Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Related to Mortgage Loans Held For Sale, Commitments to Originate and Commitments to Sell Disclosures

The following table presents the changes in fair value related to mortgage loans held for sale, commitments to originate fixed-rate residential real estate mortgage loans to be sold and commitments to sell fixed-rate residential real estate mortgage loans for the periods indicated. Changes in fair values are reported as a component of net gains on loan sales and commissions on loans originated for others in the Consolidated Statements of Income.

(Dollars in thousands)
Years ended December 31,	2012			2011			2010
Mortgage loans held for sale		$970			$716			$—
Commitments to originate	649			1,968			54
Commitments to sell	(1,611		)	(3,119		)	228
Total changes in fair value		$8			($435	)		$282

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Items Recorded at Fair Value on a Recurring Basis

The tables below present the balances of assets and liabilities reported at fair value on a recurring basis.

(Dollars in thousands)							Assets/Liabilities at Fair Value
	Fair Value Measurements Using
December 31, 2012	Level 1		Level 2		Level 3
Assets:
Securities available for sale:
Obligations of U.S. government-sponsored enterprises		$—		$31,670		$—		$31,670
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	—		231,233		—		231,233
States and political subdivisions	—		72,620		—		72,620
Trust preferred securities:
Individual name issuers	—		24,751		—		24,751
Collateralized debt obligations	—		—		843		843
Corporate bonds	—		14,381		—		14,381
Mortgage loans held for sale	—		40,243		9,813		50,056
Derivative assets (1)
Interest rate swap contracts with customers	—		3,851		—		3,851
Forward loan commitments	—		2,469		44		2,513
Total assets at fair value on a recurring basis		$—		$421,218		$10,700		$431,918
Liabilities:
Derivative liabilities (1)
Mirror swap contracts with customers		$—		$3,952		$—		$3,952
Interest rate risk management swap contracts		$—		$1,619		$—		$1,619
Forward loan commitments	—		4,005		186		4,191
Total liabilities at fair value on a recurring basis		$—		$9,576		$186		$9,762

(1) Derivative assets are included in other assets and derivative liabilities are reported in other liabilities in the Consolidated Balance Sheets.

(Dollars in thousands)							Assets/Liabilities at Fair Value
	Fair Value Measurements Using
December 31, 2011	Level 1		Level 2		Level 3
Assets:
Securities available for sale:
Obligations of U.S. government-sponsored enterprises		$—		$32,833		$—		$32,833
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	—		389,658		—		389,658
States and political subdivisions	—		79,493		—		79,493
Trust preferred securities:
Individual name issuers	—		22,396		—		22,396
Collateralized debt obligations	—		—		887		887
Corporate bonds	—		14,282		—		14,282
Perpetual preferred stocks	1,704		—		—		1,704
Mortgage loans held for sale	—		20,340		—		20,340
Derivative assets (1)
Interest rate swap contracts with customers	—		4,513		—		4,513
Forward loan commitments	—		1,864		—		1,864
Total assets at fair value on a recurring basis		$1,704		$565,379		$887		$567,970
Liabilities:
Derivative liabilities (1)
Mirror swap contracts with customers		$—		$4,669		$—		$4,669
Interest rate risk management swap contracts	—		1,802		—		1,802
Forward loan commitments	—		2,580		—		2,580
Total liabilities at fair value on a recurring basis		$—		$9,051		$—		$9,051

(1) Derivatives assets are included in other assets and derivative liabilities are reported in other liabilities in the Consolidated Balance Sheets.

Schedule of Changes in Level Three Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis during the periods indicated.

Years ended December 31,	2012											2011
(Dollars in thousands)	Securities Available for Sale (1)			Mortgage Loans Held for Sale (2)		Derivative Assets / (Liabilities) (3)			Total			Securities Available for Sale (1)			Derivative Assets / (Liabilities) (3)			Total
Balance at beginning of period		$887			$—		$—			$887			$806			$435			$1,241
Gains and losses (realized and unrealized):
Included in earnings (4)	(221		)	—		—			(221		)	(191		)	(1,263		)	(1,454		)
Included in other comprehensive income	177			—		—			177			272			—			272
Issuances	—			9,813		(142		)	9,671			—			—			—
Transfers out of Level 3	—			—		—			—			—			828			828
Balance at end of period		$843			$9,813		($142	)		$10,514			$887			$—			$887

(1) During the periods indicated, Level 3 securities available for sale were comprised of two pooled trust preferred debt securities, in the form of collateralized debt obligations.

(2) During the periods indicated, Level 3 mortgage loans held for sale consisted of certain mortgage loans whose fair value was determined utilizing a discounted cash flow analysis.

(3) During the periods indicated, Level 3 derivative assets / liabilities consisted of forward loan commitments (interest rate lock commitments and commitments to sell fixed-rate residential mortgages) whose fair value was determined utilizing a discounted cash flow analysis. During 2011, Level 3 derivative assets / liabilities consisted of certain forward loan commitments that were reclassified out of Level 3 into Level 2 after evaluation during the third quarter of 2011, when it was determined that significant inputs and significant value drivers were observable in active markets.

(4) Losses included in earnings for Level 3 securities available for sale consisted of credit-related impairment losses on the two Level 3 pooled trust preferred debt securities.  Credit-related impairment losses of $221 thousand and $191 thousand were recognized in December 31, 2012 and 2011, respectively.  The losses included in earnings for Level 3 derivative assets and liabilities, which were comprised of forward loan commitments (interest rate lock commitments and commitments to sell fixed-rate residential mortgages), were included in net gains on loan sales and commissions on loans originated for others in the Consolidated Statements of Income.

