FAIR VALUE MEASUREMENTS

Recurring fair value measurements

The Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to estimate the fair value at the measurement date in the tables below. See Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2017, for a description of how fair value measurements are determined.



	March 31, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets
Securities available for sale	$	—	$	4,542,486	$	—	$	4,542,486
CRA and Community Development Investment Funds	—		9,801		—		9,801
Mortgage loans held for sale	—		110,348		—		110,348
Derivative instruments	—		17,072		—		17,072
Total	$	—	$	4,679,707	$	—	$	4,679,707
Liabilities
Derivative instruments	$	—	$	32,154	$	—	$	32,154
Total	$	—	$	32,154	$	—	$	32,154

	December 31, 2017
	Level 1		Level 2		Level 3		Total
Assets
Securities available for sale	$	—	$	4,590,062	$	—	$	4,590,062
Mortgage loans held for sale	—		134,916		—		134,916
Derivative instruments	—		31,265		—		31,265
Total	$	—	$	4,756,243	$	—	$	4,756,243
Liabilities
Derivative instruments	$	—	$	25,154	$	—	$	25,154
Total	$	—	$	25,154	$	—	$	25,154

During the three months ended March 31, 2018, there were no transfers between the Level 1 and Level 2 fair value categories.

Non-recurring fair value measurements

The Company has segregated all assets and liabilities that are measured at fair value on a non-recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the tables below.



	March 31, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets
Loans	$	—	$	—	$	85,269	$	85,269
OREO, net	—		—		2,234		2,234
Total	$	—	$	—	$	87,503	$	87,503

	December 31, 2017
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets
Loans	$	—	$	—	$	71,210	$	71,210
OREO, net	—		—		3,029		3,029
Total	$	—	$	—	$	74,239	$	74,239

The tables above exclude the initial measurement of assets and liabilities that were acquired as part of the Sabadell United acquisition in July of 2017 and the Gibraltar acquisition in March of 2018. These assets and liabilities were recorded at their fair value upon acquisition in accordance with U.S. GAAP and were not re-measured during the periods presented unless specifically required by U.S. GAAP. Acquisition date fair values represent either Level 2 fair value measurements (investment securities, deposits, property, equipment, and debt) or Level 3 fair value measurements (loans and core deposit intangible assets.) Refer to Note 3, Acquisition Activity, for further detail regarding the Sabadell United and Gibraltar acquisitions.

In accordance with the provisions of ASC Topic 310, the Company records certain loans considered impaired at their estimated fair value. A loan is considered impaired if it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Fair value is measured at the estimated fair value of the collateral for collateral-dependent loans.

The Company did not record any liabilities at fair value for which measurement of the fair value was made on a non-recurring basis as of March 31, 2018 and December 31, 2017.

Fair value option

The Company has elected the fair value option for certain originated residential mortgage loans held for sale, which allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to hedge them without the burden of complying with the requirements for hedge accounting. The Company has $17.0 million and $15.0 million of mortgage loans held for investment for which the fair value option was elected upon origination and continue to be accounted for at fair value at March 31, 2018 and December 31, 2017, respectively. Net gains (losses) resulting from the change in fair value of these loans that were recorded in mortgage income in the consolidated statements of comprehensive income for the three months ended March 31, 2018 and 2017 totaled $(749) thousand and $(409) thousand, respectively.

The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale measured at fair value:



	March 31, 2018						December 31, 2017
(Dollars in thousands)	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Unpaid Principal		Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Unpaid Principal
Mortgage loans held for sale, at fair value	$	110,348	$	107,849	$	2,499	$	134,916	$	131,276	$	3,640

Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of comprehensive income. Net gains (losses) resulting from the change in fair value of these loans that were recorded in mortgage income in the consolidated statements of comprehensive income for the three months ended March 31, 2018 and 2017 totaled $(1.1) million and $839 thousand, respectively. The changes in fair value are mostly offset by economic hedging activities, with an insignificant portion of these changes attributable to changes in instrument-specific credit risk.