Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2013

Balances of assets and liabilities measured at fair value on a recurring basis

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012:



	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		Total
September 30, 2013
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	110,917	$	344,904	$	—	$	455,821
Debt Securities Issued by States and Political Subdivisions	—		587,239		—		587,239
Debt Securities Issued by Corporations	—		275,256		—		275,256
Mortgage-Backed Securities:
Residential - Government Agencies	—		717,474		—		717,474
Residential - U.S. Government-Sponsored Enterprises	—		25,263		—		25,263
Commercial - Government Agencies	—		216,083		—		216,083
Total Mortgage-Backed Securities	—		958,820		—		958,820
Total Investment Securities Available-for-Sale	110,917		2,166,219		—		2,277,136
Loans Held for Sale	—		18,795		—		18,795
Mortgage Servicing Rights	—		—		3,819		3,819
Other Assets	14,153		—		—		14,153
Derivatives ¹	—		189		25,390		25,579
Total Assets Measured at Fair Value on a Recurring Basis as of September 30, 2013	$	125,070	$	2,185,203	$	29,209	$	2,339,482

Liabilities:
Derivatives ¹	$	—	$	1,103	$	23,348	$	24,451
Total Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2013	$	—	$	1,103	$	23,348	$	24,451

December 31, 2012
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	470,535	$	399,454	$	—	$	869,989
Debt Securities Issued by States and Political Subdivisions	—		782,411		—		782,411
Debt Securities Issued by Corporations	—		84,434		—		84,434
Mortgage-Backed Securities:
Residential - Government Agencies	—		1,068,660		—		1,068,660
Residential - U.S. Government-Sponsored Enterprises	—		37,298		—		37,298
Commercial - Government Agencies	—		524,765		—		524,765
Total Mortgage-Backed Securities	—		1,630,723		—		1,630,723
Total Investment Securities Available-for-Sale	470,535		2,897,022		—		3,367,557
Loans Held for Sale	—		21,374		—		21,374
Mortgage Servicing Rights	—		—		4,761		4,761
Other Assets	12,566		—		—		12,566
Derivatives ¹	—		229		42,381		42,610
Total Assets Measured at Fair Value on a Recurring Basis as of December 31, 2012	$	483,101	$	2,918,625	$	47,142	$	3,448,868

Liabilities:
Derivatives ¹	$	—	$	1,185	$	32,441	$	33,626
Total Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2012	$	—	$	1,185	$	32,441	$	33,626


¹	The fair value of each class of derivatives is shown in Note 10 to the Consolidated Financial Statements.

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis

For the three and nine months ended September 30, 2013 and 2012, the changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:



(dollars in thousands)	Mortgage Servicing Rights ¹			Net Derivative Assets and Liabilities ²			Total
Three Months Ended September 30, 2013
Balance as of July 1, 2013	$	4,158		$	(384	)	$	3,774
Realized and Unrealized Net Gains (Losses):
Included in Net Income	(339		)	2,686			2,347
Transfers to Loans Held for Sale	—			(260		)	(260		)
Balance as of September 30, 2013	$	3,819		$	2,042		$	5,861
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2013	$	(68	)	$	2,042		$	1,974

Three Months Ended September 30, 2012
Balance as of July 1, 2012	$	5,459		$	7,106		$	12,565
Realized and Unrealized Net Gains (Losses):
Included in Net Income	(343		)	15,221			14,878
Transfers to Loans Held for Sale	—			(9,559		)	(9,559		)
Balance as of September 30, 2012	$	5,116		$	12,768		$	17,884
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2012	$	(5	)	$	12,768		$	12,763

Nine Months Ended September 30, 2013
Balance as of January 1, 2013	$	4,761		$	9,940		$	14,701
Realized and Unrealized Net Gains (Losses):
Included in Net Income	(942		)	5,324			4,382
Transfers to Loans Held for Sale	—			(13,222		)	(13,222		)
Balance as of September 30, 2013	$	3,819		$	2,042		$	5,861
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2013	$	(4	)	$	2,042		$	2,038

