Fair Value Measurement of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2014

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, 2014 and December 31, 2013. 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, 2014		Fair Value Measurements at Reporting Date Using:
	September 30, 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	$	92,996	$	92,996	$	—	$	—
U.S. government agency securities	45,014		—		45,014		—
Obligations of states and political subdivisions	37,615		—		37,615		—
Residential mortgage-backed securities	459,577		—		438,601		20,976
Trust preferred securities	21,244		—		16,519		4,725
Corporate and other debt securities	77,915		21,620		56,295		—
Equity securities	24,060		2,247		21,813		—
Total available for sale	758,421		116,863		615,857		25,701
Trading securities	14,186		—		14,186
Loans held for sale ⁽¹⁾	3,351		—		3,351		—
Other assets ⁽²⁾	14,931		—		14,931		—
Total assets	$	790,889	$	116,863	$	648,325	$	25,701
Liabilities
Other liabilities ⁽²⁾	$	23,639	$	—	$	23,639	$	—
Total liabilities	$	23,639	$	—	$	23,639	$	—
Non-recurring fair value measurements:
Non-performing loans held for sale	$	7,350	$	—	$	7,350	$	—
Collateral dependent impaired loans ⁽³⁾	11,931		—		—		11,931
Loan servicing rights	2,130		—		—		2,130
Foreclosed assets ⁽⁴⁾	12,433		—		—		12,433
Total	$	33,844	$	—	$	7,350	$	26,494



			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 ⁽³⁾	$	35,700	$	—	$	—	$	35,700
Loan servicing rights	3,677		—		—		3,677
Foreclosed assets ⁽⁴⁾	25,929		—		—		25,929
Total	$	65,306	$	—	$	—	$	65,306


(1)	Loans held for sale carried at fair value (which consist of residential mortgages) had contractual unpaid principal balances totaling approximately $3.3 million and $10.4 million at September 30, 2014 and December 31, 2013, respectively.


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


(3)	Excludes PCI loans.


(4)	Includes covered real estate owned totaling $1.3 million and $7.6 million at September 30, 2014 and December 31, 2013, 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, 2014 and 2013 are summarized below:



	Available for Sale Securities
	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(in thousands)
Balance, beginning of the period	$	26,029		$	79,112		$	28,523		$	71,674
Total net gains included in other comprehensive income for the period	341			218			563			11,657
Settlements	(669		)	(1,119		)	(3,385		)	(5,120		)
Balance, end of the period	$	25,701		$	78,211		$	25,701		$	78,211

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, 2014:



Security Type	Valuation Technique	Unobservable Input	Range	Weighted Average

Private label mortgage-backed securities	Discounted cash flow	Prepayment rate	0.2 - 42.3	11.2	%
		Default rate	2.9 - 23.1	8.1
		Loss severity	41.6 - 61.1	51.1

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, 2014 and 2013:



Reported in Consolidated Statements of Financial Condition	Reported in Consolidated Statements of Income	Gains (Losses) on Change in Fair Value
		Three Months Ended September 30,					Nine Months Ended September 30,
		2014			2013		2014			2013
		(in thousands)
Assets:
Trading securities	Trading (losses) gains, net	$	(35	)	$	100	$	(78	)	$	34
Loans held for sale	(Losses) gains on sales of loans, net	(95		)	2,729		1,497			32,155
Liabilities:
Junior subordinated debentures issued to capital trusts	Trading (losses) gains, net	—			2,131		—			(275		)
		$	(130	)	$	4,960	$	1,419		$	31,914

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, 2014 and December 31, 2013 were as follows:



	Fair Value Hierarchy	September 30, 2014				December 31, 2013
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets
Cash and due from banks	Level 1	$	352,799	$	352,799	$	234,253	$	234,253
Interest bearing deposits with banks	Level 1	60,655		60,655		134,915		134,915
Investment securities held to maturity:
U.S. Treasury securities	Level 1	139,156		148,485		139,255		144,307
U.S. government agency securities	Level 2	13,881		14,207		4,427		4,365
Obligations of states and political subdivisions	Level 2	501,312		519,755		545,886		543,151
Residential mortgage-backed securities	Level 2	1,020,852		1,024,402		886,043		871,021
Trust preferred securities	Level 2	98,454		86,474		103,458		91,489
Corporate and other debt securities	Level 2	39,657		45,309		52,668		57,094
Total investment securities held to maturity		1,813,312		1,838,632		1,731,737		1,711,427
Net loans	Level 3	12,062,939		11,826,631		11,453,995		11,294,348
Accrued interest receivable	Level 1	53,545		53,545		53,964		53,964
Federal Reserve Bank and Federal Home Loan Bank stock⁽¹⁾	Level 1	133,586		133,586		137,234		137,234
Financial liabilities
Deposits without stated maturities	Level 1	9,678,159		9,678,159		9,139,993		9,139,993
Deposits with stated maturities	Level 2	2,183,328		2,245,962		2,179,269		2,206,427
Short-term borrowings	Level 1	297,719		297,719		281,455		281,455
Long-term borrowings	Level 2	2,797,828		3,019,564		2,792,306		3,036,953
Junior subordinated debentures issued to capital trusts	Level 2	41,211		46,064		41,089		45,261
Accrued interest payable ⁽²⁾	Level 1	13,959		13,959		16,442		16,442


(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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