Fair Value (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities measured at fair value

Fair Value

FASB ASC No. 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level I prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair value of most securities available for sale is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

For those securities that cannot be priced using quoted market prices or observable inputs a Level 3 valuation is determined. These securities are primarily trust preferred securities, which are priced using Level 3 due to current market illiquidity and certain investments in state and municipal securities. The fair value of the trust preferred securities is obtained from a third party provider without adjustment. As described previously, management obtains values from other pricing sources to validate the Standard & Poors pricing that they currently utilize. The fair value of state and municipal obligations are derived by comparing the securities to current market rates plus an appropriate credit spread to determine an estimated value. Illiquidity spreads are then considered. Credit reviews are performed on each of the issuers. The significant unobservable inputs used in the fair value measurement of the Corporation’s state and municipal obligations are credit spreads related to specific issuers. Significantly higher credit spread assumptions would result in significantly lower fair value measurement. Conversely, significantly lower credit spreads would result in a significantly higher fair value measurements.

The fair value of derivatives is based on valuation models using observable market data as of the measurement date (Level 2 inputs).

	September 30, 2014
	Fair Value Measurements Using
(Dollar amounts in thousands)	Level 1		Level 2			Level 3		Total
U.S. Government agencies	$	—	$	1,461		$	—	$	1,461
Mortgage Backed Securities-residential	—		184,170			—		184,170
Mortgage Backed Securities-commercial	—		20			—		20
Collateralized mortgage obligations	—		492,912			—		492,912
State and municipal	—		198,788			6,685		205,473
Collateralized debt obligations	—		—			16,074		16,074
TOTAL	$	—	$	877,351		$	22,759	$	900,110
Derivative Assets			1,053
Derivative Liabilities			(1,053		)

	December 31, 2013
	Fair Value Measurements Using
(Dollar amounts in thousands)	Level 1		Level 2			Level 3		Total
U.S. Government agencies	$	—	$	1,633		$	—	$	1,633
Mortgage Backed Securities-residential	—		197,764			—		197,764
Mortgage Backed Securities-commercial	—		4,391			—		4,391
Collateralized mortgage obligations	—		506,741			—		506,741
State and municipal	—		190,462			4,525		194,987
Collateralized debt obligations	—		—			9,044		9,044
TOTAL	$	—	$	900,991		$	13,569	$	914,560
Derivative Assets			1,195
Derivative Liabilities			(1,195		)

Roll forward of financial instruments having fair value measurements using significant unobservable inputs (Level 3)

The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2014 and the year ended December 31, 2013. 

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended September 30, 2014
	State and municipal obligations			Collateralized debt obligations			Total
Beginning balance, July 1	$	4,035		$	14,621		$	18,656
Total realized/unrealized gains or losses
Included in earnings	—			—			—
Included in other comprehensive income	—			1,721			1,721
Purchases	4,000			—			4,000
Settlements	(1,350		)	(268		)	(1,618		)
Ending balance, September 30	$	6,685		$	16,074		$	22,759

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended September 30, 2014
	State and municipal obligations			Collateralized debt obligations			Total
Beginning balance, January 1	$	4,525		$	9,044		$	13,569
Total realized/unrealized gains or losses
Included in earnings	—			—			—
Included in other comprehensive income	—			7,781			7,781
Purchases	4,000			—			4,000
Settlements	(1,840		)	(751		)	(2,591		)
Ending balance, September 30	$	6,685		$	16,074		$	22,759

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2013
	State and municipal obligations			Collateralized debt obligations			Total
Beginning balance, January 1	$	9,911		$	6,122		$	16,033
Total realized/unrealized gains or losses
Included in earnings	—			904			904
Included in other comprehensive income	—			3,155			3,155
Transfers	(1,186		)	—			(1,186		)
Settlements	(4,200		)	(1,137		)	(5,337		)
Ending balance, December 31	$	4,525		$	9,044		$	13,569

Quantitative information about recurring and non-recurring Level 3

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at September 30, 2014.

