Fair Value Measurement of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2012

Assets and Liabilities Measured at Fair Value an a Recurring and Non-Recurring Basis


			Fair Value Measurements at Reporting Date Using:
	September 30, 2012		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. government agency securities	$	47,577	$	-	$	47,577	$	-
Obligations of states and political subdivisions		16,472		-		16,472		-
Residential mortgage-backed securities		470,727		-		429,227		41,500
Trust preferred securities		58,595		-		17,816		40,779
Corporate and other debt securities		31,387		28,895		2,492		-
Equity securities		49,153		27,271		21,882		-

Total available for sale		673,911		56,166		535,466		82,279
Trading securities		22,104		-		22,104		-
Loans held for sale ⁽¹⁾		149,067		-		149,067		-
Other assets ⁽²⁾		11,918		-		11,918		-

Total assets	$	857,000	$	56,166	$	718,555	$	82,279


Liabilities
Junior subordinated debentures issued to VNB Capital Trust I ⁽³⁾	$	149,708	$	149,708	$	-	$	-
Other liabilities ⁽²⁾		31,227		-		31,227		-

Total liabilities	$	180,935	$	149,708	$	31,227	$	-


Non-recurring fair value measurements:
Collateral dependent impaired loans ⁽⁴⁾	$	71,377	$	-	$	-	$	71,377
Loan servicing rights		12,814		-		-		12,814
Foreclosed assets		25,861		-		-		25,861

Total	$	110,052	$	-	$	-	$	110,052


			Fair Value Measurements at Reporting Date Using:
	December 31, 2011		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. government agency securities	$	90,748	$	-	$	90,748	$	-
Obligations of states and political subdivisions		20,214		-		20,214		-
Residential mortgage-backed securities		310,137		-		259,977		50,160
Trust preferred securities		70,425		19,576		23,698		27,151
Corporate and other debt securities		33,043		30,603		2,440		-
Equity securities		41,953		23,506		18,447		-

Total available for sale		566,520		73,685		415,524		77,311
Trading securities		21,938		-		21,938		-
Loans held for sale ⁽¹⁾		25,169		-		25,169		-
Other assets ⁽²⁾		5,211		-		5,211		-

Total assets	$	618,838	$	73,685	$	467,842	$	77,311


Liabilities
Junior subordinated debentures issued to VNB Capital Trust I ⁽³⁾	$	160,478	$	160,478	$	-	$	-
Other liabilities ⁽²⁾		21,854		-		21,854		-

Total liabilities	$	182,332	$	160,478	$	21,854	$	-


Non-recurring fair value measurements:
Collateral dependent impaired loans ⁽⁴⁾	$	66,854	$	-	$	-	$	66,854
Loan servicing rights		9,078		-		-		9,078
Foreclosed assets		15,874		-		-		15,874

Total	$	91,806	$	-	$	-	$	91,806

⁽¹⁾	Loans held for sale (which consist of residential mortgages) are carried at fair value and had contractual unpaid principal balances totaling approximately $141.4 million and $24.3 million at September 30, 2012 and December 31, 2011, respectively.

⁽²⁾	Derivative financial instruments are included in this category.

⁽³⁾	The junior subordinated debentures had contractual unpaid principal obligations totaling $146.7 million and $157.0 million at September 30, 2012 and December 31, 2011, respectively.

⁽⁴⁾	Excludes covered loans acquired in the FDIC-assisted transactions completed in the first quarter of 2010 and other purchased credit-impaired loans acquired in the first quarter of 2012.

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

The following table summarizes changes in Level 3 assets, consisting of available for sale securities, measured at fair value on a recurring basis for the three months ended September 30, 2012 and 2011:


	Three Months Ended September 30,
	2012			2011
	(in thousands)
Balance, beginning of the period	$	89,091		$	51,218
Total net (losses) gains for the period included in:
Net income		(4,697	)		-
Other comprehensive income		(150	)		(489	)
Settlements		(1,965	)		(2,565	)

Balance, end of the period	$	82,279		$	48,164

Change in unrealized losses for the period included in earnings for assets held at the end of the reporting period *	$	(4,697	)	$	-

*	Represents the net impairment losses on securities recognized in earnings for the period.