Quantitative Information About Level 3 Assets Measured at Fair Value on a Recurring Basis

The following table presents additional quantitative information about assets measured at fair value on a recurring basis for which the Corporation has utilized Level 3 inputs to determine fair value.

(Dollars in thousands)	December 31, 2012
	Fair Value			Valuation Technique	Unobservable Input	Range of Inputs Utilized (Weighted Average)
Trust preferred securities:
Collateralized debt obligations		$843		Discounted Cash Flow	Discount Rate	16.75%
					Cumulative Default %	3.3% - 100% (25.7%)
					Loss Given Default %	85% - 100% (90.9%)
Mortgage loans held for sale		$9,813		Discounted Cash Flow	Interest Rate	2.875% - 4.95% (3.71%)
					Credit Risk Adjustment	0.25%
Forward loan commitments - assets		$44		Discounted Cash Flow	Interest Rate	3.25% - 3.875% (3.56%)
					Credit Risk Adjustment	0.25%
Forward loan commitments - liabilities		($186	)	Discounted Cash Flow	Interest Rate	3.25% - 3.875% (3.69%)
					Credit Risk Adjustment	0.25%

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table presents the carrying value of certain assets measured at fair value on a nonrecurring basis during the year ended December 31, 2012.

(Dollars in thousands)	Carrying Value at December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Collateral dependent impaired loans		$—		$—		$9,550		$9,550
Property acquired through foreclosure or repossession	—		—		1,073		1,073
Total assets at fair value on a nonrecurring basis		$—		$—		$10,623		$10,623

Collateral dependent impaired loans with a carrying value of $9.6 million at December 31, 2012 were subject to nonrecurring fair value measurement during the year ended December 31, 2012.  As of December 31, 2012, the allowance for loan losses allocation on these loans amounted to $2.0 million.

For the year ended December 31, 2012, property acquired through foreclosures or repossession with a fair value of $3.2 million was transferred from loans.  Prior to the transfer, the assets whose fair value less costs to sell was less than the carrying value were written down to fair value through a charge to the allowance for loan losses.  For the year ended December 31, 2012, valuation adjustments to reflect property acquired through foreclosure or repossession at fair value less cost to sell resulted in a charge to the allowance for loan losses of $410 thousand.  Subsequent to foreclosures, valuations are updated periodically, and assets may be marked down further, reflecting a new cost basis.  Subsequent valuation adjustments resulted in a charge to earnings of $350 thousand for the year ended December 31, 2012.

The following table presents the carrying value of certain assets measured at fair value on a nonrecurring basis during the year ended December 31, 2011.

(Dollars in thousands)	Carrying Value at December 31, 2011
	Level 1		Level 2		Level 3		Total
Assets:
Collateral dependent impaired loans		$—		$—		$10,391		$10,391
Loan servicing rights	—		—		765		765
Property acquired through foreclosure or repossession	—		—		1,758		1,758
Total assets at fair value on a nonrecurring basis		$—		$—		$12,914		$12,914

Quantitative Information About Level 3 Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value.

(Dollars in thousands)	December 31, 2012
	Fair Value		Valuation Technique	Unobservable Input	Range of Inputs Utilized (Weighted Average)
Collateral dependent impaired loans		$9,550	Appraisals of collateral	Discount for costs to sell	0% - 50% (11%)
				Appraisal adjustments (1)	0% - 27% (18%)
Property acquired through foreclosure or repossession		$1,073	Appraisals of collateral	Discount for costs to sell	0% - 10% (5%)
				Appraisal adjustments (1)	15% - 34% (21%)

(1) Management may adjust appraisal values to reflect market value declines or other discounts resulting from its knowledge of the property.

Carrying Amounts and Estimated Fair Values of Financial Instruments

The following tables present the carrying amount, estimated fair value and placement in the fair value hierarchy of the Corporation’s financial instruments as of December 31, 2012 and 2011. The tables exclude financial instruments for which the carrying value approximates fair value. Financial assets for which the fair value approximates carrying value include cash and cash equivalents, FHLBB stock, accrued interest receivable and bank-owned life insurance. Financial liabilities for which the fair value approximates carrying value include non-maturity deposits, other borrowings and accrued interest payable.

(Dollars in thousands)					Fair Value Measurements
December 31, 2012	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Securities held to maturity		$40,381		$41,420		$—		$41,420		$—
Loans, net of allowance for loan losses	2,263,130		2,350,153		—		—		2,350,153
Loan servicing rights (1)	1,110		1,275		—		—		1,275
Financial Liabilities:
Time deposits		$870,232		$879,705		$—		$879,705		$—
FHLBB advances	361,172		392,805		—		392,805		—
Junior subordinated debentures	32,991		23,371		—		23,371		—

(1) The carrying value of loan servicing rights is net of $165 thousand in reserves as of December 31, 2012. The estimated fair value does not include such adjustment.

(Dollars in thousands)					Fair Value Measurements
December 31, 2011	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Securities held to maturity		$52,139		$52,499		$—		$52,499		$—
Loans, net of allowance for loan losses	2,117,357		2,198,940		—		—		2,198,940
Loan servicing rights (1)	765		937		—		—		937
Financial Liabilities:
Time deposits		$878,794		$891,378		$—		$891,378		$—
FHLBB advances	540,450		577,315		—		577,315		—
Junior subordinated debentures	32,991		20,391		—		20,391		—

(1) The carrying value of loan servicing rights is net of $172 thousand in reserves as of December 31, 2011. The estimated fair value does not include such adjustment.