Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain financial and nonfinancial assets and liabilities and to determine fair value disclosures. Various financial instruments such as available for sale and trading securities, certain non-marketable securities relating to private equity activities, and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets and liabilities on a nonrecurring basis, such as mortgage servicing rights and certain other investment securities. These nonrecurring fair value adjustments typically involve lower of cost or fair value accounting or write-downs of individual assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value. For accounting disclosure purposes, a three-level valuation hierarchy of fair value measurements has been established. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:


•	Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.


•	Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and inputs that are observable for the assets or liabilities, either directly or indirectly (such as interest rates, yield curves, and prepayment speeds).


•	Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. These may be internally developed, using the Company’s best information and assumptions that a market participant would consider.

The valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis are described in the Fair Value of Financial Instruments note in the Company's 2015 Annual Report on Form 10-K. There have been no significant changes in these methodologies since then.

Instruments Measured at Fair Value on a Recurring Basis

The table below presents the June 30, 2016 and December 31, 2015 carrying values of assets and liabilities measured at fair value on a recurring basis. There were no transfers among levels during the first six months of 2016 or the year ended December 31, 2015.



			Fair Value Measurements Using
(In thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2016
Assets:
Residential mortgage loans held for sale	$	7,094	$	—	$	7,094	$	—
Available for sale securities:
U.S. government and federal agency obligations	720,919		720,919		—		—
Government-sponsored enterprise obligations	562,177		—		562,177		—
State and municipal obligations	1,833,861		—		1,816,182		17,679
Agency mortgage-backed securities	2,589,915		—		2,589,915		—
Non-agency mortgage-backed securities	831,616		—		831,616		—
Asset-backed securities	2,298,725		—		2,298,725		—
Other debt securities	339,264		—		339,264		—
Equity securities	44,869		22,047		22,822		—
Trading securities	30,512		—		30,512		—
Private equity investments	62,813		—		—		62,813
Derivatives *	35,255		—		34,464		791
Assets held in trust for deferred compensation plan	9,701		9,701		—		—
Total assets	9,366,721		752,667		8,532,771		81,283
Liabilities:
Derivatives *	35,006		—		34,717		289
Liabilities held in trust for deferred compensation plan	9,701		9,701		—		—
Total liabilities	$	44,707	$	9,701	$	34,717	$	289
December 31, 2015
Assets:
Residential mortgage loans held for sale	$	4,981	$	—	$	4,981	$	—
Available for sale securities:
U.S. government and federal agency obligations	727,076		727,076		—		—
Government-sponsored enterprise obligations	793,023		—		793,023		—
State and municipal obligations	1,741,957		—		1,724,762		17,195
Agency mortgage-backed securities	2,618,281		—		2,618,281		—
Non-agency mortgage-backed securities	879,963		—		879,963		—
Asset-backed securities	2,644,381		—		2,644,381		—
Other debt securities	331,320		—		331,320		—
Equity securities	41,003		20,263		20,740		—
Trading securities	11,890		—		11,890		—
Private equity investments	63,032		—		—		63,032
Derivatives *	12,771		—		12,507		264
Assets held in trust for deferred compensation plan	9,278		9,278		—		—
Total assets	9,878,956		756,617		9,041,848		80,491
Liabilities:
Derivatives *	12,729		—		12,534		195
Liabilities held in trust for deferred compensation plan	9,278		9,278		—		—
Total liabilities	$	22,007	$	9,278	$	12,534	$	195

* The fair value of each class of derivative is shown in Note 10.

