Note 20 - Commitments, Guarantees, and Contingent Liabilities

12 Months Ended

Dec. 31, 2012

Commitments Contingencies and Guarantees [Text Block]

20.    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)

	December 31,
	2012		2011
Commitments to extend credit:
Commercial and industrial	$	737,973	$	609,601
Commercial real estate		168,105		139,574
Residential construction		18,986		13,300
Home equity lines		258,156		257,315
Credit card lines		25,459		21,257
Overdraft protection program (1)		176,328		178,699
All other commitments		105,344		129,015
Total commitments	$	1,490,351	$	1,348,761
Letters of credit:
Commercial real estate	$	52,145	$	49,373
Residential construction		5,696		8,661
All other		57,996		58,532
Total letters of credit	$	115,837	$	116,566
Unamortized fees associated with letters of credit (2) (3)	$	740	$	668
Remaining weighted-average term, in months		13.20		9.62
Remaining lives, in years	0.1 to 11.6		0.1 to 12.6
Recourse on assets securitized:
Unpaid principal balance of assets securitized	$	50,110	$	-
Carrying value of recourse obligation (2)		55		-

	Advance Dated May 17, 2012				Advance Dated 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 is amortizing 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 that involved in extending loans to customers. The Company uses the same credit policies for credit commitments as it does for 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 most 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 in 2012, the Company is contractually obligated to repurchase any non-performing loans, defined as loans past due greater than 90 days, at recorded value. In accordance with the sales agreement, there is no limitation to the maximum potential future payments or expiration of the Company’s recourse obligation. In previous years, the Company had similar recourse provisions related to a 2004 loan securitization, which expired on November 30, 2011. No loans were required to be repurchased during the years ended December 31, 2012 or 2011 under either agreement.

During 2012, the Company entered into two forward commitments with the FHLB to take advantage of the current low market 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 August of 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, and no class has been certified.  The Bank filed a motion to dismiss the complaint and, on January 23, 2013, the Circuit Court granted the Bank’s motion and dismissed the complaint with prejudice. On February 20, 2013, the plaintiffs filed a notice of appeal with the Illinois Appellate Court. The Company believes that the Bank has meritorious defenses to the claims made by the plaintiffs and, accordingly, the Bank intends to continue to vigorously defend itself against the allegations in the lawsuit.

As of December 31, 2012, there were 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 legal proceedings, if any, would have a material adverse effect on the consolidated financial condition of the Company as of December 31, 2012.