Fair Value (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value, Assets Measured on Recurring Basis

The following table provides the fair value for assets and liabilities required to be measured at fair value on a recurring basis in the Consolidated Statements of Financial Condition by level in the fair value hierarchy.

Recurring Fair Value Measurements

(Dollar amounts in thousands)



	September 30, 2014						December 31, 2013
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Trading securities:
Money market funds	$	1,383	$	—	$	—	$	1,847	$	—	$	—
Mutual funds	16,545		—		—		15,470		—		—
Total trading securities	17,928		—		—		17,317		—		—
Securities available-for-sale:
U.S. Agency securities	—		500		—		—		500		—
CMOs	—		416,547		—		—		475,768		—
Other MBSs	—		120,489		—		—		136,164		—
Municipal securities	—		435,072		—		—		461,393		—
CDOs	—		—		18,369		—		—		18,309
Corporate debt securities	—		3,846		—		—		14,929		—
Equity securities	44		2,553		—		44		5,618		—
Total securities available-for-sale	44		979,007		18,369		44		1,094,372		18,309
Mortgage servicing rights ⁽¹⁾	—		—		1,942		—		—		1,893
Derivative assets ⁽¹⁾	—		6,072		—		—		2,235		—
Liabilities:
Derivative liabilities ⁽²⁾	$	—	$	8,002	$	—	$	—	$	3,707	$	—


⁽¹⁾	Included in other assets in the Consolidated Statements of Financial Condition.


⁽²⁾	Included in other liabilities in the Consolidated Statements of Financial Condition.

Fair Value Inputs, Assets, Quantitative Information

Information for each CDO, as well as the significant unobservable assumptions, is presented in the following table.

Characteristics of CDOs and Significant Unobservable Inputs

Used in the Valuation of CDOs as of September 30, 2014

(Dollar amounts in thousands)



	CDO Number
	1			2			3			4			5
Characteristics:
Class	C-1			C-1			C-1			B1			C
Original par	$	17,500		$	15,000		$	15,000		$	15,000		$	6,500
Amortized cost	7,140			5,598			12,377			13,727			6,179
Fair value	4,837			704			4,872			5,428			2,528
Lowest credit rating (Moody’s)	Ca			Ca			Ca			Ca			Ca
Number of underlying Issuers	43			54			57			56			74
Percent of Issuers currently performing	83.7		%	81.5		%	77.2		%	62.5		%	73.0		%
Current deferral and default percent ⁽¹⁾	8.7		%	10.3		%	11.0		%	24.4		%	22.5		%
Expected future deferral and default percent ⁽²⁾	12.2		%	10.8		%	13.5		%	19.0		%	9.6		%
Excess subordination percent ⁽³⁾	—		%	—		%	—		%	10.3		%	10.1		%
Discount rate risk adjustment ⁽⁴⁾	12.5		%	14.3		%	13.3		%	11.8		%	12.3		%
Significant unobservable inputs, weighted average of Issuers:
Probability of prepayment	15.2		%	7.6		%	4.5		%	4.5		%	3.5		%
Probability of default	18.5		%	22.2		%	19.8		%	26.0		%	28.8		%
Loss given default	88.2		%	83.2		%	89.4		%	93.2		%	96.3		%
Probability of deferral cure	23.2		%	12.4		%	36.3		%	38.8		%	27.6		%


⁽¹⁾	Represents actual deferrals and defaults, net of recoveries, as a percent of the original collateral.

⁽²⁾

Represents expected future deferrals and defaults, net of recoveries, as a percent of the remaining performing collateral. The probability of future defaults is derived for each Issuer based on a credit analysis. The associated assumed loss given default is based on historical default and recovery information provided by a nationally recognized credit rating agency and is assumed to be 90% for banks, 85% for insurance companies, and 100% for Issuers that have already defaulted.


