Fair Value (Tables)

12 Months Ended

Dec. 31, 2013

Assets Reported on Consolidated Balance Sheets at their Fair Value

The following table presents the assets reported on the consolidated balance sheets at their fair value as of December 31, 2013 and December 31, 2012 by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			(Amounts in thousands) Fair Value Measurements at 12/31/13 Using
Description	December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
ASSETS
U.S. Treasury securities	$	112	$	—	$	112	$	—
U.S. Government agencies and corporations		8,947		—		8,947		—
Obligations of states and political subdivisions		43,535		—		43,535		—
U.S. Government-sponsored mortgage-backed securities		78,022		—		78,022		—
U.S. Government-sponsored collateralized mortgage obligations		17,085		—		17,085		—
Trust preferred securities		10,136		—		—		10,136
Loans held for sale		656		656		—		—
Mortgage banking derivatives		17		—		17		—
LIABILITIES
Mortgage banking derivatives	$	—	$	—	$	—	$	—

			Fair Value Measurements at 12/31/12 Using
Description	December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
ASSETS
U.S. Treasury securities	$	123	$	—	$	123	$	—
U.S. Government agencies and corporations		8,065		—		8,065		—
Obligations of states and political subdivisions		42,316		—		42,316		—
U.S. Government-sponsored mortgage-backed securities		92,339		—		92,339		—
U.S. Government-sponsored collateralized mortgage obligations		31,142		—		31,142		—
Trust preferred securities		7,612		—		—		7,612
Loans held for sale		24,756		—		24,756		—
Mortgage banking derivatives		531		—		531		—
LIABILITIES
Mortgage banking derivatives	$	199	$	—	$	199	$	—

Changes in the Level 3 Fair Value Category

The following tables present the changes in the Level 3 fair value category for the years ended December 31, 2013, 2012 and 2011. The Company classifies financial instruments in Level 3 of the fair-value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly.

	(Amounts in thousands)
	December 31,
	2013			2012			2011
	Trust preferred securities			Trust preferred securities			Trust preferred securities
Beginning balance	$	7,612		$	9,145		$	12,779
Net realized/unrealized gains/(losses) included in:
Noninterest income		(1,954	)		(171	)		(202	)
Other comprehensive income		4,553			2,184			(3,097	)
Discount accretion (premium amortization)		8			2			1
Transfers in and/or out of Level 3		—			—			—
Sales		—			(3,531	)		—
Purchases, issuances and settlements		(83)			(15	)		(335	)
Ending balance	$	10,136		$	7,612		$	9,145
Losses included in net income for the period relating to assets held at December 31	$	(1,954	)	$	(90	)	$	(202	)

Breakdown of Trust Preferred Securities

The following table details the breakdown of trust preferred securities for the periods indicated:

	(Dollar amounts in thousands)
	December 31,
	2013		2012
Total number of trust preferred securities		12		12
Par value	$	14,366	$	14,449
Number not considered OTTI		1		10
Par value	$	956	$	11,491
Number considered OTTI		11		2
Par value	$	13,410	$	2,958
Life-to-date impairment recognized in earnings	$	2,305	$	351
Life-to-date impairment recognized in other comprehensive income		1,718		1,868
Total life-to-date impairment	$	4,023	$	2,219

Trust Preferred Securities with OTTI, their Credit Ratings at Period End and Related Losses Recognized in Earnings

The following table details the 11 debt securities with other-than-temporary impairment, their credit ratings at December 31, 2013 and the related losses recognized in earnings:

	(Amounts in thousands)
	Moody’s/Fitch Rating		Amount of OTTI related to credit loss at January 1, 2013		Additions in QTD March 31, 2013		Additions in QTD June 30, 2013		Additions in QTD September 30, 2013		Additions in QTD December 31, 2013		Amount of OTTI related to credit loss at December 31, 2013
PreTSL XXIII Class C-FP		Ca/C	$	211	$	—	$	—	$	—	$	—	$	211
I-PreTSL I		NR/CCC		—		—		—		—		216		216
I-PreTSL I		NR/CCC		—		—		—		—		230		230
I-PreTSL I		NR/CCC		—		—		—		—		230		230
I-PreTSL II		NR/B		—		—		—		—		291		291
I-PreTSL III		Ba3/CCC		—		—		—		—		130		130
I-PreTSL III		NR/CCC		—		—		—		—		380		380
I-PreTSL IV		Ba2/B		—		—		—		—		140		140
I-PreTSL IV		Ba2/B		—		—		—		—		140		140
I-PreTSL IV		Caa1/CCC		—		—		—		—		197		197
Trapeza IX		Ca/CC		140		—		—		—		—		140
Total			$	351	$	—	$	—	$	—	$	1,954	$	2,305

