Fair Value Measurements

Fair value is defined by applicable accounting guidance as the price to sell an asset or transfer a liability in an orderly transaction between market participants in the principal market for the given asset or liability at the measurement date based on market conditions at that date. Certain assets and liabilities are recorded in the Company’s financial statements at fair value. Some are recorded on a recurring basis and some on a non-recurring basis.

For some assets and liabilities, observable market transaction and market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. A hierarchy for fair value has been established which categorizes into three levels the inputs to valuation techniques used to measure fair value. The three levels are as follows:

Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) - fair value is based on unadjusted quoted prices in active markets for identical assets or liabilities.

Significant Other Observable Inputs (Level 2) - Fair value is based on significant other observable inputs which are generally determined based on a single price for each financial instrument provided to us by an applicable third-party pricing service and is based on one or more of the following:


•	Quoted prices for similar, but not identical, assets or liabilities in active markets;


•	Quoted prices for identical or similar assets or liabilities in inactive markets;


•	Inputs other than quoted prices that are observable, such as interest rate and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates;


•	Other inputs derived from or corroborated by observable market inputs.

Significant Unobservable Inputs (Level 3) - Fair value is based upon model-based valuation techniques for which at least one significant assumption is not observable in the market.

Transfers between levels are recognized as of the end of the reporting period.

The underlying methods used by the third-party pricing services are considered in determining the primary inputs used to determine fair values. Management has evaluated the methodologies employed by the third-party pricing services by comparing the price provided by the pricing service with other sources, including brokers' quotes, sales or purchases of similar instruments and discounted cash flows to establish a basis for reliance on the pricing service values. Significant differences between the pricing service provided value and other sources are discussed with the pricing service to understand the basis for their values. Based on this evaluation, we determined that the results represent prices that would be received to sell assets or paid to transfer liabilities in orderly transactions in the current market.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of financial assets and liabilities that are measured on a recurring basis are as follows as of June 30, 2012 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:
Trading securities:
U.S. Government agency debentures	$	53,514	$	992	$	52,522	$	—
U.S. agency residential mortgage-backed securities	46,502		—		46,502		—
Municipal and other tax-exempt securities	44,632		—		44,632		1,852
Other trading securities	4,669		—		4,545		124
Total trading securities	$	149,317	992		148,201		1,976
Available for sale securities:
U.S. Treasury	1,003		1,003		—		—
Municipal and other tax-exempt	88,458		—		46,796		41,662
U.S. agency residential mortgage-backed securities	9,903,532		—		9,903,532		—
Privately issued residential mortgage-backed securities	317,761		—		317,761		—
Other debt securities	36,286		—		30,898		5,388
Perpetual preferred stock	23,431		—		23,431		—
Equity securities and mutual funds	24,944		6,912		18,032		—
Total available for sale securities	10,395,415		7,915		10,340,450		47,050
Fair value option securities:
U.S. agency residential mortgage-backed securities	299,467		—		299,467		—
Corporate debt securities	25,710		—		25,710		—
Total fair value option securities	325,177		—		325,177		—
Residential mortgage loans held for sale	259,174		—		259,174		—
Mortgage servicing rights¹	91,783		—		—		91,783
Derivative contracts, net of cash margin²	366,204		802		365,402		—
Other assets – private equity funds	31,492		—		—		31,492
Liabilities:
Derivative contracts, net of cash margin²	370,053		251		369,802		—


¹	A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 5, Mortgage Banking Activities.


²	See Note 3 for detail of fair value of derivative contracts by contract type.

The fair value of financial assets and liabilities that are measured on a recurring basis are as follows as of December 31, 2011 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:
Trading securities	$	76,800	$	—	$	76,623	$	177

Available for sale securities:
U.S. Treasury	1,006		1,006		—		—
Municipal and other tax-exempt	68,837		—		26,484		42,353
U.S. agency residential mortgage-backed securities	9,588,177		—		9,588,177		—
Privately issued residential mortgage-backed securities	419,166		—		419,166		—
Other debt securities	36,495		—		30,595		5,900
Perpetual preferred stock	18,446		—		18,446		—
Equity securities and mutual funds	47,238		23,596		23,642		—
Total available for sale securities	10,179,365		24,602		10,106,510		48,253

Fair value option securities	651,226		—		651,226		—
Residential mortgage loans held for sale	188,125		—		188,125		—
Mortgage servicing rights	86,783		—		—		86,783		¹
Derivative contracts, net of cash margin ²	293,859		457		293,402		—
Other assets – private equity funds	30,902		—		—		30,902

Liabilities:
Derivative contracts, net of cash margin ²	236,522		—		236,522		—


¹	A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 5, Mortgage Banking Activities.


