Financial Instruments

9 Months Ended

Sep. 30, 2012

Financial Instruments [Abstract]

Financial Instruments

10. Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments, consisting of commitments to extend credit, commitments under line of credit lending arrangements and letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are received.

The following methods and assumptions were used in estimating fair values of financial instruments.

Cash and cash equivalents – The carrying amounts of cash equivalents approximate their fair values.

Securities – With the exception of floating rate trust preferred securities (the valuation of the trust preferred securities is discussed in footnote 9, Fair Value), fair values for securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique which is 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.

Securities receivable – The carrying amount of securities receivable approximates their fair values.

Loans receivable and held for sale – Fair values for loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values of impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable. The carrying amounts of loans held for sale approximate their fair values.

Accrued interest receivable and payable – The carrying amounts of accrued interest approximate their fair values.

FHLB stock – FHLB stock is restricted from trading purposes and thus, the carrying value approximates its fair value.

Bank owned life insurance (BOLI) – The fair value of BOLI at September 30, 2012 and December 31, 2011 approximated the cash surrender value of the policies at those dates.

Interest rate cap and interest rate swap contracts – Fair values of interest rate cap and interest rate swap contracts are based on dealer quotes.

Deposits – The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date. Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies current market interest rates to a schedule of aggregated expected monthly maturities.

Borrowed funds and junior subordinated notes – For variable rate borrowings, fair values are based on carrying values. For fixed rate borrowings, fair values are based on the discounted value of contractual cash flows and on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. Fair values of structured borrowings are based on dealer quotes.

Advance payments by borrowers for taxes and insurance – The fair value of the advance payments by borrowers for taxes and insurance approximated the carrying value of those commitments at those dates.

The following table sets forth the carrying amount and fair value of the Company’s financial instruments included in the consolidated statement of financial condition as of September 30, 2012:

September 30, 2012
(Dollar amounts in thousands)	Carrying amount		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total Fair Value
Financial Assets:
Cash and Cash Equivalents	$	18,726	$	18,726	$	—	$	—	$	18,726
Securities		1,136,615		1,935		1,098,858		35,822		1,136,615
Securities Receivable		2,380		2,380		—		—		2,380
Loans receivable and held for sale		671,936		—		—		710,070		710,070
Accrued Interest Receivable		8,281		8,281		—		—		8,281
FHLB Stock		17,348		17,348		—		—		17,348
Bank owned life insurance		29,864		29,864		—		—		29,864
Interest rate cap contracts		102		—		102		—		102
Financial Liabilities:
Deposits		1,193,383		572,513		—		631,303		1,203,816
Borrowed funds		498,331		—		262,155		265,235		527,390
Junior subordinated notes		46,393		—		24,073		—		24,073
Advance payments by borrowers for taxes and insurance		1,331		1,331		—		—		1,331
Accrued interest payable		3,896		3,896		—		—		3,896
Interest rate swap contracts		6,075		—		6,075		—		6,075

The following table sets forth the carrying amount and fair value of the Company’s financial instruments included in the consolidated statement of financial condition as of December 31, 2011:

	December 31, 2011
(Dollar amounts in thousands)	Carrying amount		Fair value
Financial assets:
Cash and cash equivalents	$	38,848	$	38,848
Securities		1,130,116		1,130,116
Securities receivable		1,148		1,148
Loans receivable and held for sale		648,921		679,819
Accrued interest receivable		9,227		9,227
FHLB stock		21,256		21,256
Bank owned life insurance		30,802		30,802
Interest rate cap contracts		532		532
Financial liabilities:
Deposits		1,156,410		1,168,438
Borrowed funds		560,567		594,080
Junior subordinated notes		46,393		20,361
Advance payment by borrowers for taxes and insurance		2,519		2,519
Accrued interest payable		1,676		1,676
Interest rate swap contracts		5,531		5,531