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Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

12. Fair Value Measurements

FASB ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Securities Available for Sale

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique 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 (Level 2 inputs).

Impaired Loans

The fair values of impaired loans are generally measured for impairment using the practical expedients permitted by FASB ASC 310-10-35 including impaired loans measured at an observable market price (if available), or at the fair value of the loan's collateral (if the loan is collateral dependent). Fair value of the loan's collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation, which is then adjusted for the cost related to liquidation of the collateral. These are considered Level 3 inputs.

Derivatives

The fair value of our derivative financial instruments, including interest rate swaps and caps, is based on derivative valuation models using market data inputs as of the valuation date that can generally be verified and do not typically involve significant management judgments. (Level 2 inputs).

Other Real Estate Owned

Other real estate owned is valued at the time the loan is foreclosed upon and the asset is transferred to other real estate owned. The value is based primarily on third party appraisals, less costs to sell and result in a Level 3 classification of the inputs for determining fair value. Other real estate owned is reviewed and evaluated on at least an annual basis for additional impairment and adjusted accordingly, based on the same factors identified above.

Loans held for sale

Loans held for sale are carried at the lower of cost or fair value, as determined by outstanding commitments from investors, or based on recent comparable sales, if available, and if not available, are based on discounted cash flows using current market rates applied to the estimated life and credit risk (Level 2 inputs) or may be assessed based upon the fair value of the collateral which is obtained from recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in Level 3 classification of the inputs for determining fair value.

For the quarter ended March 31, 2012, there were no changes in valuation techniques and related inputs resulting from the adoption of ASU 2011-04.

The table below summarizes information about valuation method, inputs and assumptions for nonrecurring Level 3 fair value measurements. The weight assigned to each input is based on the facts and circumstances that exist at the date of measurement.

		Valuation Method		Unobservable Inputs		Range of Quantitative Information
Impaired loans at fair value		Market		Adjustments to appraisal value; Selling costs		8.5%
Other real estate owned		Market		Adjustments to appraisal value; Discount to reflect realizable value, Selling costs		0% - 8.5% 8.5%

Assets and liabilities measured at fair value on a recurring basis are summarized below:

						Fair Value Measurements at the End of the Reporting Period Using
		March 31, 2012				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
		(In thousands)
Assets:
Securities available for sale:
U.S. Treasury		$	300			$	0			$	300			$	0
GSE collateralized mortgage obligations			211,396				0				211,396				0
GSE mortgage-backed securities			462,498				0				462,498				0
Trust preferred security			3,698				0				3,698				0
Municipal bonds			5,018				0				5,018				0
Mutual funds			14,898				14,898				0				0
Derivatives—Interest rate caps			1				0				1				0

There were no transfers between Level 1, 2 and 3 during the quarter ended March 31, 2012.

						Fair Value Measurements at the End of the Reporting Period Using
		December 31, 2011				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
		(In thousands)
Assets:
Securities available for sale:
U.S. Treasury		$	300			$	0			$	300			$	0
GSE collateralized mortgage obligations			227,836				0				227,836				0
GSE mortgage-backed securities			487,754				0				487,754				0
Trust preferred securities			4,348				0				4,348				0
Municipal bonds			5,764				0				5,764				0
Mutual funds			14,918				14,918				0				0
Derivatives—Interest rate caps			9				0				9				0

Fair value adjustments for interest rate caps resulted in a net expense of $8 thousand for the three months ended March 31, 2012 and $157 thousand for the year ended December 31, 2011.

Assets measured at fair value on a non-recurring basis are summarized below:

						Fair Value Measurements at the End of the Reporting Period Using
		March 31, 2012				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total Gains (Losses) for the Three Months Ended March 31, 2012
		(In thousands)
Assets:
Impaired loans at fair value:
Real estate loans		$	13,464			$	0			$	0			$	13,464			$	(630	)
Commercial business			5,824				0				0				5,824				530
Loans held for sale, net*			11,140				0				11,140				0				(668	)
Other real estate owned*			2,986				0				0				2,986				(363	)

* The balance consists of real estate portfolio segment only.

						Fair Value Measurements at the End of the Reporting Period Using
		December 31, 2011				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total Gains (Losses) for the Twelve Months Ended December 31, 2011
		(In thousands)
Assets:
Impaired loans at fair value:
Real estate loans		$	15,485			$	0			$	0			$	15,485			$	(6,018	)
Commercial business			6,360				0				0				6,360				(2,553	)
Loans held for sale, net*			6,901				0				6,901				0				(3,393	)
Other real estate owned*			3,471				0				0				3,471				(1,031	)

* The balance consists of real estate portfolio segment only.