²	See Note 3 for detail of fair value of derivative contracts by contract type.

The fair value of financial assets and liabilities that are measured on a recurring basis are as follows as of June 30, 2011 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:
Trading securities	$	99,846	$	2,327	$	97,519	$	—

Available for sale securities:
U.S. Treasury	1,003		1,003		—		—
Municipal and other tax-exempt	70,210		—		26,552		43,658
U.S. agency residential mortgage-backed securities	8,893,789		—		8,893,789		—
Privately issued residential mortgage-backed securities	513,222		—		513,222		—
Other debt securities	5,893		—		—		5,893
Perpetual preferred stock	22,694		—		22,694		—
Equity securities and mutual funds	60,197		41,557		18,640		—
Total available for sale securities	9,567,008		42,560		9,474,897		49,551

Fair value option securities	553,231		—		553,231		—
Residential mortgage loans held for sale	169,609		—		169,609		—
Mortgage servicing rights	109,192		—		—		109,192		¹
Derivative contracts, net of cash margin ²	229,887		—		229,887		—
Other assets – private equity funds	28,313		—				28,313

Liabilities:
Derivative contracts, net of cash margin ²	173,917		—		173,917		—


¹	A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 5, Mortgage Banking Activities.


²	See Note 3 for detail of fair value of derivative contracts by contract type.

The following represents the changes for the three months ended June 30, 2012 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Other assets – private equity funds
Balance at March 31, 2012	$	41,977		$	5,900		$	30,993
Purchases and capital calls	—			—			820
Redemptions and distributions	(363		)	(500		)	(2,559		)
Gain (loss) recognized in earnings:
Gain on other assets, net	—			—			2,238
Gain on available for sale securities, net	—			—			—
Other-than-temporary impairment losses	—			—			—
Other comprehensive gain (loss)	48			(12		)	—
Balance, June 30, 2012	$	41,662		$	5,388		$	31,492

The following represents the changes for the six months ended June 30, 2012 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Other assets – private equity funds
Balance, December 31, 2011	$	42,353		$	5,900		$	30,902
Purchases and capital calls	—			—			1,909
Redemptions and distributions	(463		)	(500		)	(3,166		)
Gain (loss) recognized in earnings:
Brokerage and trading revenue	—			—			—
Gain on other assets, net	—			—			1,847
Gain on securities, net	1			—			—
Other-than-temporary impairment losses	—			—			—
Other comprehensive (loss)	(229		)	(12		)	—
Balance, June 30, 2012	$	41,662		$	5,388		$	31,492

The following represents the changes for the three months ended June 30, 2011 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Other assets – private equity funds
Balance at March 31, 2011	$	43,767		$	5,899		$	25,046
Purchases, sales, issuances and settlements, net	—			—			746
Redemptions and distributions	—			—			(783		)
Gain (loss) recognized in earnings
Brokerage and trading revenue	—			—			—
Gain (loss) on other assets, net	—			—			3,304
Gain on securities, net	—			—			—
Other-than-temporary impairment losses	(521		)	—			—
Other comprehensive (loss)	412			(6		)	—
Balance, June 30, 2011	$	43,658		$	5,893		$	28,313

The following represents the changes for the six months ended June 30, 2011 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Other assets – private equity funds
Balance, December 31, 2010	$	47,093		$	6,400		$	25,436
Purchases, sales, issuances and settlements, net	7,520			—			1,652
Redemptions and distributions	(9,975		)	(500		)	(2,185		)
Gain (loss) recognized in earnings
Brokerage and trading revenue	(576		)	—			—
Gain (loss) on other assets, net	—			—			3,410
Gain on securities, net	18			—			—
Other-than-temporary impairment losses	(521		)	—			—
Other comprehensive (loss)	99			(7		)	—
Balance, June 30, 2011	$	43,658		$	5,893		$	28,313

Following is a description of the Company's valuation methodologies used for assets and liabilities measured on a recurring basis:

Securities

The fair values of trading, available for sale and fair value options securities are based on quoted prices for identical instruments in active markets, when available. If quoted prices for identical instruments are not available, fair values are based on significant other observable inputs such as quoted prices of comparable instruments or interest rates and credit spreads, yield curves, volatilities, prepayment speeds and loss severities.

