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Fair Value Measurements
12 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
The following tables present our assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at December 31, 2014 and 2013. There were no transfers between Level 1 and Level 2 for items measured at fair value on a recurring basis during the periods presented.
 
December 31, 2014
(dollars in thousands)
Level 1
Level 2
Level 3
Total
ASSETS
 
 
 
 
Securities available-for-sale:
 
 
 
 
U.S. Treasury securities
$
—

$
14,880

$
—

$
14,880

Obligations of U.S. government corporations and agencies
—

269,285

—

269,285

Collateralized mortgage obligations of U.S. government corporations and agencies
—

118,006

—

118,006

Residential mortgage-backed securities of U.S. government corporations and agencies
—

46,668

—

46,668

Commercial mortgage-backed securities of U.S. government corporations and agencies
—

39,673

—

39,673

Obligations of states and political subdivisions
—

142,702

—

142,702

Marketable equity securities
178

8,881

—

9,059

Total securities available-for-sale
178

640,095

—

640,273

Trading securities held in a Rabbi Trust
3,456

—

—

3,456

Total securities
3,634

640,095

—

643,729

Derivative financial assets:
 
 
 
 
Interest rate swaps
—

12,981

—

12,981

Interest rate lock commitments
—

235

—

235

Total Assets
$
3,634

$
653,311

$
—

$
656,945

LIABILITIES
 
 
 
 
Derivative financial liabilities:
 
 
 
 
Interest rate swaps
$
—

$
12,953

$
—

$
12,953

Forward sale contracts
—

57

—

57

Total Liabilities
$
—

$
13,010

$
—

$
13,010

 
December 31, 2013
(dollars in thousands)
Level 1
Level 2
Level 3
Total
ASSETS
 
 
 
 
Securities available-for-sale:
 
 
 
 
Obligations of U.S. government corporations and agencies
$
—

$
234,751

$
—

$
234,751

Collateralized mortgage obligations of U.S. government corporations and agencies
—

63,774

—

63,774

Residential mortgage-backed securities of U.S. government corporations and agencies
—

48,669

—

48,669

Commercial mortgage-backed securities of U.S. government corporations and agencies
—

39,052

—

39,052

Obligations of states and political subdivisions
—

114,264

—

114,264

Marketable equity securities
202

8,713

—

8,915

Total securities available-for-sale
202

509,223

—

509,425

Trading securities held in a Rabbi Trust
2,864

—

—

2,864

Total securities
3,066

509,223

—

512,289

Derivative financial assets:
 
 
 
 
Interest rate swaps
—

13,698

—

13,698

Interest rate lock commitments
—

85

—

85

Forward sales contracts
—

34

—

34

Total Assets
$
3,066

$
523,040

$
—

$
526,106

LIABILITIES
 
 
 
 
Derivative financial liabilities:
 
 
 
 
Interest rate swaps
—

13,647

—

13,647

Total Liabilities
$
—

$
13,647

$
—

$
13,647


We classify financial instruments as Level 3 when valuation models are used because significant inputs are not observable in the market. The following table presents the changes in assets measured at fair value on a recurring basis for which we have utilized Level 3 inputs to determine the fair value:
 
Years ended December 31,
(dollars in thousands)
2014
2013
Balance at beginning of year
$
—

$
300

Total gains included in other comprehensive income (loss)(1)
—

44

Net purchases, sales, issuances and settlements
—

—

Transfers out of Level 3
—

(344
)
Balance at End of Year
$
—

$
—

(1)
Changes in estimated fair value of available-for-sale investments are recorded in accumulated other comprehensive income (loss) while gains and losses from sales are recorded in security gains (losses), net in the Consolidated Statements of Net Income.
In the second quarter of 2013, $0.3 million was transferred out of Level 3 into Level 2 as a result of a security becoming listed on a national securities exchange. There were no Level 3 liabilities measured at fair value on a recurring basis for any of the periods presented.
We may be required to measure certain assets and liabilities on a nonrecurring basis. Nonrecurring assets are recorded at the lower of cost or fair value in our financial statements. There were no liabilities measured at fair value on a nonrecurring basis at December 31, 2014 and 2013. The following table presents our assets that are measured at fair value on a nonrecurring basis by the fair value hierarchy level as of the dates presented:
 
