Fair Value Measurement of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2015

Assets and Liabilities Measured at Fair Value on Recurring and Non-Recurring Basis

The following tables present the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at September 30, 2015 and December 31, 2014. The assets presented under “nonrecurring fair value measurements” in the table below are not measured at fair value on an ongoing basis but are subject to fair value adjustments under certain circumstances (e.g., when an impairment loss is recognized).



	September 30, 2015		Fair Value Measurements at Reporting Date Using:
	September 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available for sale:
U.S. Treasury securities	$	50,468	$	50,468	$	—	$	—
U.S. government agency securities	25,513		—		25,513		—
Obligations of states and political subdivisions	43,469		—		43,469		—
Residential mortgage-backed securities	569,650		—		557,486		12,164
Trust preferred securities	8,593		—		6,411		2,182
Corporate and other debt securities	79,017		17,903		61,114		—
Equity securities	20,679		1,465		19,214		—
Total available for sale	797,389		69,836		713,207		14,346
Loans held for sale ⁽¹⁾⁽²⁾	18,184		—		18,184		—
Other assets ⁽³⁾	34,114		—		34,114		—
Total assets	$	849,687	$	69,836	$	765,505	$	14,346
Liabilities
Other liabilities ⁽³⁾	$	57,344	$	—	$	57,344	$	—
Total liabilities	$	57,344	$	—	$	57,344	$	—
Non-recurring fair value measurements:
Collateral dependent impaired loans ⁽⁴⁾	$	9,173	$	—	$	—	$	9,173
Loan servicing rights	2,922		—		—		2,922
Foreclosed assets ⁽⁵⁾	10,058		—		—		10,058
Total	$	22,153	$	—	$	—	$	22,153



			Fair Value Measurements at Reporting Date Using:
	December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Available for sale:
U.S. Treasury securities	$	49,443	$	49,443	$	—	$	—
U.S. government agency securities	33,825		—		33,825		—
Obligations of states and political subdivisions	44,051		—		44,051		—
Residential mortgage-backed securities	644,276		—		629,696		14,580
Trust preferred securities	20,537		—		15,808		4,729
Corporate and other debt securities	74,012		18,241		55,771		—
Equity securities	20,826		1,337		19,489		—
Total available for sale	886,970		69,021		798,640		19,309
Trading securities	14,233		—		14,233		—
Loans held for sale ⁽¹⁾	17,165		—		17,165		—
Other assets ⁽³⁾	20,987		—		20,987		—
Total assets	$	939,355	$	69,021	$	851,025	$	19,309
Liabilities
Other liabilities ⁽³⁾	$	33,330	$	—	$	33,330	$	—
Total liabilities	$	33,330	$	—	$	33,330	$	—
Non-recurring fair value measurements:
Non-performing loans held for sale	$	7,130	$	—	$	—	$	7,130
Collateral dependent impaired loans ⁽⁴⁾	13,985		—		—		13,985
Loan servicing rights	3,987		—		—		3,987
Foreclosed assets ⁽⁵⁾	18,098		—		—		18,098
Total	$	43,200	$	—	$	—	$	43,200


(1)	Loans held for sale carried at fair value (which consist of residential mortgages) had contractual unpaid principal balances totaling approximately $17.5 million and $16.9 million at September 30, 2015 and December 31, 2014, respectively.

(2)

Gains and losses related to the change in the fair value of loans held for sale are included in net gains on sales of loans within the non-interest income category of our consolidated statements of income and totaled to net gains of $660 thousand and $81 thousand for the three months ended September 30, 2015 and 2014, respectively, and $813 thousand and $453 thousand for the nine months ended September 30, 2015 and 2014, respectively.


(3)	Derivative financial instruments are included in this category.


(4)	Excludes PCI loans.


(5)	Includes covered other real estate owned totaling $1.3 million and $3.2 million at September 30, 2015 and December 31, 2014, respectively.

Changes in Level 3 Assets Measured at Fair Value on Recurring Basis

The changes in Level 3 assets measured at fair value on a recurring basis for the three and nine months ended September 30, 2015 and 2014 are summarized below:



	Available for Sale Securities
	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(in thousands)
Balance, beginning of the period	$	14,712		$	26,029		$	19,309		$	28,523
Total net (losses) gains included in other comprehensive income for the period	(26		)	341			(908		)	563
Sales	—			—			(2,675		)	—
Settlements	(340		)	(669		)	(1,380		)	(3,385		)
Balance, end of the period	$	14,346		$	25,701		$	14,346		$	25,701

Schedule of Quantitative Information about Level 3 Inputs Used to Measure Fair Value of Available for Sale Securities

The following table presents quantitative information about Level 3 inputs used to measure the fair value of these securities at September 30, 2015:



Security Type	Valuation Technique	Unobservable Input	Range	Weighted Average

Private label mortgage-backed securities	Discounted cash flow	Prepayment rate	4.7 - 21.9%	14.7	%
		Default rate	3.5 - 20.4	8.5
		Loss severity	39.2 - 64.2	57.7

Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at September 30, 2015 and December 31, 2014 were as follows:



	Fair Value Hierarchy	September 30, 2015				December 31, 2014
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets
Cash and due from banks	Level 1	$	220,023	$	220,023	$	462,569	$	462,569
Interest bearing deposits with banks	Level 1	71,756		71,756		367,838		367,838
Investment securities held to maturity:
U.S. Treasury securities	Level 1	139,014		152,513		139,121		151,300
U.S. government agency securities	Level 2	12,973		13,400		14,081		14,385
Obligations of states and political subdivisions	Level 2	511,788		531,616		500,018		519,693
Residential mortgage-backed securities	Level 2	889,146		899,776		986,992		998,981
Trust preferred securities	Level 2	59,780		46,811		98,456		86,243
Corporate and other debt securities	Level 2	24,609		26,835		39,648		45,374
Total investment securities held to maturity		1,637,310		1,670,951		1,778,316		1,815,976
Net loans	Level 3	14,912,263		14,633,265		13,371,560		13,085,830
Accrued interest receivable	Level 1	57,532		57,532		57,333		57,333
Federal Reserve Bank and Federal Home Loan Bank stock⁽¹⁾	Level 1	137,229		137,229		133,117		133,117
Financial liabilities
Deposits without stated maturities	Level 1	11,345,222		11,345,222		11,291,648		11,291,648
Deposits with stated maturities	Level 2	3,154,641		3,202,590		2,742,468		2,807,522
Short-term borrowings	Level 1	302,941		302,941		146,781		146,781
Long-term borrowings	Level 2	2,529,326		2,696,964		2,526,408		2,738,122
Junior subordinated debentures issued to capital trusts	Level 2	41,374		43,950		41,252		44,584
Accrued interest payable ⁽²⁾	Level 1	12,825		12,825		15,526		15,526


(1)	Included in other assets.


(2)	Included in accrued expenses and other liabilities.