The fair value of certain available for sale municipal and other debt securities may be based on significant unobservable inputs. These significant unobservable inputs include limited observed trades, projected cash flows, current credit rating of the issuers and, when applicable, the insurers of the debt and observed trades of similar debt. Discount rates are primarily based on reference to interest rate spreads on comparable securities of similar duration and credit rating as determined by the nationally recognized rating agencies adjusted for a lack of trading volume.

These securities may be either investment grade or below investment grade. As of June 30, 2012, taxable securities rated investment grade by all nationally recognized rating agencies are generally valued to yield 1.30% to 1.75%. Average yields on comparable short-term taxable securities are generally less than 1%. Tax-exempt securities rated investment grade by all nationally recognized rating agencies are generally valued to yield a range of 1.00% to 1.50%, which represents a spread of 75 to 80 basis points over average yields of comparable tax-exempt securities as of June 30, 2012. The resulting estimated fair value of securities rated investment grade ranges from 98.88% to 99.49% of par value at June 30, 2012. The fair value of these securities is sensitive primarily to changes in interest rate spreads. At June 30, 2012, a 100 basis point increase in the spreads over average yields for comparable taxable and tax-exempt securities would result in an additional decrease in the fair value of these securities of $337 thousand.

Approximately $13 million of our municipal and other tax-exempt securities are rated below investment grade by at least one of the three nationally recognized rating agencies. The fair value of these securities was determined based on yields ranging from 6.20% to 9.16%. These yields were determined using a spread of 600 basis points over comparable municipal securities of varying durations. The resulting estimated fair value of securities rated below investment grade ranges from 75.21% to 75.49% of par value as of June 30, 2012. The fair value of these municipal and other debt securities based on Significant Other Unobservable Inputs is primarily sensitive to changes in interest rate spreads. At June 30, 2012, a 100 basis point increase in the spread over average yields for comparable securities would result in an additional decrease in the fair value of these securities of $384 thousand.

Taxable securities rated investment grade by all nationally recognized rating agencies were generally valued at par to yield 1.60% to 1.80% at December 31, 2011 and 1.69% to 1.75% at June 30, 2011. Average yields on comparable short-term taxable securities were less than 1% at both December 31, 2011 and June 30, 2011. Tax-exempt investment grade securities were valued to yield a range of 1.00% to 1.50% at December 31, 2011 and 1.05% to 1.35% at June 30, 2011. This represents a spread of 75 to 80 basis points over average yields for comparable securities. The resulting estimated fair value of securities rated investment grade ranged from 98.79% to 100.00% of par at December 31, 2011 and 98.89% to 99.34% of par at June 30, 2011.

After other-than-temporary impairment charges, municipal and other tax-exempt securities rated below investment grade by at least one of the nationally recognized rating agencies totaled $13 million at December 31, 2011 and $14 million at June 30, 2011. These below investment grade municipal and other tax-exempt securities were valued based on a range of 6.25% to 9.58% at December 31, 2011 and 6.23% to 10.30% at June 30, 2011. This represented a spread of 600 basis points over comparable municipal securities of varying durations. The resulting estimated fair value of securities rated below investment grade ranged from 76.45% to 76.99% at December 31, 2011 and 82.66% to 82.83% of par value at June 30, 2011

Derivatives

All derivative instruments are carried on the balance sheet at fair value. Fair values for exchange-traded contracts are based on quoted prices. Fair values for over-the-counter interest rate, commodity and foreign exchange contracts are based on valuations provided either by third-party dealers in the contracts, quotes provided by independent pricing services, or a third-party provided pricing model that use significant other observable market inputs.

