The Fair Value Measurements and Disclosures topic of the FASB ASC defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value. We hold fixed and variable rate interest-bearing securities, investments in marketable equity securities and certain other financial instruments, which are carried at fair value. Fair value is determined based upon quoted prices when available or through the use of alternative approaches, such as matrix or model pricing, when market quotes are not readily accessible or available.

The valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our own market assumptions. These two types of inputs create the following fair value hierarchy:

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations whose inputs are observable or whose significant value drivers are observable.

Debt securities available for sale at fair value are priced using a combination of market activity, industry recognized information sources, yield curves, discounted cash flow models and other factors. These fair value calculations are considered a Level 2 input method under the provisions of the Fair Value Measurements and Disclosures topic of the FASB ASC for all debt securities available for sale.

Loans held for sale include the fair value of residential mortgage loans originated as held for sale determined based on quoted secondary market prices for similar loans, including the implicit fair value of embedded servicing rights. The change in fair value of loans held for sale is primarily driven by changes in interest rates subsequent to loan funding and changes in the fair value of the related servicing asset, resulting in revaluation adjustments to the recorded fair value.

The fair values of the interest rate lock commitments and interest rate forward loan sales contracts are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. The pull-through rate assumptions are considered Level 3 valuation inputs and are significant to the interest rate lock commitment valuation; as such, the interest rate lock commitment derivatives are classified as Level 3.

Interest rate contracts and the interest rate collar are valued in models, which use as their basis, readily observable market parameters and are classified within Level 2 of the valuation hierarchy.

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis at the dates presented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:


	Fair Value		Fair Value Measurements at Reporting Date Using
			Level 1		Level 2		Level 3
March 31, 2021	(in thousands)
Assets
Debt securities available for sale:
U.S. government agency and government-sponsored enterprise mortgage-back securities and collateralized mortgage obligations	$	4,104,219	$	—	$	4,104,219	$	—
Other asset-backed securities	358,819		—		358,819		—
State and municipal securities	751,285		—		751,285		—
U.S. government agency and government-sponsored enterprise securities	281,967		—		281,967		—

Total debt securities available for sale	$	5,496,290	$	—	$	5,496,290	$	—
Loans held for sale	$	25,587	$	—	$	25,587	$	—
Other assets:
Interest rate lock commitments	$	925	$	—	$	—	$	925
Interest rate forward loan sales contracts	$	505	$	—	$	505	$	—
Interest rate contracts	$	32,501	$	—	$	32,501	$	—

Liabilities
Other liabilities:

Interest rate contracts	$	32,769	$	—	$	32,769	$	—


	Fair Value		Fair Value Measurements at Reporting Date Using
			Level 1		Level 2		Level 3
December 31, 2020	(in thousands)
Assets
Debt securities available for sale:
U.S. government agency and government-sponsored enterprise mortgage-back securities and collateralized mortgage obligations	$	3,814,387	$	—	$	3,814,387	$	—
Other asset-backed securities	357,479		—		357,479		—
State and municipal securities	753,572		—		753,572		—
U.S. government agency and government-sponsored enterprise securities	284,696		—		284,696		—

Total debt securities available for sale	$	5,210,134	$	—	$	5,210,134	$	—
Loans held for sale	$	14,760	$	—	$	14,760	$	—
Other assets:
Interest rate lock commitments	$	1,096	$	—	$	—	$	1,096
Interest rate contracts	$	46,184	$	—	$	46,184	$	—

Liabilities
Other liabilities:
Interest rate forward loan sales contracts	$	165	$	—	$	165	$	—
Interest rate contracts	$	46,637	$	—	$	46,637	$	—

The following table provides a description of the valuation technique, significant unobservable inputs, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at the dates presented:

Fair Value at March 31, 2021

Valuation Technique

Unobservable Input

Range (Weighted Average)

(dollars in thousands)

Interest rate lock commitments

925

Internal pricing model

Pull-through rate

79.87% - 100.00%

(90.39%)

An increase in the pull-through rate utilized in the fair value measurement of the interest rate lock commitment derivative will result in positive fair value adjustments (and an increase in the fair value measurement). Conversely, a decrease in the pull-through rate will result in a negative fair value adjustment (and a decrease in the fair value measurement).


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Balance at the beginning of the period	$	1,096	$	—
Change included in earnings	1,710		—
Settlements	(1,881)		—
Balance at the end of the period	$	925	$	—

Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as collateral dependent loans. The following valuation techniques and inputs were used to estimate the fair value of collateral dependent loans and equity securities without readily determinable fair value.

Collateral dependent loans - A collateral dependent loan is a loan in which repayment is expected to be provided solely by the underlying collateral. The fair market value of the collateral is determined by either the discounted expected future cash flows from the operation of the collateral or the appraised value of the collateral, less costs to sell. The collateral dependent loan valuations are performed in conjunction with the allowance for credit losses process on a quarterly basis.

Equity securities without readily determinable fair value - The Company measures equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer, with such changes recognized in earnings. Our equity securities without readily determinable fair values consist of 77,683 Visa Class B shares. These shares are currently subject to certain transfer restrictions and will be convertible into Visa Class A shares upon final resolution of certain litigation matters involving Visa. For additional information, please see Note 3 to the Consolidated Financial Statements in “Item 1. Financial Statements (unaudited)” of this report.