⁽³⁾	Represents additional defaults that the CDO can absorb before the security experiences any credit impairment. The excess subordination percentage is calculated by dividing the amount of potential additional loss that can be absorbed (before the receipt of all expected future principal and interest payments is affected) by the total balance of performing collateral.


⁽⁴⁾	Cash flows are discounted at LIBOR plus this adjustment to reflect the higher risk inherent in these securities.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

A rollforward of the carrying value of CDOs for the quarters and nine months ended September 30, 2014 and 2013 is presented in the following table.

Rollforward of the Carrying Value of CDOs

(Dollar amounts in thousands)



	Quarters Ended September 30,					Nine Months Ended September 30,
	2014			2013		2014			2013
Beginning balance	$	18,436		$	14,917	$	18,309		$	12,129
Change in other comprehensive (loss) income ⁽¹⁾	(65		)	2,079		1,571			4,867
Purchases, sales, issuances, settlements, and paydowns ⁽²⁾	(2		)	—		(1,511		)	—
Ending balance	$	18,369		$	16,996	$	18,369		$	16,996
Change in unrealized losses recognized in earnings related to securities still held at end of period	$	—		$	—	$	—		$	—


⁽¹⁾	Included in unrealized holding (losses) gains in the Consolidated Statements of Comprehensive Income.


⁽²⁾	For the nine months ended September 30, 2014, one CDO with a carrying value of $1.3 million was sold. In addition, one CDO with a carrying value of zero was sold during the nine months ended September 30, 2013

Fair Value Measurements, Nonrecurring

The following table provides the fair value for each class of assets and liabilities required to be measured at fair value on a non-recurring basis in the Consolidated Statements of Financial Condition by level in the fair value hierarchy.

Non-Recurring Fair Value Measurements

(Dollar amounts in thousands)



	September 30, 2014						December 31, 2013
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Collateral-dependent impaired loans ⁽¹⁾	$	—	$	—	$	18,754	$	—	$	—	$	13,103
OREO ⁽²⁾	—		—		17,580		—		—		13,347
Loans held-for-sale ⁽³⁾	—		—		24,504		—		—		4,739
Assets held-for-sale ⁽⁴⁾	—		—		2,026		—		—		4,027


⁽¹⁾	Includes impaired loans with charge-offs and impaired loans with a specific reserve during the periods presented.


⁽²⁾	Includes OREO and covered OREO with fair value adjustments subsequent to initial transfer that occurred during the periods presented.


⁽³⁾	Included in other assets in the Consolidated Statements of Financial Condition.


⁽⁴⁾	Included in premises, furniture, and equipment in the Consolidated Statements of Financial Condition.

Fair Value, by Balance Sheet Grouping

For certain financial instruments that are not required to be measured at fair value in the Consolidated Statements of Financial Condition, the Company must disclose the estimated fair values and the level within the fair value hierarchy as shown in the following table.

Fair Value Measurements of Other Financial Instruments

(Dollar amounts in thousands)



		September 30, 2014				December 31, 2013
	Fair Value Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and due from banks	1	$	125,977	$	125,977	$	110,417	$	110,417
Interest-bearing deposits in other banks	2	550,606		550,606		476,824		476,824
Securities held-to-maturity	2	26,776		27,766		44,322		43,387
FHLB and Federal Reserve Bank stock	2	35,588		35,588		35,161		35,161
Net loans	3	6,445,973		6,315,474		5,628,855		5,544,146
FDIC indemnification asset	3	8,699		4,659		16,585		7,829
Investment in BOLI	3	195,270		195,270		193,167		193,167
Accrued interest receivable	3	27,375		27,375		25,735		25,735
Other interest earning assets	3	4,399		4,527		6,550		6,809
Liabilities:
Deposits	2	$	7,616,133	$	7,610,119	$	6,766,101	$	6,765,404
Borrowed funds	2	132,877		132,877		224,342		226,839
Senior and subordinated debt	1	191,028		191,769		190,932		201,147
Accrued interest payable	2	5,208		5,208		2,400		2,400

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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