The following table summarizes changes in Level 3 assets, consisting of trading and available for sale securities, measured at fair value on a recurring basis for nine months ended September 30, 2012 and 2011:


	Nine Months Ended September 30,
	2012						2011
	Trading Securities			Available For Sale Securities			Trading Securities			Available For Sale Securities
	(in thousands)
Balance, beginning of the period		$	-	$	77,311		$	21,903		$	138,655
Transfers out of Level 3:
Residential mortgage-backed securities	-				-			-			(44,771	)
Trust preferred securities	-				-			(21,903	)		(17,397	)
Corporate and other debt securities	-				-			-			(12,914	)
Equity securities	-				-			-			(9,353	)
Total net (losses) gains for the period included in:
Net income	-				(5,247	)		-			(825	)
Other comprehensive income	-				18,804			-			1,723
Settlements	-				(8,589	)		-			(6,954	)

Balance, end of the period		$	-	$	82,279		$	-		$	48,164

Change in unrealized losses for the period included in earnings for assets held at the end of the reporting period *		$	-	$	(5,247	)	$	-		$	(825	)

*	Represents the net impairment losses on securities recognized in earnings for the period.

Schedule of Quantitative Information About Level 3 Inputs Used to Measure the Fair Value of Available For Sale Securities

underlying credit worthiness of each issuer. The following table presents quantitative information about Level 3 inputs used to measure the fair value of these securities at September 30, 2012:


Security Type	Valuation Technique	Unobservable Input	Range	Weighted Average
Mortgage-backed securities	Discounted cash flow	Prepayment rate	8.9 - 29.2%	15.9%
		Default rate	4.0 - 24.9	9.1
		Loss severity	40.0 - 59.4	51.2

Single issuer trust preferred securities	Discounted cash flow	Loss severity	0.0 -100.0%	28.4%
		Market credit spreads	6.0 - 6.6	6.4
		Discount rate	6.4 - 8.3	7.5

Schedule of Gains and Losses from Fair Value Changes

The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets and liabilities carried at fair value for the three and nine months ended September 30, 2012 and 2011:


		Gains (Losses) on Change in Fair Value
Reported in Consolidated Statements of Financial Condition	Reported in Consolidated Statements of Income	Three Months Ended September 30,					Nine Months Ended September 30,
	Reported in Consolidated Statements of Income	2012			2011		2012			2011
		(in thousands)
Assets:
Available for sale securities	Net impairment losses on securities	$	(4,697	)	$	-	$	(5,247	)	$	(825	)
Trading securities	Trading gains, net		65			136		166			523
Loans held for sale	Gains on sales of loans, net		25,055			2,890		31,362			8,060
Liabilities:
Junior subordinated debentures issued to capital trusts	Trading gains, net		(59	)		640		461			2,587

		$	20,364		$	3,666	$	26,742		$	10,345

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, 2012 and December 31, 2011 were as follows:


			September 30, 2012				December 31, 2011
	Fair Value Hierarchy		Carrying Amount		Fair Value		Carrying Amount		Fair Value
					(in thousands)
Financial assets
Cash and due from banks		Level 1	$	412,895	$	412,895	$	372,566	$	372,566
Interest bearing deposits with banks		Level 1		192,364		192,364		6,483		6,483
Investment securities held to maturity:
U.S. Treasury securities		Level 1		99,906		116,261		100,018		113,859
Obligations of states and political subdivisions		Level 2		492,617		518,570		433,284		453,201
Residential mortgage-backed securities		Level 2		852,375		886,156		1,180,104		1,230,993
Trust preferred securities		Level 2		127,510		111,401		193,312		174,753
Corporate and other debt securities		Level 2		52,167		57,025		52,198		54,391

Total investment securities held to maturity				1,624,575		1,689,413		1,958,916		2,027,197


Net loans		Level 3		11,019,691		11,052,163		9,665,839		9,645,517
Accrued interest receivable		Level 1		55,548		55,548		52,527		52,527
Federal Reserve Bank and Federal Home Loan Bank stock⁽¹⁾		Level 2		145,328		145,328		129,669		129,669

Financial liabilities
Deposits without stated maturities		Level 1		8,199,031		8,199,031		7,171,718		7,171,718
Deposits with stated maturities		Level 2		2,721,769		2,780,264		2,501,384		2,557,119
Short-term borrowings		Level 1		288,865		288,865		212,849		215,179
Long-term borrowings		Level 2		2,698,403		3,128,748		2,726,099		3,154,150
Junior subordinated debentures issued to capital trusts		Level 2		40,886		40,858		25,120		25,620
Accrued interest payable⁽²⁾		Level 1		16,326		16,326		17,736		17,736

⁽¹⁾ Included in other assets.

⁽²⁾ Included in accrued expenses and other liabilities.

- 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 (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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