Credit risk is considered in determining the fair value of derivative instruments. Management determines fair value adjustments based on various risk factors including but not limited to counterparty credit rating or equivalent loan grading, derivative contract notional size, price volatility of the underlying commodity, duration of the derivative contracts and expected loss severity. Expected loss severity is based on historical losses for similarly risk-graded commercial loan customers. Decreases in counterparty credit rating or grading and increases in price volatility and expected loss severity all tend to increase the credit quality adjustment which reduces the fair value of asset contracts. The reduction in fair value is recognized in earnings during the current period.

We also consider our own credit risk in determining the fair value of derivative contracts. Changes in our credit rating would affect the fair value of our derivative liabilities. In the event of a credit downgrade, the fair value of our derivative liabilities would increase. The change in the fair value would be recognized in earnings in the current period.

Residential Mortgage Loans Held for Sale

Residential mortgage loans held for sale are carried on the balance sheet at fair value. The fair values of residential mortgage loans held for sale are based upon quoted market prices of such loans sold in securitization transactions, including related unfunded loan commitments.

Other Assets - Private Equity Funds

The fair value of the portfolio investments of the Company's two private equity funds are based upon net asset value reported by the underlying funds, as adjusted by the general partner when necessary to represent the price that would be received to sell the assets. Private equity fund assets are long-term, illiquid investments. No secondary market exists for these assets. They may only be realized through cash distributions from the underlying funds.

There were no transfers in or out of quoted prices in active markets for identical instruments, significant other observable inputs or significant unobservable input during the six months ended June 30, 2012 and 2011, respectively.

Fair Value of Assets and Liabilities Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis include pension plan assets, which are based on quoted prices in active markets for identical instruments, collateral for certain impaired loans and real property and other assets acquired to satisfy loans, which are based primarily on comparisons to completed sales of similar assets. In addition, goodwill impairment is evaluated based on the fair value of the Company's reporting units.

The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets with a balance at June 30, 2012 for which the fair value was adjusted during the six months ended June 30, 2012:



	Carrying Value at June 30, 2012						Fair Value Adjustments for the three months ended June 30, 2012 Recognized in:						Fair Value Adjustments for the six months ended June 30, 2012 Recognized in:
	Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Gross charge-offs against allowance for loan losses		Gross charge-offs against accrual for recourse loans		Net losses and expenses of repossessed assets, net		Gross charge-offs against allowance for loan losses		Gross charge-offs against accrual for recourse loans		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	29,369	$	2,881	$	4,406	$	311	$	—	$	10,826	$	311	$	—
Real estate and other repossessed assets	—		27,474		3,035		—		—		4,488		—		—		6,876

The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. he carrying value represents only those assets with a balance at June 30, 2011 for which the fair value was adjusted during the six months ended June 30, 2011:



	Carrying Value at June 30, 2011						Fair Value Adjustments for the Three Months Ended June 30, 2011 Recognized in:						Fair Value Adjustments for the Six Months Ended June 30, 2011 Recognized in:
	Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Gross charge-offs against allowance for loan losses		Gross charge-offs against accrual for recourse loans		Net losses and expenses of repossessed assets, net		Gross charge-offs against allowance for loan losses		Gross charge-offs against accrual for recourse loans		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	17,949	$	—	$	4,071	$	146	$	—	$	4,719	$	146	$	—
Real estate and other repossessed assets	—		50,885		—		—		—		4,127		—		—		8,863

The fair value of collateral-dependent impaired loans and real estate and other repossessed assets and the related fair value adjustments are generally based on unadjusted third-party appraisals. Our appraisal review policies require appraised values to be supported by observed inputs derived principally from or corroborated by observable market data. Appraisals that are not based on observable inputs or that require significant adjustments or fair value measurements that are not based on third-party appraisals are considered to be based on significant unobservable inputs.

Fair Value of Financial Instruments

The following table presents the carrying values and estimated fair values of all financial instruments, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis as of June 30, 2012 (dollars in thousands):



