FAIR VALUE DISCLOSURES

9 Months Ended

Sep. 30, 2011

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 15–FAIR VALUE DISCLOSURES

In accordance with ASC Topic 820, “Fair Value Measurements and Disclosures,” financial assets and financial liabilities that are measured at fair value subsequent to initial recognition are grouped into three levels of inputs or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the reliability of assumptions used to determine fair value. The three input levels of the valuation hierarchy are as follows:

Level 1 Inputs –	Valuation is based on quoted prices in active markets for identical instruments in active markets.
Level 2 Inputs –	Valuation is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs –	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following describes valuation methodologies used to measure financial assets and financial liabilities at fair value, as well as the general classification of such financial instruments pursuant to the valuation hierarchy:

Available-for-sale investment securities. Available-for-sale investment securities are recorded at fair value on a recurring basis. Available-for-sale investment securities included in Level 1 are valued using quoted market prices. Where quoted market prices are unavailable, the fair value included in Level 2 is based on quoted market prices of comparable instruments obtained from independent pricing vendors based on recent trading activity and other relevant information.

Loans held for sale. Mortgage loans held for sale are carried at fair value on a recurring basis. The determination of fair value is based on quoted market prices of comparable instruments obtained from independent pricing vendors based on recent trading activity and other relevant information. Other loans held for sale are carried at the lower of cost or market value, which is determined on an individual loan basis. The fair value is based on the prices secondary markets are offering for portfolios with similar characteristics. The Company classifies mortgage loans held for sale subjected to recurring fair value adjustments as recurring Level 2. The Company classifies other loans held for sale subjected to nonrecurring fair value adjustments as nonrecurring Level 2.

Loans. The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans are considered impaired when, in the judgment of management based on current information and events, it is probable that payment of all amounts due under the contractual terms of the loan agreement will not be collected. Acquired impaired loans are classified as nonaccrual loans and are initially measured at fair value with no allocated allowance for loan losses. An allowance for loan losses is recorded to the extent there is further credit deterioration subsequent to acquisition date. In accordance with ASC Topic 820, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. Once a loan is identified as impaired, management measures the impairment in accordance with ASC Topic 310-10-35, “Receivables.” Impairment is measured by reference to an observable market price, if one exists, the expected future cash flows of an impaired loan discounted at the loan’s effective interest rate, or the fair value of the collateral for a collateral-dependent loan. In most cases, the Company measures fair value based on the value of the collateral securing the loan. Collateral may be in the form of real estate or personal property, including equipment and inventory. The vast majority of the collateral is real estate. The value of the collateral is determined based on third party appraisals as well as internal estimates. These measurements are classified as Level 3.

Derivative instruments. Substantially all derivative instruments utilized by the Company are traded in over-the-counter markets where quoted market prices are not readily available. Derivative instruments utilized by the Company include interest rate swap agreements, interest rate floor and cap agreements, interest rate lock commitments and forward commitments to sell mortgage-backed securities. For these derivative instruments, fair value is based on market observable inputs utilizing pricing systems and valuation models, and where applicable, the values are compared to the market values calculated independently by the respective counterparties. The Company classifies its derivative instruments as Level 2.

Servicing rights. Servicing rights are valued based on valuation models that utilize assumptions based on the predominant risk characteristics of the underlying loans, including principal balance, interest rate, weighted average life, cost to service and estimated prepayment speeds. The valuation models estimate the present value of estimated future net servicing income. The Company classifies its servicing rights as Level 3.

Nonqualified Deferred Compensation Plan. The Company’s nonqualified deferred compensation plan is recorded at fair value on a recurring basis. The unfunded plan allows participants to hypothetically invest in various specified investment options such as equity funds, international stock funds, capital appreciation funds, money market funds, bond funds, mid-cap value funds and growth funds. The nonqualified deferred compensation plan liability is valued based on quoted market prices of the underlying investments. The Company classifies its nonqualified deferred compensation plan liability as Level 1.

Items Measured on a Recurring Basis. Assets and liabilities measured at fair value on a recurring basis as of September 30, 2011 and December 31, 2010 are reflected in the following table:

