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Fair Value Option and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Option and Fair Value Measurements

Schedule of balance of assets and liabilities which are measured at fair value on a recurring basis

		September 30, 2014
		Level 1			Level 2			Level 3			Total
Assets:
Investment securities available-for-sale
U.S. Treasury		$	1,532		$	-		$	-		$	1,532
U.S. government agencies			-			1,638			-			1,638
States and political subdivisions			-			13,754			125			13,879
Corporate Bonds			-			30,781			-			30,781
Collateralized mortgage obligations			-			28,417			-			28,417
Asset-backed securities			-			109,017			83,781			192,798
Collateralized loan obligations			-			93,198			-			93,198
Loans held-for-sale			-			3,422			-			3,422
Mortgage servicing rights			-			-			5,640			5,640
Other assets (Interest rate swap agreements net of swap credit valuation)			-			42			-			42
Other assets (Mortgage banking derivatives)			-			266			-			266
Total		$	1,532		$	280,535		$	89,546		$	371,613
Liabilities:
Other liabilities (Interest rate swap agreements)		$	-		$	42		$	-		$	42
Total		$	-		$	42		$	-		$	42

		December 31, 2013
		Level 1			Level 2			Level 3			Total
Assets:
Investment securities available-for-sale
U.S. Treasury		$	1,544		$	-		$	-		$	1,544
U.S. government agencies			-			1,672			-			1,672
States and political subdivisions			-			16,669			125			16,794
Corporate bonds			-			15,102			-			15,102
Collateralized mortgage obligations			-			63,876			-			63,876
Asset-backed securities			-			119,066			154,137			273,203
Loans held-for-sale			-			3,822			-			3,822
Mortgage servicing rights			-			-			5,807			5,807
Other assets (Interest rate swap agreements net of swap credit valuation)			-			229			(6)			223
Other assets (Mortgage banking derivatives)			-			315			-			315
Total		$	1,544		$	220,751		$	160,063		$	382,358
Liabilities:
Other liabilities (Interest rate swap agreements)		$	-		$	229		$	-		$	229
Total		$	-		$	229		$	-		$	229

Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

		Nine months ended September 30, 2014
		Securities available-for- sale
						States and			Mortgage			Interest Rate
						Political			Servicing			Swap
			Asset-backed			Subdivisons			Rights			Valuation
Beginning balance January 1, 2014			$	154,137		$	125		$	5,807		$	(6)
Transfers into Level 3				-			-			-			-
Total gains or losses
Included in earnings (or changes in net assets)				3,178			-			(761)			6
Included in other comprehensive income				(1,748)			-			-			-
Purchases, issuances, sales, and settlements
Purchases				63,704			-			-			-
Issuances				-			-			594			-
Sales				(135,490)			-			-			-
Ending balance September 30, 2014			$	83,781		$	125		$	5,640		$	-

		Nine months ended September 30, 2013
		Securities available-for- sale
								States and			Mortgage			Interest Rate
		Collateralized Debt						Political			Servicing			Swap
		Obligations			Asset-backed			Subdivisons			Rights			Valuation
Beginning balance January 1, 2013		$	9,957		$	-		$	132		$	4,116		$	(47)
Transfers into Level 3			-			-			-			-			-
Transfers out of Level 3			-			-			-			-			-
Total gains or losses
Included in earnings (or changes in net assets)			178			485			-			81			34
Included in other comprehensive income			1,898			(1,487)			-			-			-
Purchases, issuances, sales, and settlements
Purchases			-			168,753			-			-			-
Issuances			-			-			-			1,259			-
Settlements			(946)			-			-			-			-
Sales			-			(20,539)			-			-			-
Ending balance September 30, 2013		$	11,087		$	147,212		$	132		$	5,456		$	(13)

Schedule of quantitative information about level 3 fair value measurements

The following table and commentary presents quantitative (dollars in thousands) and qualitative information about Level 3 fair value measurements as of September 30, 2014:

											Weighted
Measured at fair value							Unobservable				Average
on a recurring basis:		Fair Value			Valuation Methodology		Inputs		Range of Input		of Inputs
Mortgage Servicing rights			5,640		Discounted Cash Flow		Discount Rate		10.0-30.75%		10.3	%
							Prepayment Speed		3.97-77.99%		9.5	%
Asset-backed securities			83,781		Discounted Cash Flow		Credit Risk Premium		0.8-1.2%		1.0	%
					with comparable transaction yields		Liquidity Discount		4.0-4.3%		4.2	%

The following table and commentary presents quantitative (dollars in thousands) and qualitative information about Level 3 fair value measurements as of December 31, 2013:

											Weighted
Measured at fair value							Unobservable				Average
on a recurring basis:		Fair Value			Valuation Methodology		Inputs		Range of Input		of Inputs
Mortgage Servicing rights			5,807		Discounted Cash Flow		Discount Rate		10.2%		10.2	%
							Prepayment Speed		9.7%		9.7	%
Interest Rate Swap Valuation			(6)		Management estimate of		Probability of Default		5.0-20%		12.5	%
					credit risk exposure
Asset-backed securities			154,137		Discounted Cash Flow		Credit Risk Premium		1.1-1.5%		1.2	%
					with comparable transaction yields		Liquidity Discount		4.5-5.1%		4.9	%

Schedule of assets and liabilities measured at fair value on a nonrecurring basis

		September 30, 2014
		Level 1			Level 2			Level 3			Total
Impaired loans1		$	-		$	-		$	957		$	957
Other real estate owned, net2			-			-			40,877			40,877
Total		$	-		$	-		$	41,834		$	41,834

1 Represents carrying value and related write-downs of loans for which adjustments are substantially based on the appraised value of collateral for collateral-dependent loans, had a carrying amount of $1.5 million, with a valuation allowance of $541,000,  resulting in a decrease of specific allocations within the allowance for loan losses of $1.9 million for the nine months ended months ending September 30, 2014.

2 OREO is measured at the lower of carrying or fair value less costs to sell, and had a net carrying amount of $40.9 million, which is made up of the outstanding balance of $61.7 million, net of a valuation allowance of $19.0 million and participations of $1.8 million, at September 30, 2014.

		December 31, 2013
		Level 1			Level 2			Level 3			Total
Impaired loans1		$	-		$	-		$	9,103		$	9,103
Other real estate owned, net2			-			-			41,537			41,537
Total		$	-		$	-		$	50,640		$	50,640

1 Represents carrying value and related write-downs of loans for which adjustments are substantially based on the appraised value of collateral for collateral-dependent loans, had a carrying amount of $11.5 million, with a valuation allowance of $2.4 million, resulting in a decrease of specific allocations within the provision for loan losses of $3.9 million for the year ending December 31, 2013.

2 OREO is measured at the lower of carrying or fair value less costs to sell, and had a net carrying amount of $41.5 million, which is made up of the outstanding balance of $65.9 million, net of a valuation allowance of $22.3 million and participations of $2.1 million, at December 31, 2013.

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- Definition

Tabular disclosure of the fair value measurement of assets and liabilities 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, 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, issuances, 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 or liability.

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- Definition

Tabular disclosure of the inputs and valuation techniques used to measure fair value, and a discussion of changes in valuation techniques and related inputs, if any, applied during the period to each separate class of assets, liabilities, and financial instruments classified in shareholders' equity that are measured on a recurring and/or nonrecurring basis.

+ References

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

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Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

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Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by 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 (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

+ References

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

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

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