FAIR VALUE MEASUREMENTS

See Note 1 “Summary of Significant Accounting Policies” to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2017 for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.

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.



	June 30, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets
Securities available for sale	$	—	$	4,650,915	$	—	$	4,650,915
CRA and Community Development Investment Funds	—		1,878		—		1,878
Mortgage loans held for sale	—		78,843		—		78,843
Mortgage loans held for investment, at fair value option	—		18,274		—		18,274
Derivative instruments	—		12,913		—		12,913
Total	$	—	$	4,762,823	$	—	$	4,762,823
Liabilities
Derivative instruments	$	—	$	38,607	$	—	$	38,607
Total	$	—	$	38,607	$	—	$	38,607

	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
Mortgage loans held for investment, at fair value option	—		14,953		—		14,953
Derivative instruments	—		31,265		—		31,265
Total	$	—	$	4,771,196	$	—	$	4,771,196
Liabilities
Derivative instruments	$	—	$	25,154	$	—	$	25,154
Total	$	—	$	25,154	$	—	$	25,154

During the six months ended June 30, 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.



	June 30, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets
Loans	$	—	$	—	$	71,748	$	71,748
OREO, net	—		—		1,721		1,721
Total	$	—	$	—	$	73,469	$	73,469

	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 business combinations disclosed in Note 3, Acquisition Activity. 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, and equipment) or Level 3 fair value measurements (loans, core deposit intangible assets, and debt.) Refer to Note 3, Acquisition Activity, for further detail.

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 June 30, 2018 and December 31, 2017.

Fair value option

The Company has elected the fair value option for 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 also has a portion 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 June 30, 2018 and December 31, 2017, respectively.

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



	June 30, 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	$	78,843	$	76,675	$	2,168		$	134,916	$	131,276	$	3,640
Mortgage loans held for investment, at fair value	18,274		20,548		(2,274		)	14,953		16,306		(1,353		)

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. The following table details net gains (losses) resulting from the change in fair value of loans that were recorded in mortgage income in the consolidated statements of comprehensive income for the three and six months ended June 30, 2018 and 2017. 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.



	Net Gains (Losses) Resulting From Changes in Fair Value
	For the Three Months Ended June 30,					For the Six Months Ended June 30,
(Dollars in thousands)	2018			2017		2018			2017
Fair value option
Mortgage loans held for sale, at fair value	$	(331	)	$	32	$	(1,472	)	$	871
Mortgage loans held for investment, at fair value	(172		)	344		(921		)	(65		)