The following table presents the carrying value of equity securities, without readily determinable fair values, still held as of March 31, 2021, that are measured under the measurement alternative and related adjustments recorded during the periods presented for those securities with observable price changes. These securities are included in the nonrecurring fair value tables when applicable price changes are observable.


	Three Months Ended
	March 31,
	2021		2020
Equity securities without readily determinable fair values	(in thousands)
Carrying value, beginning of period	$	13,425	$	—
Upward carrying value changes	—		—

Carrying value, end of period	$	13,425	$	—

The following tables set forth information related to the Company’s assets that were measured using fair value estimates on a nonrecurring basis during the current and prior year quarterly periods:


	Fair Value at March 31, 2021		Fair Value Measurements at Reporting Date Using						Losses During the Three Months Ended March 31, 2021
			Level 1		Level 2		Level 3
	(in thousands)
Collateral dependent loans	$	1,520	$	—	$	—	$	1,520	$	722


	Fair Value at March 31, 2020		Fair Value Measurements at Reporting Date Using						Losses During the Three Months Ended March 31, 2020
			Level 1		Level 2		Level 3
	(in thousands)
Collateral dependent loans	$	3,043	$	—	$	—	$	3,043	$	5,138

The losses on collateral dependent loans disclosed above represent the amount of the allowance for credit losses and/or charge-offs during the period applicable to loans held at period-end. The amount of the allowance is included in the ACL.

The range and weighted average of the significant unobservable inputs used to fair value our Level 3 nonrecurring assets, along with the valuation techniques used, are shown in the following table:

Fair Value at March 31, 2021

Valuation Technique

Unobservable Input

Range (Weighted Average) (1)

(dollars in thousands)

Collateral dependent loans (2)

1,520

Fair Market Value of Collateral

Adjustment to Stated Value

42.96% - 75.00% (59.53%)

Fair Value at March 31, 2020

Valuation Technique

Unobservable Input

Range (Weighted Average) (1)

(dollars in thousands)

Collateral dependent loans (2)

3,043

Fair Market Value of Collateral

Adjustment to Stated Value

0.00% - 100.00% (59.78%)


	March 31, 2021
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	(in thousands)
Assets
Cash and due from banks	$	178,096	$	178,096	$	178,096	$	—	$	—
Interest-earning deposits with banks	706,389		706,389		706,389		—		—
Debt securities available for sale	5,496,290		5,496,290		—		5,496,290		—
FHLB stock	10,280		10,280		—		10,280		—
Loans held for sale	26,176		26,176		—		26,176		—
Loans	9,528,024		9,948,104		—		—		9,948,104
Interest rate contracts	32,501		32,501		—		32,501		—
Interest rate lock commitments	925		925		—		—		925
Interest rate forward loan sales contracts	505		505		—		505		—
Liabilities
Time deposits	$	336,918	$	333,169	$	—	$	333,169	$	—
FHLB advances	7,400		8,764		—		8,764		—
Repurchase agreements	38,624		38,624		—		38,624		—
Subordinated debentures	35,046		35,102		—		35,102		—

Interest rate contracts	32,769		32,769		—		32,769		—


	December 31, 2020
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	(in thousands)
Assets
Cash and due from banks	$	218,899	$	218,899	$	218,899	$	—	$	—
Interest-earning deposits with banks	434,867		434,867		434,867		—		—
Debt securities available for sale	5,210,134		5,210,134		—		5,210,134		—
FHLB stock	10,280		10,280		—		10,280		—
Loans held for sale	26,481		26,481		—		26,481		—
Loans	9,278,520		9,720,592		—		—		9,720,592
Interest rate contracts	46,184		46,184		—		46,184		—
Interest rate lock commitments	1,096		1,096		—		—		1,096
Liabilities
Time deposits	$	338,845	$	338,815	$	—	$	338,815	$	—
FHLB advances and FRB borrowings	7,414		9,295		—		9,295		—
Repurchase agreements	73,859		73,859		—		73,859		—
Subordinated debentures	35,092		35,414		—		35,414		—
Interest rate contracts	46,637		46,637		—		46,637		—
Interest rate forward loan sales contracts	165		165		—		165		—

The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale sold under the mandatory delivery method and accounted for under the fair value option as of the dates presented:


March 31,
2021						2020
Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregate Unpaid Principal Balance		Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregate Unpaid Principal Balance
(in thousands)
$	25,587	$	25,167	$	420	$	—	$	—	$	—

Residential mortgage loans held for sale that are sold under the mandatory delivery method and accounted for under the fair value option are measured initially at fair value with subsequent changes in fair value recognized in earnings. Gains and losses from such changes in fair value are reported in loan revenue. For the three months ended March 31, 2021, the Company recorded a net decrease in fair value of $88 thousand representing the change in fair value reflected in earnings. For the three months ended March 31, 2020, there were no such loans held for sale under the mandatory delivery method. At March 31, 2021 and 2020, there were no residential mortgage loans held for sale for which the fair value option was elected that were 90 days or more past due, in nonaccrual status or both.