total Losses
Description of Assets
Investment Security-HTM	$	3,143	$	—	$	—	$	3,143	$	(904	)
Non-covered loans held-for-sale		1,656		—		—		1,656		(865	)
Impaired Loans-Noncovered		89,676		—		—		89,676		(50,482	)
OREO-Noncovered		2,462		—		—		2,462		(1,283	)
OREO-Covered		2,577		—		—		2,577		(1,917	)

The following disclosure presents estimated fair value of financial instruments. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company could have realized in a current market exchange as of December 31, 2011 and 2010. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

	December 31, 2011				December 31, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
			(Dollars in thousands)
Assets
Total cash and cash equivalents	$	345,343	$	345,343	$	404,275	$	404,275
Interest-bearing balances due from depository institutions		60,000		60,000		50,190		50,190
FHLB Stock		72,689		72,689		86,744		86,744
Investment securities available-for-sale		2,201,526		2,201,526		1,791,558		1,791,558
Investment securities held-to-maturity		2,383		2,383		3,143		3,143
Non-covered loans held-for-sale		348		348		2,954		2,954
Covered loans held-for-sale		5,664		5,664		—		—
Total Loans, net of allowance for credit losses		3,382,632		3,534,960		3,642,481		3,729,296
Accrued interest receivable		23,512		23,512		23,647		23,647
Swaps		20,497		20,497		9,127		9,127
Liabilities
Deposits:
Noninterest-bearing	$	2,027,876	$	2,027,876	$	1,701,523	$	1,701,523
Interest-bearing		2,576,672		2,577,825		2,817,305		2,818,390
Demand note to U.S. Treasury		—		—		1,917		1,917
Borrowings		958,032		1,012,211		1,095,578		1,128,562
Junior subordinated debentures		115,055		115,854		115,055		115,823
Accrued interest payable		3,526		3,526		4,985		4,985
Swaps		20,497		20,497		9,127		9,127

The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2011 and 2010. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented above.