Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2014

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 March 31, 2014 and December 31, 2013:



	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
March 31, 2014
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	61,832	$	312,147	$	—	$	373,979
Debt Securities Issued by States and Political Subdivisions	—		723,119		—		723,119
Debt Securities Issued by Corporations	—		259,561		—		259,561
Mortgage-Backed Securities:
Residential - Government Agencies	—		604,983		—		604,983
Residential - U.S. Government-Sponsored Enterprises	—		21,408		—		21,408
Commercial - Government Agencies	—		205,014		—		205,014
Total Mortgage-Backed Securities	—		831,405		—		831,405
Total Investment Securities Available-for-Sale	61,832		2,126,232		—		2,188,064
Loans Held for Sale	—		2,437		—		2,437
Mortgage Servicing Rights	—		—		3,381		3,381
Other Assets	16,333		—		—		16,333
Derivatives ¹	—		78		20,292		20,370
Total Assets Measured at Fair Value on a Recurring Basis as of March 31, 2014	$	78,165	$	2,128,747	$	23,673	$	2,230,585

Liabilities:
Derivatives ¹	$	—	$	165	$	20,003	$	20,168
Total Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2014	$	—	$	165	$	20,003	$	20,168

December 31, 2013
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	70,693	$	326,586	$	—	$	397,279
Debt Securities Issued by States and Political Subdivisions	—		686,802		—		686,802
Debt Securities Issued by Corporations	—		273,501		—		273,501
Mortgage-Backed Securities:
Residential - Government Agencies	—		653,194		—		653,194
Residential - U.S. Government-Sponsored Enterprises	—		23,268		—		23,268
Commercial - Government Agencies	—		209,653		—		209,653
Total Mortgage-Backed Securities	—		886,115		—		886,115
Total Investment Securities Available-for-Sale	70,693		2,173,004		—		2,243,697
Loans Held for Sale	—		6,435		—		6,435
Mortgage Servicing Rights	—		—		3,826		3,826
Other Assets	15,535		—		—		15,535
Derivatives ¹	—		343		21,426		21,769
Total Assets Measured at Fair Value on a Recurring Basis as of December 31, 2013	$	86,228	$	2,179,782	$	25,252	$	2,291,262

Liabilities:
Derivatives ¹	$	—	$	904	$	21,047	$	21,951
Total Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2013	$	—	$	904	$	21,047	$	21,951


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 months ended March 31, 2014 and 2013, 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 March 31, 2014
Balance as of January 1, 2014	$	3,826		$	379		$	4,205
Realized and Unrealized Net Gains (Losses):
Included in Net Income	(445		)	1,104			659
Transfers to Loans Held for Sale	—			(1,194		)	(1,194		)
Balance as of March 31, 2014	$	3,381		$	289		$	3,670
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of March 31, 2014	$	(349	)	$	289		$	(60	)

Three Months Ended March 31, 2013
Balance as of January 1, 2013	$	4,761		$	9,940		$	14,701
Realized and Unrealized Net Gains (Losses):
Included in Net Income	(325		)	3,278			2,953
Transfers to Loans Held for Sale	—			(8,240		)	(8,240		)
Balance as of March 31, 2013	$	4,436		$	4,978		$	9,414
Total Unrealized Net Gains Included in Net Income Related to Assets Still Held as of March 31, 2013	$	34		$	4,978		$	5,012


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 March 31, 2014 and December 31, 2013, 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	Mar. 31, 2014		Dec. 31, 2013		Mar. 31, 2014			Dec. 31, 2013
Mortgage Servicing Rights	Discounted Cash Flow	Constant Prepayment Rate ¹	9.03	%	7.98	%	$	31,684		$	33,926
		Discount Rate ²	9.75	%	9.70	%

Net Derivative Assets and Liabilities:
Interest Rate Lock Commitments	Pricing Model	Closing Ratio	94.11	%	93.76	%	$	443		$	536
Interest Rate Swap Agreements	Discounted Cash Flow	Credit Factor	0.77	%	0.74	%	$	(154	)	$	(157	)


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 March 31, 2014 and December 31, 2013.



(dollars in thousands)	Aggregate Fair Value		Aggregate Unpaid Principal			Aggregate Fair Value Less Aggregate Unpaid Principal
March 31, 2014
Loans Held for Sale	$	2,437		$	2,277		$	160

December 31, 2013
Loans Held for Sale	$	6,435		$	6,284		$	151

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 March 31, 2014 and December 31, 2013. 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)
March 31, 2014
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	4,777,494	$	4,774,032	$	497,853	$	4,276,179	$	—
Loans ¹	5,841,620		6,248,862		—		—		6,248,862

Financial Instruments - Liabilities
Time Deposits	1,471,623		1,476,282		—		1,476,282		—
Securities Sold Under Agreements to Repurchase	797,213		872,907		—		872,907		—
Long-Term Debt ²	165,877		167,026		—		167,026		—

December 31, 2013
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	4,744,519	$	4,697,587	$	433,365	$	4,264,222	$	—
Loans ¹	5,707,133		6,062,147		—		—		6,062,147

Financial Instruments - Liabilities
Time Deposits	1,317,770		1,322,967		—		1,322,967		—
Securities Sold Under Agreements to Repurchase	770,049		846,193		—		846,193		—
Long-Term Debt ²	165,877		167,049		—		167,049		—


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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