Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

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, 2018 and December 31, 2017:



	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, 2018
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	535	$	437,875	$	—	$	438,410
Debt Securities Issued by States and Political Subdivisions	—		612,004		—		612,004
Debt Securities Issued by Corporations	—		251,066				251,066
Mortgage-Backed Securities:
Residential - Government Agencies	—		222,541		—		222,541
Residential - U.S. Government-Sponsored Enterprises	—		594,095		—		594,095
Commercial - Government Agencies	—		66,071		—		66,071
Total Mortgage-Backed Securities	—		882,707		—		882,707
Total Investment Securities Available-for-Sale	535		2,183,652		—		2,184,187
Loans Held for Sale	—		23,548		—		23,548
Mortgage Servicing Rights	—		—		1,404		1,404
Other Assets	31,106		—		—		31,106
Derivatives ¹	—		157		14,007		14,164
Total Assets Measured at Fair Value on a Recurring Basis as of March 31, 2018	$	31,641	$	2,207,357	$	15,411	$	2,254,409

Liabilities:
Derivatives ¹	$	—	$	282	$	13,460	$	13,742
Total Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2018	$	—	$	282	$	13,460	$	13,742

December 31, 2017
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	538	$	425,392	$	—	$	425,930
Debt Securities Issued by States and Political Subdivisions	—		627,019		—		627,019
Debt Securities Issued by Corporations	—		266,111		—		266,111
Mortgage-Backed Securities:
Residential - Government Agencies	—		235,360		—		235,360
Residential - U.S. Government-Sponsored Enterprises	—		609,812		—		609,812
Commercial - Government Agencies	—		68,747		—		68,747
Total Mortgage-Backed Securities	—		913,919		—		913,919
Total Investment Securities Available-for-Sale	538		2,232,441		—		2,232,979
Loans Held for Sale	—		19,231		—		19,231
Mortgage Servicing Rights	—		—		1,454		1,454
Other Assets	29,230		—		—		29,230
Derivatives ¹	—		146		10,372		10,518
Total Assets Measured at Fair Value on a Recurring Basis as of December 31, 2017	$	29,768	$	2,251,818	$	11,826	$	2,293,412

Liabilities:
Derivatives ¹	$	—	$	215	$	9,478	$	9,693
Total Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2017	$	—	$	215	$	9,478	$	9,693


¹

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

For the three months ended March 31, 2018 and 2017, 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
Three Months Ended March 31, 2018
Balance as of January 1, 2018	$	1,454		$	894
Realized and Unrealized Net Gains (Losses):
Included in Net Income	(50		)	537
Transfers to Loans Held for Sale	—			(382		)
Variation Margin Payments	—			(502		)
Balance as of March 31, 2018	$	1,404		$	547
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of March 31, 2018	$	—		$	547

Three Months Ended March 31, 2017
Balance as of January 1, 2017	$	1,655		$	1,053
Realized and Unrealized Net Gains (Losses):
Included in Net Income	(69		)	1,267
Transfers to Loans Held for Sale	—			(1,072		)
Balance as of March 31, 2017	$	1,586		$	1,248
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of March 31, 2017	$	—		$	1,248


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, 2018 and December 31, 2017, 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, 2018		Dec. 31, 2017		Mar. 31, 2018			Dec. 31, 2017
Mortgage Servicing Rights	Discounted Cash Flow	Constant Prepayment Rate ¹	7.07	%	8.50	%	$	30,004		$	28,170
		Discount Rate ²	9.77	%	8.87	%

Net Derivative Assets and Liabilities:
Interest Rate Lock Commitments	Pricing Model	Closing Ratio	92.81	%	93.25	%	$	937		$	789
Interest Rate Swap Agreements	Discounted Cash Flow	Credit Factor	0.02	%	0.10	%	$	(390	)	$	105


¹	Represents annualized loan repayment rate assumption.


²	Derived from multiple interest rate scenarios that incorporate a spread to a market yield curve and market volatilities.

Assets and liabilities measured at fair value on a nonrecurring basis

December 31, 2017

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, 2018 and December 31, 2017.



(dollars in thousands)	Aggregate Fair Value		Aggregate Unpaid Principal			Aggregate Fair Value Less Aggregate Unpaid Principal
March 31, 2018
Loans Held for Sale	$	23,548		$	23,307		$	241

December 31, 2017
Loans Held for Sale	$	19,231		$	18,854		$	377

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 not recorded at fair value on a recurring basis as of March 31, 2018 and December 31, 2017. 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, 2018
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	3,789,092	$	3,711,149	$	392,798	$	3,318,351	$	—
Loans ¹	9,553,491		9,485,997		—		—		9,485,997

Financial Instruments - Liabilities
Time Deposits	$	1,771,692	$	1,758,779	$	—	$	1,758,779	$	—
Securities Sold Under Agreements to Repurchase	505,293		505,271		—		505,271		—
Other Debt ²	$	225,000	$	223,027	—		$	223,027	$	—

December 31, 2017
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	3,928,170	$	3,894,121	$	373,640	$	3,520,481	$	—
Loans ¹	9,436,506		9,519,369		—		—		9,519,369

Financial Instruments - Liabilities
Time Deposits	1,688,092		1,679,684		—		1,679,684		—
Securities Sold Under Agreements to Repurchase	505,293		505,278		—		505,278		—
Other Debt ²	250,000		248,520		—		248,520		—


¹	Carrying amount is net of unearned income and the Allowance. In accordance with the prospective adoption of ASU No. 2016-01, the fair value of loans as of March 31, 2018 was measured using an exit price notion. The fair value of loans as of December 31, 2017 was measured using an entry price notion.


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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