December 31, 2014
 
December 31, 2013
(dollars in thousands)
Level 1
Level 2
Level 3
Total
 
Level 1
Level 2
Level 3
Total
ASSETS(1)
 
 
 
 
 
 
 
 
 
Loans held for sale
$
—

$
—

$
—

$
—

 
$
—

$
—

$
1,516

$
1,516

Impaired loans
—

—

12,916

12,916

 
—

—

19,197

19,197

Other real estate owned
—

—

117

117

 
—

—

317

317

Mortgage servicing rights
—

—

2,934

2,934

 
—

—

1,025

1,025

Total Assets
$
—

$
—

$
15,967

$
15,967

 
$
—

$
—

$
22,055

$
22,055

(1)
This table presents only the nonrecurring items that are recorded at fair value in our financial statements.
The carrying values and fair values of our financial instruments at December 31, 2014 and 2013 are presented in the following tables:
 
 
Fair Value Measurements at December 31, 2014
(dollars in thousands)
Carrying
Value(1)
Total
Level 1
Level 2
Level 3
ASSETS
 
 
 
 
 
Cash and due from banks, including interest-bearing deposits
$
109,580

$
109,580

$
109,580

$
—

$
—

Securities available-for-sale
640,273

640,273

178

640,095

—

Loans held for sale
2,970

2,991

—

—

2,991

Portfolio loans, net of unearned income
3,868,746

3,827,634

—

—

3,827,634

Bank owned life insurance
62,252

62,252

—

62,252

—

FHLB and other restricted stock
15,135

15,135

—

—

15,135

Trading securities held in a Rabbi Trust
3,456

3,456

3,456

—

—

Mortgage servicing rights
2,817

2,934

—

—

2,934

Interest rate swaps
12,981

12,981

—

12,981

—

Interest rate lock commitments
235

235

—

235

—

LIABILITIES
 
 
 
 
 
Deposits
$
3,908,842

$
3,910,342

$
—

$
—

$
3,910,342

Securities sold under repurchase agreements
30,605

30,605

—

—

30,605

Short-term borrowings
290,000

290,000

—

—

290,000

Long-term borrowings
19,442

20,462

—

—

20,462

Junior subordinated debt securities
45,619

45,619

—

—

45,619

Interest rate swaps
12,953

12,953

—

12,953

—

Forward sale contracts
57

57

 
57

 
(1)
As reported in the Consolidated Balance Sheets
 
 
Fair Value Measurements at December 31, 2013
(dollars in thousands)
Carrying
Value(1)
Total
Level 1
Level 2
Level 3
ASSETS
 
 
 
 
 
Cash and due from banks, including interest-bearing deposits
$
108,356

$
108,356

$
108,356

$
—

$
—

Securities available-for-sale
509,425

509,425

202

509,223

—

Loans held for sale
2,136

2,139

—

—

2,139

Portfolio loans, net of unearned income
3,566,199

3,538,072

—

—

3,538,072

Bank owned life insurance
60,480

60,480

—

60,480

—

FHLB and other restricted stock
13,629

13,629

—

—

13,629

Trading securities held in a Rabbi Trust
2,864

2,864

2,864

—

—

Mortgage servicing rights
2,919

3,143

—

—

3,143

Interest rate swaps
13,698

13,698

—

13,698

—

Interest rate lock commitments
85

85

—

85

—

Forward sale contracts
34

34

—

34

—

LIABILITIES
 
 
 
 
 
Deposits
$
3,672,308

$
3,673,624

$
—

$
—

$
3,673,624

Securities sold under repurchase agreements
33,847

33,847

—

—

33,847

Short-term borrowings
140,000

140,000

—

—

140,000

Long-term borrowings
21,810

22,924

—

—

22,924

Junior subordinated debt securities
45,619

45,619

—

—

45,619

Interest rate swaps
13,647

13,647

—

13,647

—

(1)
As reported in the Consolidated Balance Sheets