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Note 11 - Commitments, Guarantees, and Contingent Liabilities

6 Months Ended

Jun. 30, 2013

Disclosure Text Block Supplement [Abstract]

Commitments Contingencies and Guarantees [Text Block]

11. COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES

Credit Commitments and Guarantees

In the normal course of business, the Company enters into a variety of financial instruments with off-balance sheet risk to meet the financing needs of its customers and to conduct lending activities, including commitments to extend credit and standby and commercial letters of credit. These instruments involve elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition.

Contractual or Notional Amounts of Financial Instruments

(Dollar amounts in thousands)

	June 30, 2013				December 31, 2012
Commitments to extend credit:
Commercial and industrial	$		790,927		$		737,973
Commercial real estate			196,987				168,105
Residential construction			14,089				18,986
Home equity lines			261,962				258,156
Credit card lines			26,804				25,459
Overdraft protection program ⁽¹⁾			174,681				176,328
All other commitments			103,890				105,344
Total commitments	$		1,569,340		$		1,490,351
Letters of credit:
Commercial real estate	$		43,635		$		52,145
Residential construction			5,694				5,696
All other			58,412				57,996
Total letters of credit	$		107,741		$		115,837
Unamortized fees associated with letters of credit ⁽²⁾⁽³⁾	$		559		$		740
Remaining weighted-average term, in months			10.26				13.20
Remaining lives, in years		0.1	to	11.1		0.1	to	11.6
Recourse on assets sold:
Unpaid principal balance of assets sold	$		126,901		$		50,110
Carrying value of recourse obligation ⁽²⁾			129				55

	Advance Dated
	May 17, 2012			October 3, 2012
Forward committed advances with FHLB:
Amount of advance	$	200,000		$	50,000
Interest rate		2.05	%		1.77	%
Expected settlement date	May 19, 2014			October 3, 2014
Maturity date	May 20, 2019			October 3, 2019

⁽¹⁾

Federal regulations regarding electronic fund transfers require customers to affirmatively consent to the institution’s overdraft service for automated teller machine and one-time debit card transactions before overdraft fees may be assessed on the account. Customers are provided a specific line for the amount they may overdraw.

⁽²⁾

Included in other liabilities in the Consolidated Statements of Financial Condition.

⁽³⁾

The Company amortizes these amounts into income over the commitment period.

Commitments to extend credit are agreements to lend funds to a customer, subject to contractual terms and covenants. Commitments generally have fixed expiration dates or other termination clauses, variable interest rates, and fee requirements, when applicable. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements.

In the event of a customer’s non-performance, the Company’s credit loss exposure is equal to the contractual amount of the commitments. The credit risk is essentially the same as extending loans to customers. The Company uses the same credit policies for credit commitments and its loans and minimizes exposure to credit loss through various collateral requirements.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent on the failure of the customer to perform according to the terms of the contract with the third party and are often issued in favor of a municipality where construction is taking place to ensure the borrower adequately completes the construction.

The maximum potential future payments guaranteed by the Company under standby letters of credit arrangements are equal to the contractual amount of the commitment. If a commitment is funded, the Company may seek recourse through the liquidation of the underlying collateral including real estate, production plants and property, marketable securities, or receipt of cash.

As a result of the sale of certain 1-4 family mortgage loans, the Company is contractually obligated to repurchase any non-performing loans or loans that do not meet underwriting requirements at recorded value. In accordance with the sales agreements, there is no limitation on the maximum potential future payments or expiration of the Company’s recourse obligation. No loans were required to be repurchased during the quarters and six months ended June 30, 2013 or 2012.

During 2012, the Company entered into two forward commitments with the FHLB to take advantage of low interest rates for future funding. The advances have prepayment features allowing the Company to prepay the advances below par if the prepayment calculations indicate a discount.

Legal Proceedings

In 2011, the Bank was named in a purported class action lawsuit filed in the Circuit Court of Cook County, Illinois on behalf of certain of the Bank’s customers who incurred overdraft fees. The lawsuit is based on the Bank’s practices relating to debit card transactions, and alleges that these practices resulted in customers being assessed excessive overdraft fees. The plaintiffs seek an unspecified amount of damages and other relief, including restitution. No class has been certified. The Bank filed a motion to dismiss the plaintiffs’ complaint and, on January 23, 2013, the Circuit Court entered an order granting the Bank’s motion and dismissed the complaint with prejudice. The plaintiffs have appealed the Circuit Court’s ruling, and the appeal is currently pending with the Appellate Court of Illinois. The Company continues to believe that the Bank has meritorious defenses to the claims made by the plaintiffs.

There are certain other legal proceedings pending against the Company and its subsidiaries in the ordinary course of business. The Company does not believe that liabilities, individually or in the aggregate, arising from any legal proceedings, if any, would have a material adverse effect on the consolidated financial condition of the Company as of June 30, 2013.