The following table details the 2 debt securities with other-than-temporary impairment, their credit ratings at December 31, 2012 and the related losses recognized in earnings:

	(Amounts in thousands)
	Moody’s/Fitch Rating		Amount of OTTI related to credit loss at January 1, 2012		Additions in QTD March 31, 2012		Additions in QTD June 30, 2012		Additions in QTD September 30, 2012		Additions in QTD December 31, 2012		Amount of OTTI related to credit loss at December 31, 2012
PreTSL XXIII Class C-FP		C/C	$	211	$	—	$	—	$	—	$	—	$	211
Trapeza IX		Ca/CC		50		90		—		—		—		140
Total			$	261	$	90	$	—	$	—	$	—	$	351

Additional Information Related to the Company's Trust Preferred Securities

The following table provides additional information related to the Company’s trust preferred securities as of December 31, 2013 used to evaluate other-than-temporary impairments:

	(Amounts in thousands)
Deal	Class	Amortized Cost		Fair Value		Unrealized Gain/(Loss)			Moody’s/ Fitch Rating	Number of Issuers Currently Performing		Deferrals and Defaults as a % of Current Collateral			Excess Subordination as a % of Current Performing Collateral
PreTSL XXIII	C-2	$	956	$	392	$	(564	)	Ca/C		93		24.20	%		—	%
PreTSL XXIII	C-FP		1,535		811		(724	)	Ca/C		93		24.20			—
I-PreTSL I	B-1		770		770		—		NR/CCC		14		17.30			7.78
I-PreTSL I	B-2		770		770		—		NR/CCC		14		17.30			7.78
I-PreTSL I	B-3		770		770		—		NR/CCC		14		17.30			7.78
I-PreTSL II	B-3		2,700		2,700		—		NR/B		21		8.00			18.03
I-PreTSL III	B-2		870		870		—		Ba3/CCC		20		14.10			14.74
I-PreTSL III	C		620		620		—		NR/CCC		20		14.10			4.70
I-PreTSL IV	B-1		860		860		—		Ba2/B		30		—			17.67
I-PreTSL IV	B-2		860		860		—		Ba2/B		30		—			17.67
I-PreTSL IV	C		283		283		—		Caa1/CCC		30		—			11.16
Trapeza IX	B-1		860		430		(430	)	Ca/CC		32		20.90			—
Total		$	11,854	$	10,136	$	(1,718	)

The following table provides additional information related to the Company’s trust preferred securities as of December 31, 2012 used to evaluate other-than-temporary impairments:

	(Amounts in thousands)
Deal	Class	Amortized Cost		Fair Value		Unrealized Gain/(Loss)			Moody’s/ Fitch Rating	Number of Issuers Currently Performing		Deferrals and Defaults as a % of Current Collateral			Excess Subordination as a % of Current Performing Collateral
PreTSL XXIII	C-2	$	1,011	$	203	$	(808	)	C/C		88		26.28	%		—	%
PreTSL XXIII	C-FP		1,556		325		(1,231	)	C/C		88		26.28			—
I-PreTSL I	B-1		986		368		(618	)	NR/CCC		15		7.96			13.60
I-PreTSL I	B-2		1,000		757		(243	)	NR/CCC		15		7.96			13.60
I-PreTSL I	B-3		1,000		758		(242	)	NR/CCC		15		7.96			13.60
I-PreTSL II	B-3		2,990		1,810		(1,180	)	NR/B		23		7.20			11.00
I-PreTSL III	B-2		1,000		765		(235	)	Ba3/CCC		23		6.37			15.60
I-PreTSL III	C		1,000		822		(178	)	NR/CCC		23		6.37			—
I-PreTSL IV	B-1		1,000		614		(386	)	Ba2/CCC		23		14.16			5.60
I-PreTSL IV	B-2		1,000		822		(178	)	Ba2/CCC		23		14.16			5.60
I-PreTSL IV	C		480		146		(334	)	Caa1/CC		23		14.16			1.20
Trapeza IX	B-1		860		222		(638	)	Ca/CC		34		19.91			—
Total		$	13,883	$	7,612	$	(6,271	)