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	State and Municipal Obligations			Private Equity Investments			Derivatives			Total
For the three months ended June 30, 2016
Balance March 31, 2016	$	17,209		$	67,432		$	506		$	85,147
Total gains or losses (realized/unrealized):
Included in earnings	—			(2,810		)	(4		)	(2,814		)
Included in other comprehensive income *	401			—			—			401
Discount accretion	69			—			—			69
Purchases of private equity investments	—			575			—			575
Sale/pay down of private equity investments	—			(2,398		)	—			(2,398		)
Capitalized interest/dividends	—			14			—			14
Balance June 30, 2016	$	17,679		$	62,813		$	502		$	80,994
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2016	$	—		$	(2,810	)	$	767		$	(2,043	)
For the six months ended June 30, 2016
Balance January 1, 2016	$	17,195		$	63,032		$	69		$	80,296
Total gains or losses (realized/unrealized):
Included in earnings	—			(3,724		)	469			(3,255		)
Included in other comprehensive income *	502			—			—			502
Investment securities called	(100		)	—			—			(100		)
Discount accretion	82			—			—			82
Purchases of private equity investments	—			5,841			—			5,841
Sale/pay down of private equity investments	—			(2,398		)	—			(2,398		)
Capitalized interest/dividends	—			62			—			62
Sale of risk participation agreement	—			—			(36		)	(36		)
Balance June 30, 2016	$	17,679		$	62,813		$	502		$	80,994
Total gains or losses for the six months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2016	$	—		$	(3,724	)	$	732		$	(2,992	)
For the three months ended June 30, 2015
Balance March 31, 2015	$	93,271		$	61,162		$	158		$	154,591
Total gains or losses (realized/unrealized):
Included in earnings	—			875			12			887
Included in other comprehensive income *	(352		)	—			—			(352		)
Discount accretion	21			—			—			21
Purchases of private equity investments	—			1,437			—			1,437
Sale/pay down of private equity investments	—			(4,800		)	—			(4,800		)
Capitalized interest/dividends	—			52			—			52
Balance June 30, 2015	$	92,940		$	58,726		$	170		$	151,836
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2015	$	—		$	875		$	420		$	1,295
For the six months ended June 30, 2015
Balance January 1, 2015	$	95,143		$	57,581		$	(223	)	$	152,501
Total gains or losses (realized/unrealized):
Included in earnings	—			4,175			393			4,568
Included in other comprehensive income *	(354		)	—			—			(354		)
Investment securities called	(2,000		)	—			—			(2,000		)
Discount accretion	151			—			—			151
Purchases of private equity investments	—			1,653			—			1,653
Sale/pay down of private equity investments	—			(4,800		)	—			(4,800		)
Capitalized interest/dividends	—			117			—			117
Balance June 30, 2015	$	92,940		$	58,726		$	170		$	151,836
Total gains or losses for the six months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2015	$	—		$	4,175		$	393		$	4,568

* Included in "net unrealized gains (losses) on other securities" in the consolidated statements of comprehensive income.

Gains and losses included in earnings for the Level 3 assets and liabilities in the previous table are reported in the following line items in the consolidated statements of income:



(In thousands)	Loan Fees and Sales			Other Non-Interest Income			Investment Securities Gains (Losses), Net			Total
For the three months ended June 30, 2016
Total gains or losses included in earnings	$	19		$	(23	)	$	(2,810	)	$	(2,814	)
Change in unrealized gains or losses relating to assets still held at June 30, 2016	$	790		$	(23	)	$	(2,810	)	$	(2,043	)
For the six months ended June 30, 2016
Total gains or losses included in earnings	$	527		$	(58	)	$	(3,724	)	$	(3,255	)
Change in unrealized gains or losses relating to assets still held at June 30, 2016	$	790		$	(58	)	$	(3,724	)	$	(2,992	)
For the three months ended June 30, 2015
Total gains or losses included in earnings	$	(63	)	$	75		$	875		$	887
Change in unrealized gains or losses relating to assets still held at June 30, 2015	$	345		$	75		$	875		$	1,295
For the six months ended June 30, 2015
Total gains or losses included in earnings	$	345		$	48		$	4,175		$	4,568
Change in unrealized gains or losses relating to assets still held at June 30, 2015	$	345		$	48		$	4,175		$	4,568

Level 3 Inputs

The Company's significant Level 3 measurements which employ unobservable inputs that are readily quantifiable pertain to auction rate securities (ARS) held by the Bank, investments in portfolio concerns held by the Company's private equity subsidiaries, and held for sale residential mortgage loan commitments. ARS are included in state and municipal securities and totaled $17.7 million at June 30, 2016, while private equity investments, included in non-marketable securities, totaled $62.8 million.

Information about these inputs is presented in the table and discussions below.



Quantitative Information about Level 3 Fair Value Measurements						Weighted
	Valuation Technique	Unobservable Input	Range			Average
Auction rate securities	Discounted cash flow	Estimated market recovery period			5 years
		Estimated market rate	2.3%	-	3.4%
Private equity investments	Market comparable companies	EBITDA multiple	4.0	-	5.5
Mortgage loan commitments	Discounted cash flow	Probability of funding	59.4%	-	95.6%	78.9%
		Embedded servicing value	.9%	-	1.0%	1.0%

Instruments Measured at Fair Value on a Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the first six months of 2016 and 2015, and still held as of June 30, 2016 and 2015, the following table provides the adjustments to fair value recognized during the respective periods, the level of valuation inputs used to determine each adjustment, and the carrying value of the related individual assets or portfolios at June 30, 2016 and 2015.



			Fair Value Measurements Using
(In thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Six Months Ended June 30, 2016
June 30, 2016
Collateral dependent impaired loans	$	5,001	$	—	$	—	$	5,001	$	(1,491	)
Mortgage servicing rights	2,191		—		—		2,191		(2		)
Foreclosed assets	28		—		—		28		(10		)
Long-lived assets	1,871		—		—		1,871		(956		)

June 30, 2015
Collateral dependent impaired loans	$	3,897	$	—	$	—	$	3,897	$	(1,340	)
Mortgage servicing rights	1,242		—		—		1,242		53
Foreclosed assets	608		—		—		608		(162		)
Long-lived assets	2,425		—		—		2,425		(1,667		)