Fair Value Measurement of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2013

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 June 30, 2013 and December 31, 2012. 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).


			Fair Value Measurements at Reporting Date Using:
	June 30, 2013		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	$	89,786	$	89,786	$	—	$	—
U.S. government agency securities		55,808		—		55,808		—
Obligations of states and political subdivisions		39,234		—		39,234		—
Residential mortgage-backed securities		573,827		—		545,687		28,140
Trust preferred securities		68,413		—		17,441		50,972
Corporate and other debt securities		84,246		26,721		57,525		—
Equity securities		47,342		26,675		20,667		—

Total available for sale		958,656		143,182		736,362		79,112
Trading securities		14,170		—		14,170
Loans held for sale ⁽¹⁾		48,901		—		48,901		—
Other assets ⁽²⁾		7,425		—		7,425		—

Total assets	$	1,029,152	$	143,182	$	806,858	$	79,112


Liabilities
Junior subordinated debentures issued to VNB Capital Trust I ⁽³⁾	$	150,001	$	150,001	$	—	$	—
Other liabilities ⁽²⁾		18,971		—		18,971		—

Total liabilities	$	168,972	$	150,001	$	18,971	$	—


Non-recurring fair value measurements:
Collateral dependent impaired loans ⁽⁴⁾		41,835		—		—		41,835
Loan servicing rights		5,558		—		—		5,558
Foreclosed assets		7,192		—		—		7,192

Total	$	54,585	$	—	$	—	$	54,585


			Fair Value Measurements at Reporting Date Using:
	December 31, 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. Treasury securities	$	97,625	$	97,625	$	—	$	—
U.S. government agency securities		45,762		—		45,762		—
Obligations of states and political subdivisions		16,627		—		16,627		—
Residential mortgage-backed securities		510,154		—		478,783		31,371
Trust preferred securities		57,432		—		17,129		40,303
Corporate and other debt securities		30,708		28,444		2,264		—
Equity securities		49,508		28,608		20,900		—

Total available for sale		807,816		154,677		581,465		71,674
Trading securities		22,157		—		22,157		—
Loans held for sale ⁽¹⁾		120,230		—		120,230		—
Other assets ⁽²⁾		7,916		—		7,916		—

Total assets	$	958,119	$	154,677	$	731,768	$	71,674


Liabilities
Junior subordinated debentures issued to VNB Capital Trust I⁽³⁾	$	147,595	$	147,595	$	—	$	—
Other liabilities⁽²⁾		26,594		—		26,594		—

Total liabilities	$	174,189	$	147,595	$	26,594	$	—


Non-recurring fair value measurements:
Collateral dependent impaired loans ⁽⁴⁾	$	65,231	$	—	$	—	$	65,231
Loan servicing rights		16,201		—		—		16,201
Foreclosed assets		33,251		—		—		33,251

Total	$	114,683	$	—	$	—	$	114,683

⁽¹⁾	Loans held for sale (which consist of residential mortgages) are carried at fair value and had contractual unpaid principal balances totaling approximately $49.1 million and $115.4 million at June 30, 2013 and December 31, 2012, respectively.

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

⁽³⁾	The junior subordinated debentures had contractual unpaid principal obligations totaling $146.7 million at June 30, 2013 and December 31, 2012.

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

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 six months ended June 30, 2013 and 2012 are summarized below:


	Available for Sale Securities
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(in thousands)
Balance, beginning of the period	$	77,920		$	84,720		$	71,674		$	77,311
Total net gains (losses) for the period included in:
Net income		—			(550	)		—			(550	)
Other comprehensive income		3,406			7,847			11,439			18,954
Settlements		(2,214	)		(2,926	)		(4,001	)		(6,624	)

Balance, end of the period	$	79,112		$	89,091		$	79,112		$	89,091


Change in unrealized losses for the period included in earnings for assets held at the end of the reporting period *	$	—		$	(550	)	$	—		$	(550	)

*	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

The following table presents quantitative information about Level 3 inputs used to measure the fair value of these securities at June 30, 2013:


Security Type	Valuation Technique	Unobservable Input	Range			Weighted Average

Private label mortgage-backed securities	Discounted cash flow	Prepayment rate		14.7 - 25.2	%		19.3	%
		Default rate		4.3 - 12.2			7.0
		Loss severity		40.2 - 59.8			51.4

Single issuer trust preferred securities	Discounted cash flow	Loss severity		0.0 - 100.0	%		20.3	%
		Market credit spreads		4.8 - 5.4			5.2
		Discount rate		5.1 - 7.9			6.7

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 six months ended June 30, 2013 and 2012:


		Gains (Losses) on Change in Fair Value
Reported in Consolidated Statements of Financial Condition	Reported in Consolidated Statements of Income	Three Months Ended June 30,						Six Months Ended June 30,
	Reported in Consolidated Statements of Income	2013			2012			2013			2012
		(in thousands)
Assets:
Available for sale securities	Net impairment losses on securities	$	—		$	(550	)	$	—		$	(550	)
Trading securities	Trading (losses) gains, net		(36	)		(151	)		(66	)		101
Loans held for sale	Gains on sales of loans, net		14,366			3,141			29,426			6,307
Liabilities:
Junior subordinated debentures issued to capital trusts	Trading (losses) gains, net		(234	)		1,760			(2,406	)		520

		$	14,096		$	4,200		$	26,954		$	6,378

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 June 30, 2013 and December 31, 2012 were as follows:


		June 30, 2013				December 31, 2012
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets
Cash and due from banks	Level 1	$	401,228	$	401,228	$	390,078	$	390,078
Interest bearing deposits with banks	Level 1		299,097		299,097		463,022		463,022
Investment securities held to maturity:
U.S. Treasury securities	Level 1		99,792		108,734		99,869		115,329
Obligations of states and political subdivisions	Level 2		542,154		542,614		506,473		531,966
Residential mortgage-backed securities	Level 2		969,341		963,575		813,647		838,116
Trust preferred securities	Level 2		103,453		91,348		127,505		113,657
Corporate and other debt securities	Level 2		52,207		57,910		52,213		58,882

Total investment securities held to maturity			1,766,947		1,764,181		1,599,707		1,657,950

Net loans	Level 3		10,765,581		10,734,500		10,892,599		10,908,742
Accrued interest receivable	Level 1		53,303		53,303		52,375		52,375
Federal Reserve Bank and Federal Home Loan Bank stock⁽¹⁾	Level 1		138,359		138,359		138,533		138,533

Financial liabilities
Deposits without stated maturities	Level 1		8,877,529		8,877,529		8,755,252		8,755,252
Deposits with stated maturities	Level 2		2,365,093		2,404,271		2,508,766		2,563,726
Short-term borrowings	Level 1		125,060		125,060		154,323		154,323
Long-term borrowings	Level 2		2,695,897		2,994,601		2,697,299		3,100,173
Junior subordinated debentures issued to capital trusts	Level 2		41,008		42,731		40,927		40,776
Accrued interest payable⁽²⁾	Level 1		16,766		16,766		15,917		15,917

⁽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, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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