FAIR VALUE MEASUREMENT (Tables)

9 Months Ended

Sep. 30, 2014

Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:



	Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)
September 30, 2014
Financial Assets:
AFS securities:
Obligations of U.S. government-sponsored enterprises	$	4,982	$	—	$	4,982	$	—
Obligations of states and political subdivisions	28,046		—		28,046		—
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	378,204		—		378,204		—
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	354,313		—		354,313		—
Private issue collateralized mortgage obligations	6,261		—		6,261		—
Trading account assets	2,418		2,418		—		—
Customer interest rate swap agreements	506		—		506		—
Financial Liabilities:
Interest rate swap agreements	6,969		—		6,969		—
Customer interest rate swap agreements	506		—		506		—
December 31, 2013
Financial Assets:
AFS securities:
Obligations of states and political subdivisions	$	31,207	$	—	$	31,207	$	—
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	395,903		—		395,903		—
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	374,435		—		374,435		—
Private issue collateralized mortgage obligations	6,932		—		6,932		—
Trading account assets	2,488		2,488		—		—
Customer interest rate swap agreements	114		—		114		—
Financial Liabilities:
Interest rate swap agreements	3,911		—		3,911		—
Customer interest rate swap agreements	114		—		114		—

Summary of Assets Measured at Fair Value on Non Recurring Basis

The table below highlights financial and non-financial assets measured and recorded at fair value on a non-recurring basis as of September 30, 2014 and December 31, 2013. Not included in the table below because they are not recorded at fair value at September 30, 2014 and December 31, 2013 are: (i) impaired loans of $20.2 million and $19.4 million, respectively; (ii) MSRs reported of $359,000 and $322,000, respectively; and (iii) OREO properties of $305,000 and $612,000, respectively.



	Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)
September 30, 2014
Financial assets:
Collateral-dependent impaired loans	$	3,022	$	—	$	—	$	3,022
MSRs⁽¹⁾	179		—		179		—
Non-financial assets:
OREO	1,261		—		—		1,261
December 31, 2013
Financial assets:
Collateral-dependent impaired loans	$	8,557	$	—	$	—	$	8,557
MSRs⁽¹⁾	404		—		404		—
Non-financial assets:
OREO	1,583		—		—		1,583
Goodwill - financial services reporting unit	3,904		—		—		3,904

(1) Represents MSRs deemed to be impaired and a valuation allowance established to carry at fair value.

Valuation Methodology and Unobservable Inputs for Level Three Assets Measured at Fair Value on Non Recurring Basis

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at September 30, 2014 and December 31, 2013:



	Fair Value		Valuation Methodology	Unobservable input	Discount Range (Weighted-Average)
September 30, 2014
Collateral-dependent impaired loans:
Partially charged-off	$	808	Market approach appraisal of collateral	Management adjustment of appraisal	0 - 46%	(8%)
Specifically reserved⁽¹⁾	2,214		Market approach appraisal of collateral	Management adjustment of appraisal	10 - 69%	(37%)
OREO	1,261		Market approach appraisal of collateral	Management adjustment of appraisal	0 - 41%	(18%)
				Estimated selling cost	6 - 10%	(9%)
December 31, 2013
Collateral-dependent impaired loans:
Partially charged-off	$	1,874	Market approach appraisal of collateral	Management adjustment of appraisal	0 - 85%	(14%)
Specifically reserved⁽¹⁾	6,683		Market approach appraisal of collateral	Management adjustment of appraisal	7 - 90%	(22%)
OREO	1,583		Market approach appraisal of collateral	Management adjustment of appraisal	0 - 41%	(16%)
				Estimated selling cost	6 - 10%	(10%)
Goodwill	3,904		Discounted cash flow	Revenue growth rate	5.0%	—
				Margin percentage	8.3%	—
				Discount rate	16.5%	—
				Fair value weighting	50.0%	—
			Market approach	Fair value weighting	50.0%	—

(1) The specific reserve for collateral-dependent impaired loans is determined by any loan-to-value ratio in excess of 80% for consumer loans and any loan-to-value ratio in excess of 75% for commercial loans. Appraisals are received on impaired loans in accordance with the Company's internal policy. As such, adjustments to the appraised fair value are made, as necessary, should the appraisal not be current. Adjustments are made to the appraised fair value to reflect changes in known factors, including, but not limited to, property condition, property location, and costs to sell the collateral.

