Fair Value Measurement of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2015

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, 2015 and December 31, 2014. 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).



	June 30, 2015		Fair Value Measurements at Reporting Date Using:
	June 30, 2015		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	$	49,273	$	49,273	$	—	$	—
U.S. government agency securities	26,529		—		26,529		—
Obligations of states and political subdivisions	43,410		—		43,410		—
Residential mortgage-backed securities	585,791		—		573,202		12,589
Trust preferred securities	8,618		—		6,495		2,123
Corporate and other debt securities	73,484		17,963		55,521		—
Equity securities	20,469		1,338		19,131		—
Total available for sale	807,574		68,574		724,288		14,712
Loans held for sale ⁽¹⁾⁽²⁾	4,533		—		4,533		—
Other assets ⁽³⁾	23,982		—		23,982		—
Total assets	$	836,089	$	68,574	$	752,803	$	14,712
Liabilities
Other liabilities ⁽³⁾	$	41,801	$	—	$	41,801	$	—
Total liabilities	$	41,801	$	—	$	41,801	$	—
Non-recurring fair value measurements:
Collateral dependent impaired loans ⁽⁴⁾	$	9,642	$	—	$	—	$	9,642
Loan servicing rights	3,023		—		—		3,023
Foreclosed assets ⁽⁵⁾	6,429		—		—		6,429
Total	$	19,094	$	—	$	—	$	19,094



			Fair Value Measurements at Reporting Date Using:
	December 31, 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	$	49,443	$	49,443	$	—	$	—
U.S. government agency securities	33,825		—		33,825		—
Obligations of states and political subdivisions	44,051		—		44,051		—
Residential mortgage-backed securities	644,276		—		629,696		14,580
Trust preferred securities	20,537		—		15,808		4,729
Corporate and other debt securities	74,012		18,241		55,771		—
Equity securities	20,826		1,337		19,489		—
Total available for sale	886,970		69,021		798,640		19,309
Trading securities	14,233		—		14,233		—
Loans held for sale ⁽¹⁾	17,165		—		17,165		—
Other assets ⁽³⁾	20,987		—		20,987		—
Total assets	$	939,355	$	69,021	$	851,025	$	19,309
Liabilities
Other liabilities ⁽³⁾	$	33,330	$	—	$	33,330	$	—
Total liabilities	$	33,330	$	—	$	33,330	$	—
Non-recurring fair value measurements:
Non-performing loans held for sale	$	7,130	$	—	$	—	$	7,130
Collateral dependent impaired loans ⁽⁴⁾	13,985		—		—		13,985
Loan servicing rights	3,987		—		—		3,987
Foreclosed assets ⁽⁵⁾	18,098		—		—		18,098
Total	$	43,200	$	—	$	—	$	43,200


(1)	Loans held for sale carried at fair value (which consist of residential mortgages) had contractual unpaid principal balances totaling approximately $4.5 million and $16.9 million at June 30, 2015 and December 31, 2014, respectively.

(2)

Gains and losses related to the change in the fair value of loans held for sale is included in net gains on sales of loans within the non-interest income category of our consolidated statements of income and totaled a net gain of $53 thousand and $252 thousand for the three months ended June 30, 2015 and 2014, respectively and $153 thousand and $372 thousand for the six months ended June 30, 2015 and 2014, respectively.


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


(4)	Excludes PCI loans.


(5)	Includes covered other real estate owned totaling $2.9 million and $3.2 million at June, 30 2015 and December 31, 2014, 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 months ended June 30, 2015 and 2014 are summarized below:



	Available for Sale Securities
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(in thousands)
Balance, beginning of the period	$	15,468		$	26,911		$	19,309		$	28,523
Total net (losses) gains included in other comprehensive income for the period	(90		)	174			(882		)	222
Sales	—			—			(2,675		)	—
Settlements	(666		)	(1,056		)	(1,040		)	(2,716		)
Balance, end of the period	$	14,712		$	26,029		$	14,712		$	26,029

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 June 30, 2015:



Security Type	Valuation Technique	Unobservable Input	Range	Weighted Average

Private label mortgage-backed securities	Discounted cash flow	Prepayment rate	4.5 - 18.9%	11.9	%
		Default rate	3.2 - 23.2	9.6
		Loss severity	40.2 - 63.4	57.4

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, 2015 and December 31, 2014 were as follows:



	Fair Value Hierarchy	June 30, 2015				December 31, 2014
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets
Cash and due from banks	Level 1	$	266,586	$	266,586	$	462,569	$	462,569
Interest bearing deposits with banks	Level 1	206,619		206,619		367,838		367,838
Investment securities held to maturity:
U.S. Treasury securities	Level 1	139,051		150,076		139,121		151,300
U.S. government agency securities	Level 2	13,523		13,802		14,081		14,385
Obligations of states and political subdivisions	Level 2	498,128		512,399		500,018		519,693
Residential mortgage-backed securities	Level 2	965,647		969,548		986,992		998,981
Trust preferred securities	Level 2	79,617		66,468		98,456		86,243
Corporate and other debt securities	Level 2	24,609		27,002		39,648		45,374
Total investment securities held to maturity		1,720,575		1,739,295		1,778,316		1,815,976
Net loans	Level 3	14,377,459		14,104,550		13,371,560		13,085,830
Accrued interest receivable	Level 1	58,278		58,278		57,333		57,333
Federal Reserve Bank and Federal Home Loan Bank stock⁽¹⁾	Level 1	137,229		137,229		133,117		133,117
Financial liabilities
Deposits without stated maturities	Level 1	11,415,142		11,415,142		11,291,648		11,291,648
Deposits with stated maturities	Level 2	2,915,889		2,981,525		2,742,468		2,807,522
Short-term borrowings	Level 1	126,148		126,148		146,781		146,781
Long-term borrowings	Level 2	2,625,116		2,833,408		2,526,408		2,738,122
Junior subordinated debentures issued to capital trusts	Level 2	41,333		43,989		41,252		44,584
Accrued interest payable ⁽²⁾	Level 1	15,225		15,225		15,526		15,526


(1)	Included in other assets.


(2)	Included in accrued expenses and other liabilities.