Nine Months Ended September 30, 2012
Balance as of January 1, 2012	$	7,131		$	2,058		$	9,189
Realized and Unrealized Net Gains (Losses):
Included in Net Income	(2,015		)	28,293			26,278
Transfers to Loans Held for Sale	—			(17,583		)	(17,583		)
Balance as of September 30, 2012	$	5,116		$	12,768		$	17,884
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2012	$	(886	)	$	12,768		$	11,882


¹	Realized and unrealized gains and losses related to mortgage servicing rights are reported as a component of mortgage banking income in the Company’s consolidated statements of income.


²	Realized and unrealized gains and losses related to interest rate lock commitments are reported as a component of mortgage banking income in the Company’s consolidated statements of income. Realized and unrealized gains and losses related to interest rate swap agreements are reported as a component of other noninterest income in the Company’s consolidated statements of income.

Summary of the significant unobservable inputs

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of September 30, 2013 and December 31, 2012, the significant unobservable inputs used in the fair value measurements were as follows:



		Significant Unobservable Inputs (weighted-average)					Fair Value
(dollars in thousands)	Valuation Technique	Description	Sept. 30, 2013		Dec. 31, 2012		Sept. 30, 2013			Dec. 31, 2012
Mortgage Servicing Rights	Discounted Cash Flow	Constant Prepayment Rate ¹	8.77	%	12.26	%	$	32,512		$	27,904
		Discount Rate ²	7.71	%	5.57	%

Net Derivative Assets and Liabilities:
Interest Rate Lock Commitments	Pricing Model	Closing Ratio	89.72	%	88.86	%	$	2,214		$	10,188
Interest Rate Swap Agreements	Discounted Cash Flow	Credit Factor	0.74	%	0.77	%	$	(172	)	$	(248	)


¹	Represents annualized loan repayment rate assumption.


²	Derived from multiple interest rate scenarios that incorporate a spread to the London Interbank Offered Rate swap curve and market volatilities.

Schedule of difference between the aggregate fair value and the aggregate unpaid principal balance of the Company's residential mortgage loans held for sale

The following table reflects the difference between the aggregate fair value and the aggregate unpaid principal balance of the Company’s residential mortgage loans held for sale as of September 30, 2013 and December 31, 2012.



(dollars in thousands)	Aggregate Fair Value		Aggregate Unpaid Principal			Aggregate Fair Value Less Aggregate Unpaid Principal
September 30, 2013
Loans Held for Sale	$	18,795		$	18,108		$	687

December 31, 2012
Loans Held for Sale	$	21,374		$	20,492		$	882

Schedule of carrying amount, fair value, and fair value hierarchy of financial instruments

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2013 and December 31, 2012. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For non-marketable equity securities such as Federal Home Loan Bank and Federal Reserve Bank stock, the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government supported institution or to another member institution. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.



					Fair Value Measurements
	Carrying				Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2013
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	4,633,399	$	4,621,491	$	416,693	$	4,204,798	$	—
Loans ¹	5,619,486		5,942,313		—		—		5,942,313

Financial Instruments - Liabilities
Time Deposits	1,259,081		1,264,904		—		1,264,904		—
Securities Sold Under Agreements to Repurchase	847,239		932,881		—		932,881		—
Long-Term Debt ²	165,877		167,411		—		167,411		—

December 31, 2012
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	3,595,065	$	3,687,676	$	195,366	$	3,492,310	$	—
Loans ¹	5,451,935		5,846,906		—		—		5,846,906

Financial Instruments - Liabilities
Time Deposits	1,599,508		1,609,506		—		1,609,506		—
Securities Sold Under Agreements to Repurchase	758,947		868,199		—		868,199		—
Long-Term Debt ²	119,185		121,906		—		121,906		—


¹	Net of unearned income and the Allowance.


²	Excludes capitalized lease obligations.

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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