Fair Value Option and Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value Option and Fair Value Measurements

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

	March 31, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Securities available-for-sale
U.S. Treasury	$	1,502	$	-	$	-	$	1,502
U.S. government agencies	-		69,265		-		69,265
U.S. government agency mortgage-backed	-		76,352		-		76,352
States and political subdivisions	-		26,883		132		27,015
Corporate Bonds	-		38,579		-		38,579
Collateralized mortgage obligations	-		131,669		-		131,669
Asset-backed securities			114,709		106,028		220,737
Collateralized debt obligations	-		-		10,627		10,627
Loans held-for-sale	-		6,381		-		6,381
Mortgage servicing rights	-		-		4,469		4,469
Other assets (Interest rate swap agreements
net of swap credit valuation)	-		1,197		(33)		1,164
Other assets (Forward MBS)	-		492		-		492
Total	$	1,502	$	465,527	$	121,223	$	588,252
Liabilities:
Other liabilities (Interest rate swap agreements)	$	-	$	1,197	$	-	$	1,197
Other liabilities (Interest rate lock commitments to borrowers)	-		-		-		-
Total	$	-	$	1,197	$	-	$	1,197
	December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Securities available-for-sale
U.S. Treasury	$	1,507	$	-	$	-	$	1,507
U.S. government agencies	-		49,850		-		49,850
U.S. government agency mortgage-backed	-		128,738		-		128,738
States and political subdivisions	-		15,723		132		15,855
Corporate Bonds	-		36,886		-		36,886
Collateralized mortgage obligations	-		169,600		-		169,600
Asset-backed securities			167,493		-		167,493
Collateralized debt obligations	-		-		9,957		9,957
Loans held-for-sale	-		9,571		-		9,571
Mortgage servicing rights	-		-		4,116		4,116
Other assets (Interest rate swap agreements
net of swap credit valuation)	-		1,349		(47)		1,302
Other assets (Forward MBS)	-		567		-		567
Total	$	1,507	$	579,777	$	14,158	$	595,442
Liabilities:
Other liabilities (Interest rate swap agreements)	$	-	$	1,349	$	-	$	1,349
Other liabilities (Interest rate lock commitments to borrowers)	-		5		-		5
Total	$	-	$	1,354	$	-	$	1,354

Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

	Three months ended March 31, 2013
	Securities available-for-sale
	Collateralized Debt Obligations		Asset-Backed		States and Political Subdivisons		Mortgage Servicing Rights		Interest Rate Swap Valuation
Beginning balance January 1, 2013	$	9,957	$	-	$	132	$	4,116	$	(47)
Transfers into Level 3	-		106,028		-		-		-
Total gains or losses
Included in earnings (or changes in net assets)	42		-		-		(106)		14
Included in other comprehensive income	692		-		-		-		-
Purchases, issuances, sales, and settlements
Issuances	-		-		-		459		-
Settlements	(64)		-		-		-		-
Ending balance March 31, 2013	$	10,627	$	106,028	$	132	$	4,469	$	(33)
	Three months ended March 31, 2012
	Securities available-for-sale
	Collateralized Debt Obligations		States and Political Subdivisons		Mortgage Servicing Rights		Interest Rate Swap Valuation
Beginning balance January 1, 2012	$	9,974	$	138	$	3,487	$	(80)
Transfers into Level 3	-		-		-		-
Transfers out of Level 3	-		-		-		-
Total gains or losses
Included in earnings (or changes in net assets)	38		-		(123)		2
Included in other comprehensive income	(283)		-		-		-
Purchases, issuances, sales, and settlements
Issuances	-		-		442		-
Settlements	(27)		-		-		-
Ending balance March 31, 2012	$	9,702	$	138	$	3,806	$	(78)

Schedule of quantitative information about level 3 fair value measurements

The following table and commentary presents quantitative (dollars in thousands) and qualitative information about Level 3 fair value measurements as of March 31, 2013:

Measured at fair value  on a recurring basis:	Fair Value	Valuation Methodology	Unobservable Inputs	Range of Input	Weighted Average of Inputs
Collateralized Debt Obligations	$  10,627	Discounted Cash Flow	Discount Rate	Libor + 5.75-6.75%	6.2%
			Prepayment %	0%-100%	18.3%
			Default range	3.5%-55.6%	16.2%
Mortgage Servicing rights	4,469	Discounted Cash Flow	Discount Rate	10.5%	10.5%
			Prepayment Speed	14.4%	14.4%
Interest Rate Swap Valuation	(33)	Management estimate of credit risk exposure	Probability of Default	2-31%	20.3%
Asset-backed securities	106,028	Discounted Cash Flow	Credit Risk Premium	1-3%	2%
			Liquidity Risk Premium	0-2%	1%

The following table and commentary presents quantitative (dollars in thousands) and qualitative information about Level 3 fair value measurements as of December 31, 2012:

Measured at fair value  on a recurring basis:	Fair Value	Valuation Methodology	Unobservable Inputs	Range of Input	Weighted Average of Inputs
Collateralized Debt Obligations	$  9,957	Discounted Cash Flow	Discount Rate	Libor + 6%-7%	6.4%
			Prepayment %	0%-76%	16.4%
			Default range	3.1%-100%	19.1%
Mortgage Servicing rights	4,116	Discounted Cash Flow	Discount Rate	10.5%	10.5%
			Prepayment Speed	15.8%	15.8%
Interest Rate Swap Valuation	(47)	Management estimate of credit risk exposure	Probability of Default	2%-31%	17.9%

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

	March 31, 2013
	Level 1		Level 2		Level 3		Total
Impaired loans1	$	-	$	-	$	19,954	$	19,954
Other real estate owned, net2	-		-		65,663		65,663
Total	$	-	$	-	$	85,617	$	85,617

1   Represents carrying value and related write-downs of loans for which adjustments are substantially based on the appraised value of collateral for collateral-dependent loans, had a carrying amount of $25.0 million, with a valuation allowance of $5.0 million, resulting in a decrease of specific allocations within the provision for loan losses of $1.2 million for the quarter ending March 31, 2013.  The carrying value of loans fully charged off is zero.

2   OREO is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of $65.7 million, which is made up of the outstanding balance of $99.1 million, net of a valuation allowance of $31.0 million and participations of $2.6 million, at March 31, 2013, resulting in a charge to expense of $2.0 million for the quarter ended March 31, 2013.

	December 31, 2012
	Level 1		Level 2		Level 3		Total
Impaired loans1	$	-	$	-	$	21,543	$	21,543
Other real estate owned, net2	-		-		72,423		72,423
Total	$	-	$	-	$	93,966	$	93,966

1   Represents carrying value and related write-downs of loans for which adjustments are substantially based on the appraised value of collateral for collateral-dependent loans, had a carrying amount of $27.8 million, with a valuation allowance of $6.3 million, resulting in a decrease of specific allocations within the provision for loan losses of $6.8 million for the year ending December 31, 2012.  The carrying value of loans fully charged off is zero.

2   OREO is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of $72.4 million, which is made up of the outstanding balance of $109.7 million, net of a valuation allowance of $31.4 million and participations of $5.9 million, at December 31, 2012, resulting in a charge to expense of $16.4 million for the year ended December 31, 2012.