Fair Value Measurement of Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 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 December 31, 2013 and 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:
	December 31, 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	$	84,665	$	84,665	$	—	$	—
U.S. government agency securities		48,627		—		48,627		—
Obligations of states and political subdivisions		37,700		—		37,700		—
Residential mortgage-backed securities		508,029		—		483,277		24,752
Trust preferred securities		19,215		—		15,444		3,771
Corporate and other debt securities		83,398		27,273		56,125		—
Equity securities		48,058		26,905		21,153		—

Total available for sale		829,692		138,843		662,326		28,523
Trading securities		14,264		—		14,264		—
Loans held for sale ⁽¹⁾		10,488		—		10,488		—
Other assets ⁽²⁾		15,122		—		15,122		—

Total assets	$	869,566	$	138,843	$	702,200	$	28,523

Liabilities
Other liabilities ⁽²⁾	$	20,586	$	—	$	20,586	$	—

Total liabilities	$	20,586	$	—	$	20,586	$	—

Non-recurring fair value measurements:
Collateral dependent impaired loans ⁽⁴⁾	$	35,700	$	—	$	—	$	35,700
Loan servicing rights		3,677		—		—		3,677
Foreclosed assets		25,929		—		—		25,929

Total	$	65,306	$	—	$	—	$	65,306


			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 $10.4 million and $115.4 million at December 31, 2013 and 2012, respectively.

⁽²⁾	Amount represents derivative financial instruments.

⁽³⁾	The junior subordinated debentures had contractual unpaid principal obligations totaling $146.7 million.

⁽⁴⁾	Excludes PCI loans.

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 years ended December 31, 2013 and 2012 are summarized below:


	Available For Sale Securities
	2013			2012
	(in thousands)
Balance, beginning of the period	$	71,674		$	77,311
Total net (losses) gains for the period included in:
Net income		—			(5,247	)
Other comprehensive income		657			18,482
Sales		(36,681	)		(9,146	)
Settlements		(7,127	)		(9,726	)

Balance, end of the period	$	28,523		$	71,674

Change in unrealized losses for the period included in earnings for assets held at year end *	$	—		$	(5,247	)

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

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 December 31, 2013:


Security Type	Valuation Technique	Unobservable Input	Range			Weighted Average

Private label mortgage-backed securities	Discounted cash flow	Prepayment rate		4.6 - 25.9	%		17.6	%
		Default rate		3.1 - 25.6			9.3
		Loss severity		25.8 - 46.2			37.0

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 years ended December 31, 2013, 2012 and 2011:


Reported in Consolidated Statements of Financial Condition	Reported in Consolidated Statements of Income	Gains (Losses) on Change in Fair Value
Reported in Consolidated Statements of Financial Condition	Reported in Consolidated Statements of Income	2013		2012			2011
		(in thousands)
Assets:
Available for sale securities	Net impairment losses on securities	$	—	$	(5,247	)	$	(19,968	)*
Trading securities	Trading gains, net		28		219			1,015
Loans held for sale	Gains on sales of loans, net		33,695		46,998			10,699
Liabilities:
Junior subordinated debentures issued to capital trusts	Trading gains, net		881		2,574			1,256

		$	34,604	$	44,544		$	(6,998	)

*	Includes $18.3 million related to impaired trust preferred securities transferred from held-to-maturity to available for sale at December 31, 2011.

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 December 31, 2013 and 2012 were as follows:


		December 31,
		2013				2012
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets
Cash and due from banks	Level 1	$	234,253	$	234,253	$	390,078	$	390,078
Interest bearing deposits with banks	Level 1		134,915		134,915		463,022		463,022
Investment securities held to maturity:
U.S. Treasury securities	Level 1		139,255		144,307		99,869		115,329
U.S. government agency securities	Level 2		4,427		4,365		—		—
Obligations of states and political subdivisions	Level 2		545,886		543,151		506,473		531,966
Residential mortgage-backed securities	Level 2		886,043		871,021		813,647		838,116
Trust preferred securities	Level 2		103,458		91,489		127,505		113,657
Corporate and other debt securities	Level 2		52,668		57,094		52,213		58,882

Total investment securities held to maturity			1,731,737		1,711,427		1,599,707		1,657,950


Net loans	Level 3		11,453,995		11,294,348		10,892,599		10,908,742
Accrued interest receivable	Level 1		53,964		53,964		52,375		52,375
Federal Reserve Bank and Federal Home Loan Bank stock⁽¹⁾	Level 1		137,234		137,234		138,533		138,533

Financial liabilities
Deposits without stated maturities	Level 1		9,139,993		9,139,993		8,755,252		8,755,252
Deposits with stated maturities	Level 2		2,179,269		2,206,427		2,508,766		2,563,726
Short-term borrowings	Level 1		281,455		281,455		154,323		154,323
Long-term borrowings	Level 2		2,792,306		3,036,953		2,697,299		3,100,173
Junior subordinated debentures issued to capital trusts	Level 2		41,089		45,261		40,927		40,776
Accrued interest payable⁽²⁾	Level 1		16,442		16,442		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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