Carrying Amounts and Estimated Fair Value for Financial Instrument Assets and Liabilities

The following table presents the carrying amounts and estimated fair value for financial instrument assets and liabilities measured at September 30, 2014:



	Carrying Amount		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Prices (Level 2)		Company Determined Market Prices (Level 3)
Financial assets:
Cash and due from banks	$	59,450	$	59,450	$	59,450	$	—	$	—
AFS securities	771,806		771,806		—		771,806		—
HTM securities	11,490		11,659		—		11,659		—
FHLB and FRB stock	20,379		20,379		20,379		—		—
Trading account assets	2,418		2,418		2,418		—		—
Residential real estate loans	570,933		580,261		—		—		580,261
Commercial real estate loans	608,396		604,195		—		—		604,195
Commercial loans	238,619		235,131		—		—		235,131
Home equity loans	268,889		270,112		—		—		270,112
Consumer loans	17,805		18,005		—		—		18,005
MSRs⁽¹⁾	538		1,526		—		1,526		—
Interest receivable	6,162		6,162		—		6,162		—
Investments in CCTA and UBCT	1,331		1,331		—		—		1,331
Customer interest rate swap agreements	506		506		—		506		—
Financial liabilities:
Deposits	$	1,928,543	$	1,930,182	$	1,389,977	$	540,205	$	—
FHLB advances	56,058		58,244		—		58,244		—
Commercial repurchase agreements	30,109		31,591		—		31,591		—
Other borrowed funds	411,062		411,125		411,125		—		—
Junior subordinated debentures	43,998		43,998		—		43,998		—
Interest payable	510		510		510		—		—
Interest rate swap agreements	6,969		6,969		—		6,969		—
Customer interest rate swap agreements	506		506		—		506		—

(1) Reported fair value represents all MSRs currently being serviced by the Company, regardless of carrying amount.

The following table presents the carrying amounts and estimated fair value for financial instrument assets and liabilities measured at December 31, 2013:



	Carrying Amount		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Prices (Level 2)		Company Determined Market Prices (Level 3)
Financial assets:
Cash and due from banks	$	51,355	$	51,355	$	51,355	$	—	$	—
AFS securities	808,477		808,477		—		808,477		—
FHLB and FRB stock	19,724		19,724		19,724		—		—
Trading account assets	2,488		2,488		2,488		—		—
Residential real estate loans	563,425		577,153		—		—		577,153
Commercial real estate loans	536,107		535,961		—		—		535,961
Commercial loans	172,105		171,432		—		—		171,432
Home equity loans	269,888		271,041		—		—		271,041
Consumer loans	17,287		17,662		—		—		17,662
MSRs⁽¹⁾	726		1,494		—		1,494		—
Interest receivable	5,808		5,808		—		5,808		—
Investments in CCTA and UBCT	1,331		1,331		—		—		1,331
Customer interest rate swap agreements	114		114		—		114		—
Financial liabilities:
Deposits	$	1,813,824	$	1,817,199	$	1,324,221	$	492,978	$	—
FHLB advances	56,112		59,118		—		59,118		—
Commercial repurchase agreements	30,142		32,038		—		32,038		—
Other borrowed funds	399,916		400,144		400,144		—		—
Junior subordinated debentures	43,922		43,922		—		43,922		—
Interest payable	567		567		567		—		—
Interest rate swap agreements	3,911		3,911		—		3,911		—
Customer interest rate swap agreements	114		114		—		114		—

(1) Reported fair value represents all MSRs currently being serviced by the Company, regardless of carrying amount.

- 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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