Assets Measured on a Nonrecurring Basis on the Consolidated Balance Sheets at their Fair Value

The following table presents the assets measured on a nonrecurring basis on the consolidated balance sheets at their fair value as of December 31, 2013 and December 31, 2012, by level within the fair value hierarchy. Impaired loans that are collateral dependent are written down to fair value through the establishment of specific reserves. Techniques used to value the collateral that secure the impaired loans include: quoted market prices for identical assets classified as Level 1 inputs; observable inputs, employed by certified appraisers, for similar assets classified as Level 2 inputs. In cases where valuation techniques include inputs that are unobservable and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified as Level 3 inputs.

	(Amounts in thousands)
	December 31, 2013
	Level 1		Level 2		Level 3			Total
Assets measured on a nonrecurring basis:
Impaired loans:
Recorded investment	$	—	$	—	$	5,552		$	5,552
Reserve		—		—		(301	)		(301	)
Net balance	$	—	$	—	$	5,251		$	5,251
Other real estate owned:
Recorded investment	$	—	$	—	$	33		$	33

	December 31, 2012
	Level 1		Level 2		Level 3			Total
Assets measured on a nonrecurring basis:
Impaired loans:
Recorded investment	$	—	$	—	$	5,080		$	5,080
Reserve		—		—		(472	)		(472	)
Net balance	$	—	$	—	$	4,608		$	4,608
Other real estate owned:
Recorded investment	$	—	$	—	$	145		$	145

Carrying Amounts and Estimated Fair Values of the Company's Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows:

	(Amounts in thousands)
	December 31, 2013
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
ASSETS:
Cash and cash equivalents	$	12,396	$	12,396	$	—	$	—	$	12,396
Investment securities available-for-sale		160,886		—		150,750		10,136		160,886
Trading securities		7,247		—		7,247		—		7,247
Loans held for sale		656		656		—		—		656
Loans, net of allowance for loan losses		343,069		—		—		349,190		349,190
Bank-owned life insurance		15,049		15,049		—		—		15,049
Accrued interest receivable		1,675		1,675		—		—		1,675
Mortgage banking derivatives		17		—		17		—		17
LIABILITIES:
Demand, savings and money market deposits	$	316,708	$	316,708	$	—	$	—	$	316,708
Time deposits		131,961		—		135,712		—		135,712
FHLB advances		42,600		—		—		44,746		44,746
Short-term borrowings		3,804		3,804		—		—		3,804
Subordinated debt		5,155		—		—		4,694		4,694
Accrued interest payable		290		290		—		—		290

	December 31, 2012
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
ASSETS:
Cash and cash equivalents	$	27,577	$	27,577	$	—	$	—	$	27,577
Investment securities available-for-sale		184,646		—		177,034		7,612		184,646
Loans held for sale		24,756		—		24,756		—		24,756
Loans, net of allowance for loan losses		313,457		—		—		320,012		320,012
Bank-owned life insurance		14,009		14,009		—		—		14,009
Accrued interest receivable		1,765		1,765		—		—		1,765
Mortgage banking derivatives		531		—		531		—		531
LIABILITIES:
Demand, savings and money market deposits	$	323,855	$	323,855	$	—	$	—	$	323,855
Time deposits		153,046		—		157,406		—		157,406
FHLB advances		42,000		—		—		45,113		45,113
Short-term borrowings		4,051		4,051		—		—		4,051
Subordinated debt		5,155		—		—		4,227		4,227
Accrued interest payable		359		359		—		—		359
Mortgage banking derivatives		199		—		199		—		199

Significant Unobservable Inputs for Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

The following table presents quantitative information about the Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis at December 31, 2013.

