Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2019

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, 2019 and December 31, 2018:



	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, 2019
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	993	$	362,729	$	—	$	363,722
Debt Securities Issued by States and Political Subdivisions	—		176,729		—		176,729
Debt Securities Issued by U.S. Government-Sponsored Enterprises	—		190		—		190
Debt Securities Issued by Corporations	—		223,983		—		223,983
Mortgage-Backed Securities:
Residential - Government Agencies	—		398,964		—		398,964
Residential - U.S. Government-Sponsored Enterprises	—		555,243		—		555,243
Commercial - Government Agencies	—		140,425		—		140,425
Total Mortgage-Backed Securities	—		1,094,632		—		1,094,632
Total Investment Securities Available-for-Sale	993		1,858,263		—		1,859,256
Loans Held for Sale	—		17,909		—		17,909
Mortgage Servicing Rights	—		—		1,268		1,268
Other Assets	35,387		—		—		35,387
Derivatives ¹	—		55		16,185		16,240
Total Assets Measured at Fair Value on a Recurring Basis as of March 31, 2019	$	36,380	$	1,876,227	$	17,453	$	1,930,060

Liabilities:
Derivatives ¹	$	—	$	607	$	7,010	$	7,617
Total Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2019	$	—	$	607	$	7,010	$	7,617

December 31, 2018
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	972	$	391,429	$	—	$	392,401
Debt Securities Issued by States and Political Subdivisions	—		563,996		—		563,996
Debt Securities Issued by U.S. Government-Sponsored Enterprises	—		56		—		56
Debt Securities Issued by Corporations	—		223,140		—		223,140
Mortgage-Backed Securities:
Residential - Government Agencies	—		190,442		—		190,442
Residential - U.S. Government-Sponsored Enterprises	—		578,527		—		578,527
Commercial - Government Agencies	—		59,380		—		59,380
Total Mortgage-Backed Securities	—		828,349		—		828,349
Total Investment Securities Available-for-Sale	972		2,006,970		—		2,007,942
Loans Held for Sale	—		10,987		—		10,987
Mortgage Servicing Rights	—		—		1,290		1,290
Other Assets	31,871		—		—		31,871
Derivatives ¹	—		812		13,792		14,604
Total Assets Measured at Fair Value on a Recurring Basis as of December 31, 2018	$	32,843	$	2,018,769	$	15,082	$	2,066,694

Liabilities:
Derivatives ¹	$	—	$	371	$	9,376	$	9,747
Total Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2018	$	—	$	371	$	9,376	$	9,747


¹	The fair value of each class of derivatives is shown in Note 12 Derivative Financial Instruments.

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

For the three months ended March 31, 2019 and 2018, 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, 2019
Balance as of January 1, 2019	$	1,290		$	4,416
Realized and Unrealized Net Gains (Losses):
Included in Net Income	(22		)	1,715
Transfers to Loans Held for Sale	—			(1,498		)
Variation Margin Payments	—			4,542
Balance as of March 31, 2019	$	1,268		$	9,175
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of March 31, 2019	$	—		$	9,175

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


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, 2019 and December 31, 2018, 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, 2019		Dec. 31, 2018		Mar. 31, 2019		Dec. 31, 2018
Mortgage Servicing Rights	Discounted Cash Flow	Constant Prepayment Rate ¹	8.62	%	7.01	%	$	28,082	$	30,508
		Discount Rate ²	8.57	%	9.59	%

Net Derivative Assets and Liabilities:
Interest Rate Lock Commitments	Pricing Model	Closing Ratio	87.60	%	89.00	%	$	1,099	$	871
Interest Rate Swap Agreements	Discounted Cash Flow	Credit Factor	0.13	%	0.06	%	$	8,076	$	3,545


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

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, 2019 and December 31, 2018.



(dollars in thousands)	Aggregate Fair Value		Aggregate Unpaid Principal			Aggregate Fair Value Less Aggregate Unpaid Principal
March 31, 2019
Loans Held for Sale	$	17,909		$	17,441		$	468

December 31, 2018
Loans Held for Sale	$	10,987		$	10,656		$	331

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, 2019 and December 31, 2018. 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, 2019
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	3,668,811	$	3,637,496	$	353,340	$	3,284,156	$	—
Loans ¹	10,203,730		10,280,694		—		—		10,280,694

Financial Instruments - Liabilities
Time Deposits	1,763,070		1,754,931		—		1,754,931		—
Securities Sold Under Agreements to Repurchase	504,299		504,293		—		504,293		—
Other Debt ²	100,000		99,905		—		99,905		—

December 31, 2018
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	3,482,092	$	3,413,994	$	352,216	$	3,061,778	$	—
Loans ¹	10,084,527		10,008,417		—		—		10,008,417

Financial Instruments - Liabilities
Time Deposits	1,745,522		1,734,447		—		1,734,447		—
Securities Sold Under Agreements to Repurchase	504,296		504,288		—		504,288		—
Other Debt ²	125,000		124,559		—		124,559		—


¹	Carrying amount is net of unearned income and the Allowance.


²	Excludes capitalized lease obligations.