Fair Values of Financial Instruments

12 Months Ended

Dec. 31, 2011

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

(21) Fair Values of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Short-Term Instruments

For short-term instruments, such as cash and cash equivalents, accrued interest receivable, accrued interest payable, and short term borrowings, carrying value approximates fair value.

Securities

Fair values for securities are based on quoted market prices or dealer quotes, where available.  Where quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.  When necessary, the Company utilizes matrix pricing from third party pricing vendors to determine fair value pricing.  Matrix prices are based on quoted prices for securities with similar coupons, ratings, and maturities, rather than on specific bids and offers for the designated security.

Loans

For variable rate loans that reprice frequently and have no significant credit risk, fair values are based on carrying values. The fair values for fixed rate loans are estimated through discounted cash flow analysis using interest rates currently being offered for loans with similar terms and credit quality. Nonperforming loans are valued based upon recent loss history for similar loans.

Deposits

The fair values disclosed for savings, money market, and noninterest bearing accounts are, by definition, equal to their carrying values at the reporting date.  The fair value of fixed maturity time deposits is estimated using a discounted cash flow analysis that applies interest rates currently offered to a schedule of aggregated expected monthly maturities on time deposits.

Long-Term Debt

The fair value of long-term debt has been estimated using discounted cash flow analysis that applies interest rates currently offered for notes with similar terms.

Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments to extend credit and standby letters of credit are estimated using fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit worthiness of the counterparties. Carrying amounts, which are comprised of the unamortized fee income, are not significant.

Trust Preferred Debentures

The fair value of trust preferred debentures has been estimated using a discounted cash flow analysis.

Estimated fair values of financial instruments at December 31 are as follows:

	2011				2010
(In thousands)	Carrying amount		Estimated fair value		Carrying  amount		Estimated fair value
Financial assets
Cash and cash equivalents	$	129,381	$	129,381	$	168,792	$	168,792
Securities available for sale		1,244,619		1,244,619		1,129,368		1,129,368
Securities held to maturity		70,811		72,198		97,310		98,759
Trading securities		3,062		3,062		2,808		2,808
Net loans		3,728,869		3,821,640		3,538,772		3,626,603
Accrued interest receivable		17,800		17,800		19,130		19,130
Financial liabilities
Savings, NOW, and money market	$	2,381,116	$	2,381,116	$	2,291,833	$	2,291,833
Time deposits		933,127		942,436		930,778		943,988
Noninterest bearing		1,052,906		1,052,906		911,741		911,741
Short-term borrowings		181,592		181,592		159,434		159,434
Long-term debt		370,344		427,107		369,874		423,350
Accrued interest payable		3,942		3,942		4,356		4,356
Trust preferred debentures		75,422		75,422		75,422		71,148

1. Lease receivables, although excluded from the scope of SFAS No. 107, are included in the estimated fair value amounts at their carrying amounts.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Company has a substantial trust and investment management operation that contributes net fee income annually. The trust and investment management operation is not considered a financial instrument, and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities include the benefits resulting from the low-cost funding of deposit liabilities as compared to the cost of borrowing funds in the market, and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimate of fair value.

The following table sets forth the Company's financial assets and liabilities measured on a recurring basis that were accounted for at fair value as of December 31, 2011 and December 31, 2010.  Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2011
Assets:
Securities Available for Sale:
U.S. Treasury		82,233		-		-		82,233
Federal Agency		-		255,846		-		255,846
State & municipal		-		104,789		-		104,789
Mortgage-backed		-		325,397		-		325,397
Collateralized mortgage obligations		-		465,475		-		465,475
Other securities		8,825		2,054		-		10,879
Total Securities Available for Sale	$	91,058	$	1,153,561	$	-	$	1,244,619
Trading Securities		3,062		-		-		3,062
Total	$	94,120	$	1,153,561	$	-	$	1,247,681

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2010
Assets:
Securities Available for Sale:
U.S. Treasury		91,280		-		-		91,280
Federal Agency		-		349,750		-		349,750
State & municipal		-		114,937		-		114,937
Mortgage-backed		-		244,808		-		244,808
Collateralized mortgage obligations		-		297,888		-		297,888
Corporate		-		20,489		-		20,489
Other securities		8,190		2,026		-		10,216
Total Securities Available for Sale	$	99,470	$	1,029,898	$	-	$	1,129,368
Trading Securities		2,808		-		-		2,808
Total	$	102,278	$	1,029,898	$	-	$	1,132,176

Fair values for securities are based on quoted market prices or dealer quotes, where available.  Where quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.  When necessary, the Company utilizes matrix pricing from a third party pricing vendor to determine fair value pricing.  Matrix prices are based on quoted prices for securities with similar coupons, ratings, and maturities, rather than on specific bids and offers for the designated security.

FASB ASC Topic 820 requires disclosure of assets and liabilities measured and recorded at fair value on a nonrecurring basis.  In accordance with the provisions of FASB ASC Topic 310, the Company had collateral dependent impaired loans with a carrying value of approximately $0.5 million which had specific reserves included in the allowance for loan and lease losses of $0.2 million at December 31, 2011.  The Company uses the fair value of underlying collateral to estimate the specific reserves for collateral dependent impaired loans.  Based on the valuation techniques used, the fair value measurements for collateral dependent impaired loans are classified as Level 3.

FASB ASC Topic 825 gives entities the option to measure eligible financial assets, financial liabilities and Company commitments at fair value (i.e., the fair value option), on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards.  The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a Company commitment.  Subsequent changes in fair value must be recorded in earnings.  As of December 31, 2011, the Company has not elected the fair value option

for any eligible items.