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Fair Value Option and Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 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

 

 

 

September 30, 2013

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

 $

1,548

 

 $

-

 

 $

-

 

 $

1,548

 

U.S. government agencies

 

 

-

 

 

1,693

 

 

-

 

 

1,693

 

States and political subdivisions

 

 

-

 

 

19,709

 

 

132

 

 

19,841

 

Corporate Bonds

 

 

-

 

 

22,200

 

 

-

 

 

22,200

 

Collateralized mortgage obligations

 

 

-

 

 

48,125

 

 

-

 

 

48,125

 

Asset-backed securities

 

 

 

 

 

121,772

 

 

147,212

 

 

268,984

 

Collateralized debt obligations

 

 

-

 

 

-

 

 

11,087

 

 

11,087

 

Loans held-for-sale

 

 

-

 

 

3,129

 

 

-

 

 

3,129

 

Mortgage servicing rights

 

 

-

 

 

-

 

 

5,456

 

 

5,456

 

Other assets (Interest rate swap agreements net of swap credit valuation)

 

 

-

 

 

584

 

 

(13)

 

 

571

 

Other assets (Forward MBS)

 

 

-

 

 

69

 

 

-

 

 

69

 

Total

 

 $

1,548

 

 $

217,281

 

 $

163,874

 

 $

382,703

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities (Interest rate swap agreements)

 

 $

-

 

 $

584

 

 $

-

 

 $

584

 

Other liabilities (Interest rate lock commitments to borrowers)

 

 

-

 

 

1

 

 

-

 

 

1

 

Total

 

 $

-

 

 $

585

 

 $

-

 

 $

585

 

 

 

 

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

 

 

 

Nine months ended September 30, 2013

 

 

 

 

 

Investment 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

 

-

 

-

 

-

 

-

 

-

 

Transfers out of Level 3

 

-

 

-

 

-

 

-

 

-

 

Total gains or losses

 

 

 

 

 

 

 

 

 

 

 

Included in earnings (or changes in net assets)

 

178

 

485

 

-

 

81

 

34

 

Included in other comprehensive income

 

1,898

 

(1,487)

 

-

 

-

 

-

 

Purchases, issuances, sales, and settlements

 

 

 

 

 

 

 

 

 

 

 

Purchases

 

-

 

168,753

 

-

 

-

 

-

 

Issuances

 

-

 

-

 

-

 

1,259

 

-

 

Settlements

 

(946)

 

-

 

-

 

-

 

-

 

Sales

 

-

 

(20,539)

 

-

 

-

 

-

 

Ending balance June 30, 2013

 

 $

11,087

 

 $

147,212

 

 $

132

 

 $

5,456

 

 $

(13)

 

 

 

 

Nine months ended September 30, 2012

 

 

 

 

 

Investment securities

 

 

 

 

 

 

 

 

 

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)

 

125

 

-

 

(1,315)

 

19

 

 

 

Included in other comprehensive income

 

(441)

 

-

 

-

 

-

 

 

 

Purchases, issuances, sales, and settlements

 

 

 

 

 

 

 

 

 

 

 

Purchases

 

-

 

-

 

-

 

-

 

 

 

Issuances

 

-

 

-

 

1,431

 

-

 

 

 

Settlements

 

(115)

 

-

 

-

 

-

 

 

 

Expirations

 

-

 

-

 

-

 

-

 

 

 

Ending balance September 30, 2012

 

 $

9,543

 

 $

138

 

 $

3,603

 

 $

(61)

 

 
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 September 30, 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

 

$  11,087

 

Discounted Cash Flow

 

Discount Rate

 

Libor +
5.25-6.25%

 

5.7%

 

 

 

 

 

 

 

Prepayment %

 

0%-76.0%

 

13.5%

 

 

 

 

 

 

 

Default range

 

3.0%-100.0%

 

15.7%

 

Mortgage Servicing rights

 

5,456

 

Discounted Cash Flow

 

Discount Rate

 

10.0%

 

10.0%

 

 

 

 

 

 

 

Prepayment Speed

 

10.8%

 

10.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Rate Swap Valuation

 

(13)

 

Management estimate
of credit risk exposure

 

Probability of Default

 

5%-20%

 

13.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed securities

 

147,212

 

Discounted Cash Flow

 

Credit Risk Premium
Liquidity Risk Premium

 

1.00%-1.5%
1.0%

 

1.3%
1.0%

 

 

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

 

 

 

September 30, 2013

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Impaired loans1

 

 $

-

 

 $

-

 

 $

5,653

 

 $

5,653

 

Other real estate owned, net2

 

-

 

-

 

49,066

 

49,066

 

Total

 

 $

-

 

 $

-

 

 $

54,719

 

 $

54,719

 

 

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 $7.8 million, with a valuation allowance of $2.1 million, resulting in a decrease of specific allocations within the allowance for loan losses of $4.1 million for the nine months ending September 30, 2013.

 

2   OREO is measured at the lower of carrying or fair value less costs to sell, and had a net carrying amount of $49.1 million, which is made up of the outstanding balance of $75.8 million, net of a valuation allowance of $24.6 million and participations of $2.1 million, at September 30, 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.

 

2   OREO is measured at the lower of carrying or fair value less costs to sell, and 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.