	Carrying Value			Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate		Estimated Fair Value
Cash and cash equivalents	$	639,263						$	639,263
Trading securities:
Obligations of the U.S. government	53,514							53,514
U.S. agency residential mortgage-backed securities	46,502							46,502
Municipal and other tax-exempt securities	44,632							44,632
Other trading securities	4,669							4,669
Total trading securities	149,317							149,317
Investment securities:
Municipal and other tax-exempt	126,168							130,308
U.S. agency residential mortgage-backed securities	102,347							105,535
Other debt securities	183,964							204,795
Total investment securities	412,479							440,638
Available for sale securities:
U.S. Treasury	1,003							1,003
Municipal and other tax-exempt	88,458							88,458
U.S. agency residential mortgage-backed securities	9,903,532							9,903,532
Privately issued residential mortgage-backed securities	317,761							317,761
Other debt securities	36,286							36,286
Perpetual preferred stock	23,431							23,431
Equity securities and mutual funds	24,944							24,944
Total available for sale securities	10,395,415							10,395,415
Fair value option securities:
U.S. agency residential mortgage-backed securities	299,467							299,467
Corporate debt securities	25,710							25,710
Total fair value option securities	325,177							325,177
Residential mortgage loans held for sale	259,174							259,174
Loans:
Commercial	7,052,544			0.25 - 30.00%	0.70	0.63 - 3.68%		7,010,486
Commercial real estate	2,126,214			0.38 - 18.00%	0.92	1.33 - 3.33%		2,105,823
Residential mortgage	2,005,097			0.38 - 18.00%	3.10	1.08 - 3.52%		2,042,362
Consumer	392,576			0.38 - 21.00%	0.34	1.59 - 3.79%		387,423
Total loans	11,576,431							11,546,094
Allowance for loan losses	(231,669		)					—
Net loans	11,344,762							11,546,094
Mortgage servicing rights	91,783							91,783
Derivative instruments with positive fair value, net of cash margin	366,204							366,204
Other assets – private equity funds	31,492							31,492
Deposits with no stated maturity	15,254,247							15,157,587
Time deposits	3,107,950			0.01 - 9.64%	2.17	0.92 - 1.31%		3,175,687
Other borrowings	2,648,753			0.09 - 5.25%	—	0.09 - 2.70%		2,642,598
Subordinated debentures	353,378			1.16 - 5.00%	4.02	2.40	%	350,813
Derivative instruments with negative fair value, net of cash margin	370,053							370,053



	Carrying Value			Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate		Estimated Fair Value
Cash and cash equivalents	$	986,365						$	986,365
Trading securities	76,800							76,800
Investment securities:
Municipal and other tax-exempt	128,697							133,670
U.S. agency residential mortgage-backed securities	121,704							120,536
Other debt securities	188,835							208,451
Total investment securities	439,236							462,657

Available for sale securities:
U.S. Treasury	1,006							1,006
Municipal and other tax-exempt	68,837							68,837
U.S. agency residential mortgage-backed securities	9,588,177							9,588,177
Privately issued residential mortgage-backed securities	419,166							419,166
Other debt securities	36,495							36,495
Perpetual preferred stock	18,446							18,446
Equity securities and mutual funds	47,238							47,238
Total available for sale securities	10,179,365							10,179,365

Fair value option securities	651,226							651,226
Residential mortgage loans held for sale	188,125							188,125
Loans:
Commercial	6,571,454			0.25 - 30.00%	0.57	0.63 - 3.85%		6,517,795
Commercial real estate	2,279,909			0.38 - 18.00%	1.26	0.28 - 3.51%		2,267,375
Residential mortgage	1,970,461			0.38 - 18.00%	3.26	1.14 - 3.70%		2,034,898
Consumer	447,919			0.38 - 21.00%	0.42	1.88 - 3.88%		436,490
Total loans	11,269,743							11,256,558
Allowance for loan losses	(253,481		)					—
Net loans	11,016,262							11,256,558

Mortgage servicing rights	86,783							86,783
Derivative instruments with positive fair value, net of cash margin	293,859							293,859
Other assets – private equity funds	30,902							30,902
Deposits with no stated maturity	15,380,598							15,380,598
Time deposits	3,381,982			0.01 - 9.64%	2.07	1.02 - 1.43%		3,441,610
Other borrowings	2,370,867			0.25 - 6.58%	—	0.04 - 2.76%		2,369,224
Subordinated debentures	398,881			5.19 - 5.82%	1.44	3.29	%	411,243
Derivative instruments with negative fair value, net of cash margin	236,522							236,522

A1pha-509



	Carrying Value			Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate		Estimated Fair Value
Cash and cash equivalents	$	1,110,761						$	1,110,761
Trading securities	99,846							99,846
Investment securities:
Municipal and other tax-exempt	160,870							165,449
Other debt securities	188,713							203,798
Total investment securities	349,583							369,247