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
State and municipal obligations	$	6,685	Discounted cash flow	Discount rate Probability of default	3.05%-5.50% 0%
Other real estate	$	4,012	Sales comparison/income approach	Discount rate for age of appraisal and market conditions	5.00%-20.00%
Impaired Loans	$	8,345	Sales comparison/income approach	Discount rate for age of appraisal and market conditions	0.00%-50.00%

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at December 31, 2013.

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
State and municipal obligations	$	4,525	Discounted cash flow	Discount rate Probability of default	3.05%-5.50% 0%
Other real estate	$	5,291	Sales comparison/income approach	Discount rate for age of appraisal and market conditions	5.00%-20.00%
Impaired Loans	$	13,765	Sales comparison/income approach	Discount rate for age of appraisal and market conditions	0.00%-50.00%

Schedule of loans identified as impaired by class of loans

The following tables presents loans identified as impaired by class of loans as of September 30, 2014 and December 31, 2013, which are all considered Level 3.

	September 30, 2014
(Dollar amounts in thousands)	Carrying Value		Allowance for Loan Losses Allocated		Fair Value
Commercial
Commercial & Industrial	$	1,459	$	418	$	1,041
Farmland	—		—		—
Non Farm, Non Residential	6,836		710		6,126
Agriculture	—		—		—
All Other Commercial	1,259		115		1,144
Residential
First Liens	34		—		34
Home Equity	—		—		—
Junior Liens	—		—		—
Multifamily	—		—		—
All Other Residential	—		—		—
Consumer
Motor Vehicle	—		—		—
All Other Consumer	—		—		—
TOTAL	$	9,588	$	1,243	$	8,345

	December 31, 2013
(Dollar amounts in thousands)	Carrying Value		Allowance for Loan Losses Allocated		Fair Value
Commercial
Commercial & Industrial	$	8,620	$	1,612	$	7,008
Farmland	—		—		—
Non Farm, Non Residential	7,204		1,500		5,704
Agriculture	—		—
All Other Commercial	1,062		46		1,016
Residential
First Liens	37		—		37
Home Equity	—		—		—
Junior Liens	—		—		—
Multifamily	—		—		—
All Other Residential	—				—
Consumer
Motor Vehicle	—				—
All Other Consumer	—				—
TOTAL	$	16,923	$	3,158	$	13,765

Schedule of carrying amount and estimated fair value of financial instruments

The fair value of off-balance sheet items is not considered material.

	September 30, 2014
	Carrying			Fair Value
(Dollar amounts in thousands)	Value			Level 1		Level 2			Level 3		Total
Cash and due from banks	$	96,998		$	22,198	$	74,800		$	—	$	96,998
Federal funds sold	14,980			—		14,980			—		14,980
Securities available—for—sale	900,110			—		877,351			22,759		900,110
Restricted stock	21,075			n/a		n/a			n/a		n/a
Loans, net	1,793,818			—		—			1,825,140		1,825,140
FDIC Indemnification Asset	375			—		375			—		375
Accrued interest receivable	12,100			—		3,598			8,502		12,100
Deposits	(2,451,952		)	—		(2,451,389		)	—		(2,451,389		)
Short—term borrowings	(59,031		)	—		(59,031		)	—		(59,031		)
Federal Home Loan Bank advances	(87,961		)	—		(88,546		)	—		(88,546		)
Accrued interest payable	(495		)	—		(495		)	—		(495		)

	December 31, 2013
	Carrying			Fair Value
(Dollar amounts in thousands)	Value			Level 1		Level 2			Level 3		Total
Cash and due from banks	$	71,033		$	22,455	$	48,578		$	—	$	71,033
Federal funds sold	4,276			—		4,276			—		4,276
Securities available—for—sale	914,560			—		900,991			13,569		914,560
Restricted stock	21,057			n/a		n/a			n/a		n/a
Loans, net	1,771,360			—		—			1,816,726		1,816,726
FDIC Indemnification Asset	1,055			—		1,055			—		1,055
Accrued interest receivable	11,554			—		3,279			8,275		11,554
Deposits	(2,458,791		)	—		(2,460,197		)	—		(2,460,197		)
Short—term borrowings	(59,592		)	—		(59,592		)	—		(59,592		)
Federal Home Loan Bank advances	(58,288		)	—		(60,258		)	—		(60,258		)
Accrued interest payable	(750		)	—		(750		)	—		(750		)