Fair Value of Financial Instruments

Carrying amounts and estimated fair values of financial instruments, not previously presented, at March 31, 2012 and December 31, 2011 were as follows:

		March 31, 2012
		Carrying Amount				Estimated Fair Value				Fair Value Measurement Using
		(In thousands)
Financial Assets:
Cash and cash equivalents		$	365,679			$	365,679			Level 1
Term federal funds sold			20,000				20,000			Level 1
Loans held for sale			28,107				30,508			Level 2
Loans receivable—net			3,655,602				3,941,945			Level 3
Federal Home Loan Bank stock			26,064				N/A			N/A
Accrued interest receivable			12,253				12,253			Level 2
FDIC loss share receivable			11,095				11,095			Level 3
Customers' liabilities on acceptances			12,187				12,187			Level 2
Financial Liabilities:
Noninterest-bearing deposits		$	1,011,466			$	1,011,466			Level 2
Saving and other interest bearing demand deposits			1,433,752				1,433,752			Level 2
Time deposits			1,475,245				1,482,475			Level 2
Borrowings from Federal Home Loan Bank			332,109				336,606			Level 2
Subordinated debentures			52,137				49,848			Level 2
Accrued interest payable			6,485				6,485			Level 2
Bank's liabilities on acceptances outstanding			12,187				12,187			Level 2
		December 31, 2011
		Carrying Amount				Estimated Fair Value
		(In thousands)
Financial Assets:
Cash and cash equivalents		$	300,110			$	300,110
Term federal funds sold			40,000				40,000
Loans held for sale			18,000				19,374
Loans receivable—net			3,655,029				3,911,865
Federal Home Loan Bank stock			27,373				N/A
Accrued interest receivable			13,439				13,439
FDIC loss share receivable			10,819				10,819
Customers' liabilities on acceptances			10,515				10,515
Financial Liabilities:
Noninterest-bearing deposits			984,350				984,350
Saving and other interest bearing demand deposits			1,435,441				1,435,441
Time deposits			1,521,101				1,532,152
Borrowings from Federal Home Loan Bank			344,402				349,311
Subordinated debentures			52,102				53,757
Accrued interest payable			6,519				6,519
Bank's liabilities on acceptances outstanding			10,515				10,515

The methods and assumptions used to estimate fair value are described as follows.

The carrying amount is the estimated fair value for cash and cash equivalents, savings and other interest bearing demand deposits, accrued interest receivable and payable, customer's and Bank's liabilities on acceptances, non-interest-bearing deposits, short-term debt, secured borrowings, and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. The allowance for loan losses is considered to be a reasonable estimate of discount for credit quality concerns. Fair value of loans held for sale is based on market quotes. Fair value of time deposits and debt is based on current rates for similar financing. It was not practicable to determine the fair value of Federal Reserve Bank stock or Federal Home Loan Bank stock due to restrictions placed on their transferability. The fair value of commitments to fund loans represents fees currently charged to enter into similar agreements with similar remaining maturities and is not presented herein. The fair value of these financial instruments is not material to the consolidated financial statements.

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- Definition

This element represents the disclosure related to the fair value measurement of assets and liabilities which includes [financial] instruments measured at fair value that are classified in stockholders' equity. Such assets and liabilities may be measured on a recurring or nonrecurring basis. The disclosures which may be required or desired include: (1) for assets and liabilities measured on a recurring basis, disclosure may include: (a) the fair value measurements at the reporting date; (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3); (c) for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), 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); (ii) purchases, sales, issuances, and settlements (net); (iii) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs); (d) the amount of the total gains or losses for the period in subparagraph (c) (i) above included in earnings (or changes in net assets) that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income (or activities); (e) the valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques, if any, during the period and (2) for assets and liabilities that are measured at fair value on a nonrecurring basis (for example, impaired assets) disclosure may include, in addition to (a) above: (a) the reasons for the fair value measurements recorded; (b) the same as (b) above; (c) for fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs; and (d) the valuation technique(s) used to measure fair value and a discussion of changes, if any, in the valuation technique(s) used to measure similar assets and/or liabilities in prior periods.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32



Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 33



Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 6

-Footnote 4

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