Available for sale securities:
U.S. Treasury	1,003							1,003
Municipal and other tax-exempt	70,210							70,210
U.S. agency residential mortgage-backed securities	8,893,789							8,893,789
Privately issued residential mortgage-backed securities	513,222							513,222
Other debt securities	5,893							5,893
Perpetual preferred stock	22,694							22,694
Equity securities and mutual funds	60,197							60,197
Total available for sale securities	9,567,008							9,567,008

Fair value option securities	553,231							553,231
Residential mortgage loans held for sale	169,609							169,609

Loans:
Commercial	6,178,596			0.25 - 18.00%	0.60	0.72 - 4.50%		6,085,941
Commercial real estate	2,183,715			0.38 - 18.00%	1.18	0.28 - 3.66%		2,134,950
Residential mortgage	1,867,997			0.38 - 18.00%	3.32	0.74 - 4.31%		1,915,710
Consumer	507,236			0.38 - 21.00%	0.53	1.96 - 3.74%		507,831
Total loans	10,737,544							10,644,432
Allowance for loan losses	(286,611		)					—
Net loans	10,450,933							10,644,432

Mortgage servicing rights	109,192							109,192
Derivative instruments with positive fair value, net of cash margin	229,887							229,887
Other assets – private equity funds	28,313							28,313
Deposits with no stated maturity	13,951,177							13,951,177
Time deposits	3,634,700			0.01 - 9.64%	1.91	0.76 - 1.45%		3,655,527
Other borrowings	2,962,759			0.07 - 6.58%	—	0.07 - 2.65%		2,962,773
Subordinated debentures	398,788			5.19 - 5.82%	1.87	3.50	%	412,242
Derivative instruments with negative fair value, net of cash margin	173,917							173,917

Because no market exists for certain of these financial instruments and management does not intend to sell these financial instruments, the fair values shown in the tables above may not represent values at which the respective financial instruments could be sold individually or in the aggregate at the given reporting date.

The following methods and assumptions were used in estimating the fair value of these financial instruments:

Cash and Cash Equivalents

The book value reported in the consolidated balance sheet for cash and short-term instruments approximates those assets’ fair values.

Securities

The fair values of securities are generally based on Significant Other Observable Inputs such as quoted prices for comparable instruments or interest rates and credit spreads, yield curves, volatilities prepayment speeds and loss severities.

Loans

The fair value of loans, excluding loans held for sale, are based on discounted cash flow analyses using interest rates and credit and liquidity spreads currently being offered for loans with similar remaining terms to maturity and risk, adjusted for the impact of interest rate floors and ceilings which are classified as Significant Unobservable Inputs. The fair values of loans were estimated to approximate their discounted cash flows less loan loss allowances allocated to these loans of $191 million at June 30, 2012, $207 million at December 31, 2011 and $259 million at June 30, 2011.

Deposits

The fair values of time deposits are based on discounted cash flow analyses using interest rates currently being offered on similar transactions which are considered Significant Unobservable Inputs. Estimated fair value of deposits with no stated maturity, which includes demand deposits, transaction deposits, money market deposits and savings accounts, is equal to the amount payable on demand. Although market premiums paid reflect an additional value for these low cost deposits, adjusting fair value for the expected benefit of these deposits is prohibited. Accordingly, the positive effect of such deposits is not included in the tables above.

Other Borrowings and Subordinated Debentures

The fair values of these instruments are based upon discounted cash flow analyses using interest rates currently being offered on similar instruments which are considered Significant Unobservable Inputs

Off-Balance Sheet Instruments

The fair values of commercial loan commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of these off-balance sheet instruments were not significant at June 30, 2012, December 31, 2011 or June 30, 2011.

Fair Value Election

As more fully disclosed in Note 2 and Note 5 to the Consolidated Financial Statements, the Company has elected to carry all residential mortgage-backed securities which have been designated as economic hedges against changes in the fair value of mortgage servicing rights, certain corporate debt securities economically hedged by derivative contracts to manage interest rate risk and all residential mortgage loans originated for sale at fair value. Changes in the fair value of these financial instruments are recognized in earnings.