	Fair Value Measurements
	Level 1		Level 2		Level 3	Fair Value
	(dollars expressed in thousands)
September 30, 2011:
Assets:
Available-for-sale investment securities:
U.S. Government sponsored agencies	$	—	372,728		—	372,728
Residential mortgage-backed		—	1,838,630		—	1,838,630
Commercial mortgage-backed		—	929		—	929
State and political subdivisions		—	6,251		—	6,251
Corporate notes		—	179,959		—	179,959
Equity investments		1,023	10,678		—	11,701
Mortgage loans held for sale		—	36,595		—	36,595
Derivative instruments:
Customer interest rate swap agreements		—	518		—	518
Interest rate lock commitments		—	2,707		—	2,707
Forward commitments to sell mortgage-backed securities		—	(1,569	)	—	(1,569	)
Servicing rights		—	—		15,073	15,073
Total	$	1,023	2,447,426		15,073	2,463,522
Liabilities:
Derivative instruments:
Interest rate swap agreements	$	—	1,189		—	1,189
Customer interest rate swap agreements		—	432		—	432
Nonqualified deferred compensation plan		6,693	—		—	6,693
Total	$	6,693	1,621		—	8,314
December 31, 2010:
Assets:
Available-for-sale investment securities:
U.S. Treasury	$	101,202	—		—	101,202
U.S. Government sponsored agencies		—	20,332		—	20,332
Residential mortgage-backed		—	1,341,578		—	1,341,578
Commercial mortgage-backed		—	1,008		—	1,008
State and political subdivisions		—	8,387		—	8,387
Equity investments		—	10,678		—	10,678
Mortgage loans held for sale		—	54,470		—	54,470
Derivative instruments:
Customer interest rate swap agreements		—	792		—	792
Interest rate lock commitments		—	276		—	276
Forward commitments to sell mortgage-backed securities		—	1,538		—	1,538
Servicing rights		—	—		19,582	19,582
Total	$	101,202	1,439,059		19,582	1,559,843
Liabilities:
Derivative instruments:
Interest rate swap agreements	$	—	2,402		—	2,402
Customer interest rate swap agreements		—	636		—	636
Nonqualified deferred compensation plan		7,790	—		—	7,790
Total	$	7,790	3,038		—	10,828

There were no transfers between Levels 1 and 2 of the fair value hierarchy for the three and nine months ended September 30, 2011.

The following table presents the changes in Level 3 assets measured on a recurring basis for the three and nine months ended September 30, 2011 and 2010:

	Servicing Rights
	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2011			2010		2011		2010
	(dollars expressed in thousands)
Balance, beginning of period	$	18,826		19,266		19,582		20,608
Total gains or losses (realized/unrealized):
Included in earnings (1)		(4,370	)	(3,375	)	(6,739	)	(6,239	)
Included in other comprehensive income (loss)		—		—		—		—
Issuances		617		1,262		2,230		2,784
Transfers in and/or out of level 3		—		—		—		—
Balance, end of period	$	15,073		17,153		15,073		17,153
____________________

(1) Gains or losses (realized/unrealized) are included in noninterest income in the consolidated statements of operations.

Items Measured on a Nonrecurring Basis. From time to time, the Company measures certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis as of September 30, 2011 and December 31, 2010 are reflected in the following table:

	Fair Value Measurements
	Level 1		Level 2	Level 3	Fair Value
	(dollars expressed in thousands)
September 30, 2011:
Assets:
Impaired loans:
Commercial, financial and agricultural	$	—	—	66,216	66,216
Real estate construction and development		—	—	79,858	79,858
Real estate mortgage:
Bank portfolio		—	—	15,123	15,123
Mortgage Division portfolio		—	—	85,788	85,788
Home equity portfolio		—	—	6,538	6,538
Multi-family residential		—	—	10,202	10,202
Commercial real estate		—	—	63,111	63,111
Consumer and installment		—	—	41	41
Other real estate and repossessed assets		—	—	131,349	131,349
Total	$	—	—	458,226	458,226
December 31, 2010:
Assets:
Impaired loans:
Commercial, financial and agricultural	$	—	—	60,748	60,748
Real estate construction and development		—	—	126,784	126,784
Real estate mortgage:
Bank portfolio		—	—	14,107	14,107
Mortgage Division portfolio		—	—	107,969	107,969
Home equity portfolio		—	—	5,967	5,967
Multi-family residential		—	—	11,936	11,936
Commercial real estate		—	—	133,287	133,287
Consumer and installment		—	—	110	110
Other real estate and repossessed assets		—	—	140,665	140,665
Total	$	—	—	601,573	601,573

Non-Financial Assets and Non-Financial Liabilities. Certain non-financial assets measured at fair value on a non-recurring basis include other real estate (upon initial recognition or subsequent impairment), non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, and intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment.

Certain other real estate, upon initial recognition, was re-measured and reported at fair value through a charge-off to the allowance for loan losses based upon the estimated fair value of the other real estate. The fair value of other real estate, upon initial recognition, is estimated using Level 3 inputs based on third-party appraisals, and where applicable, discounted based on management’s judgment taking into account current market conditions, distressed or forced sale price comparisons and other factors in effect at the time of valuation. Other real estate and repossessed assets measured at fair value upon initial recognition totaled $52.6 million and $131.0 million for the nine months ended September 30, 2011 and 2010, respectively. In addition to other real estate and repossessed assets measured at fair value upon initial recognition, the Company recorded write-downs to the balance of other real estate and repossessed assets of $1.6 million and $8.4 million to noninterest expense for the three and nine months ended September 30, 2011, respectively, compared to $12.7 million and $23.6 million for the comparable periods in 2010. Other real estate and repossessed assets were $131.3 million at September 30, 2011, compared to $140.7 million at December 31, 2010.

