XML 44 R17.htm IDEA: XBRL DOCUMENT v2.4.0.8
Junior Subordinated Debt/Trust Preferred Securities
9 Months Ended
Sep. 30, 2014
Debt Disclosure [Abstract]  
Junior Subordinated Debt/Trust Preferred Securities
Junior Subordinated Debt/Trust Preferred Securities
 
Effective September 30, 2009 and beginning with the quarterly interest payment due October 1, 2009, the Company elected to defer interest payments on the Company's $15.0 million of junior subordinated debentures relating to its trust preferred securities. The terms of the debentures and trust indentures allow for the Company to defer interest payments for up to 20 consecutive quarters without default or penalty. During the period that the interest deferrals were elected, the Company continued to record interest expense associated with the debentures. As of June 30, 2014, the Company ended the extension period, paid all accrued and unpaid interest, and is currently making quarterly interest payments. The Company may redeem the junior subordinated debentures at anytime at par.
 
The fair value guidance generally permits the measurement of selected eligible financial instruments at fair value at specified election dates. Effective January 1, 2008, the Company elected the fair value option for its junior subordinated debt issued under USB Capital Trust II. The rate paid on the junior subordinated debt issued under USB Capital Trust II is 3-month LIBOR plus 1.29, and is adjusted quarterly.
 
At September 30, 2014 the Company performed a fair value measurement analysis on its junior subordinated debt using a cash flow model approach to determine the present value of those cash flows. The cash flow model utilizes the forward 3-month LIBOR curve to estimate future quarterly interest payments due over the thirty-year life of the debt instrument. These cash flows were discounted at a rate which incorporates a current market rate for similar-term debt instruments, adjusted for additional credit and liquidity risks associated with the junior subordinated debt. Although there is little market data in the current relatively illiquid credit markets, we believe the 7.53% discount rate used represents what a market participant would consider under the circumstances based on current market assumptions.
 
The fair value calculation performed at September 30, 2014 resulted in a pretax loss adjustment of $34,000 ($20,000, net of tax) for the nine months ended September 30, 2014, compared to a pretax loss adjustment of $519,000 ($305,000, net of tax) for the nine months ended September 30, 2013.

The fair value calculation performed at September 30, 2014 resulted in a pretax gain adjustment of $95,000 ($56,000, net of tax) for the quarter ended September 30, 2014, compared to a pretax gain adjustment of $141,000 ($83,000, net of tax) for the quarter ended September 30, 2013.