	(Amounts in thousands) Fair value at December 31, 2013		Valuation Technique	Significant Unobservable Input	Description of Inputs
Trust preferred securities	$	10,136	Discounted Cash Flow	Projected Prepayments	1) Trust preferred securities issued by banks subject to Dodd-Frank’s phase-out of trust preferred securities from Tier 1 Capital. 2) Trust preferred securities issued by healthy, well capitalized banks that have fixed rate coupons greater than 8% or floating rate spreads greater than 300 bps. 3) 5% every 5 years for all banks beginning in 2018. 4) Zero for collateral issued by REITs or insurance companies.

				Projected Defaults	1) All deferring issuers that do not meet the criteria for curing, as described below, are projected to default immediately. 2) Banks with high, near team default risk are identified using a CAMELS model, and projected to default immediately. Healthy banks are projected to default at a rate of 2% annually for 2 years, and .36% annually thereafter. 3) Insurance and REIT defaults are projected according to the historical default rates exhibited by companies with the same credit ratings. Historical default rates are doubled in each of the first two years of the projection to account for current economic conditions. Unrated issuers are assumed to have CCC- ratings.

				Projected Cures	1) Deferring issuers that have definitive agreements to either be acquired or recapitalized.

				Projected Recoveries	1) Zero for insurance companies, REITs and insolvent banks, and 10% for projected bank deferrals.

				Discount Rates	1) Ranging from ~6.61% to ~15.71%, depending on each bond’s seniority and remaining subordination after projected losses.

Impaired loans		5,251	Appraisal of Collateral (1)	Appraisal Adjustments (2)	Weighted average (21)%

				Liquidation Expenses (2)	Weighted average (6)%

Other real estate owned		33	Appraisal of Collateral (1), (3)	Appraisal Adjustments (2)	0%

(1)	Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

(2)

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses are presented as a percent of the appraisal. The adjustment of appraised value is measured as the effect on fair value as a percentage of unpaid principal.

(3)	Includes qualitative adjustments by management and estimated liquidation expenses.

	(Amounts in thousands) Fair value at December 31, 2012		Valuation Technique	Significant Unobservable Input	Description of Inputs
Trust preferred securities	$	7,612	Discounted Cash Flow	Projected Prepayments	1) Trust preferred securities issued by banks subject to Dodd-Frank’s phase-out of trust preferred securities from Tier 1 Capital. 2) Trust preferred securities issued by healthy, well capitalized banks that have fixed rate coupons greater than 8% or floating rate spreads greater than 300 bps. 3) 5% every 5 years for all banks beginning in 2018. 4) Zero for collateral issued by REITs or insurance companies.

				Projected Defaults	1) All deferring issuers that do not meet the criteria for curing, as described below, are projected to default immediately. 2) Banks with high, near team default risk are identified using a CAMELS model, and projected to default immediately. Healthy banks are projected to default at a rate of 2% annually for 2 years, and .36% annually thereafter. 3) Insurance and REIT defaults are projected according to the historical default rates exhibited by companies with the same credit ratings. Historical default rates are doubled in each of the first two years of the projection to account for current economic conditions. Unrated issuers are assumed to have CCC- ratings.

				Projected Cures	1) Deferring issuers that have definitive agreements to either be acquired or recapitalized.

				Projected Recoveries	1) Zero for insurance companies, REITs and insolvent banks, and 10% for projected bank deferrals.

				Discount Rates	1) Ranging from ~5.69% to ~21.76%, depending on each bond’s seniority and remaining subordination after projected losses.

Impaired loans		3,503	Appraisal of Collateral (1)	Appraisal Adjustments (2)	Weighted average (22)%

				Liquidation Expenses (2)	Weighted average (8)%

		1,105	Discounted Cash Flow	Discount Rate	5.75% (only one loan)

Other real estate owned		145	Appraisal of Collateral (1), (3)	Sales Agreements	0% to (39)%

(1)	Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

(2)

(3)	Includes qualitative adjustments by management and estimated liquidation expenses.

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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- 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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