Fair Value of Financial Instruments. The fair value of financial instruments is management’s estimate of the values at which the instruments could be exchanged in a transaction between willing parties. These estimates are subjective and may vary significantly from amounts that would be realized in actual transactions. In addition, other significant assets are not considered financial assets including servicing assets, deferred income tax assets, bank premises and equipment and goodwill and other intangible assets. Furthermore, the income taxes that would be incurred if the Company were to realize any of the unrealized gains or unrealized losses indicated between the estimated fair values and corresponding carrying values could have a significant effect on the fair value estimates and have not been considered in any of the estimates.

The following summarizes the methods and assumptions used in estimating the fair value of all other financial instruments:

Cash and cash equivalents and accrued interest receivable:The carrying values reported in the consolidated balance sheets approximate fair value.

Held-to-maturity investment securities: The fair value of held-to-maturity investment securities is based on quoted market prices where available. If quoted market prices are not available, the fair value is based on quoted market prices of comparable instruments.

Loans: The fair value of loans held for portfolio uses an exit price concept and reflects discounts the Company believes are consistent with liquidity discounts in the market place. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial and industrial, real estate construction and development, commercial real estate, one-to-four family residential real estate, home equity and consumer and installment. The fair value of loans is estimated by discounting the future cash flows, utilizing assumptions for prepayment estimates over the loans’ remaining life and considerations for the current interest rate environment compared to the weighted average rate of the loan portfolio. The fair value analysis also included other assumptions to estimate fair value, intended to approximate those factors a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate.

Loans held for sale: The fair value of loans held for sale, which is the amount reported in the consolidated balance sheets, is based on quoted market prices where available. If quoted market prices are not available, the fair value is based on quoted market prices of comparable instruments.

Deposits: The fair value of deposits generally payable on demand (i.e., noninterest-bearing and interest-bearing demand, and savings and money market accounts) is considered equal to their respective carrying amounts as reported in the consolidated balance sheets. The fair value of demand deposits does not include the benefit that results from the low-cost funding provided by deposit liabilities compared to the cost of borrowing funds in the market. The fair value disclosed for time deposits was estimated utilizing a discounted cash flow calculation that applied interest rates currently being offered on similar deposits to a schedule of aggregated monthly maturities of time deposits. If the estimated fair value is lower than the carrying value, the carrying value is reported as the fair value of time deposits.

Other borrowings and accrued interest payable: The carrying values reported in the consolidated balance sheets for variable rate borrowings approximate fair value. The fair value of fixed rate borrowings is based on quoted market prices where available. If quoted market prices are not available, the fair value is based on discounting contractual maturities using an estimate of current market rates for similar instruments.

Subordinated debentures: The fair value of subordinated debentures is based on quoted market prices of comparable instruments.

Off-Balance Sheet Financial Instruments: The fair value of commitments to extend credit, standby letters of credit and financial guarantees is based on estimated probable credit losses.

The estimated fair value of the Company’s financial instruments at September 30, 2011 and December 31, 2010 were as follows:

	September 30, 2011					December 31, 2010
	Carrying			Estimated		Carrying		Estimated
	Value			Fair Value		Value		Fair Value
	(dollars expressed in thousands)
Financial Assets:
Cash and cash equivalents	$	498,630		498,630		995,758		995,758
Investment securities:
Available for sale		2,410,198		2,410,198		1,483,185		1,483,185
Held to maturity		13,940		14,605		11,152		11,990
Loans held for portfolio		3,308,472		3,016,161		4,236,781		3,973,825
Loans held for sale		36,595		36,595		54,470		54,470
Federal Reserve Bank and FHLB stock		27,257		27,257		30,121		30,121
Derivative instruments		1,656		1,656		2,606		2,606
Accrued interest receivable		21,596		21,596		22,488		22,488
Assets held for sale		—		—		2,266		2,866
Assets of discontinued operations		—		—		43,532		43,532
Financial Liabilities:
Deposits:
Noninterest-bearing demand	$	1,153,092		1,153,092		1,167,206		1,167,206
Interest-bearing demand		983,289		983,289		919,973		919,973
Savings and money market		2,098,689		2,098,689		2,206,763		2,206,763
Time deposits		1,708,743		1,715,056		2,164,473		2,176,855
Other borrowings		53,112		53,112		31,761		31,761
Derivative instruments		1,621		1,621		3,038		3,038
Accrued interest payable		31,084		31,084		22,444		22,444
Subordinated debentures		354,038		175,989		353,981		202,298
Liabilities held for sale		—		—		23,406		23,276
Liabilities of discontinued operations		—		—		94,184		91,894
Off-Balance Sheet Financial Instruments:
Commitments to extend credit, standby
letters of credit and financial
guarantees	$	(2,785	)	(2,785	)	(3,148	)	(3,148	)