Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Schedule of differences between aggregate fair value and aggregate unpaid principle balance

The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for residential mortgage loans measured at fair value.



	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
	(In Thousands)
March 31, 2017
Residential mortgage loans held for sale	$	74,741	$	72,041	$	2,700
December 31, 2016
Residential mortgage loans held for sale	$	105,257	$	103,886	$	1,371

Summary of asset and liabilities measure at fair value on a recurring basis

The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis.



			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	March 31, 2017		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	2,614,008	$	2,614,008	$	—	$	—
Collateralized mortgage obligations	1,324		—		1,324		—
State and political subdivisions	460		—		460		—
Other debt securities	7,485		—		7,485		—
Interest rate contracts	244,525		—		244,525		—
Foreign exchange contracts	23,633		—		23,633		—
Other trading assets	819		—		—		819
Total trading account assets	2,892,254		2,614,008		277,427		819
Investment securities available for sale:
U.S. Treasury and other U.S. government agencies	2,967,385		1,883,291		1,084,094		—
Mortgage-backed securities	3,522,024		—		3,522,024		—
Collateralized mortgage obligations	4,934,143		—		4,934,143		—
States and political subdivisions	8,208		—		8,208		—
Other debt securities	14,061		14,061		—		—
Equity securities (1)	370		73		—		297
Total investment securities available for sale	11,446,191		1,897,425		9,548,469		297
Loans held for sale	74,741		—		74,741		—
Derivative assets:
Interest rate contracts	35,559		—		32,381		3,178
Equity contracts	60,829		—		60,829		—
Foreign exchange contracts	1,336		—		1,336		—
Total derivative assets	97,724		—		94,546		3,178
Other assets - MSR	50,776		—		—		50,776
Other assets - SBIC	22,553		—		—		22,553
Liabilities:
Trading account liabilities:
U.S. Treasury and other U.S. government agencies	$	2,584,514	$	2,581,472	$	3,042	$	—
Other debt securities	8,025		—		8,025		—
Interest rate contracts	193,258		—		193,258		—
Foreign exchange contracts	21,560		—		21,560		—
Total trading account liabilities	2,807,357		2,581,472		225,885		—
Derivative liabilities:
Interest rate contracts	48,925		—		48,924		1
Equity contracts	56,178		—		56,178		—
Foreign exchange contracts	3,169		—		3,169		—
Total derivative liabilities	108,272		—		108,271		1


(1)	Excludes $400 million of FHLB and Federal Reserve stock required to be owned by the Company at March 31, 2017. These securities are carried at par.



			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2016		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	2,820,797	$	2,820,797	$	—	$	—
State and political subdivisions	219		—		219		—
Other debt securities	4,120		—		4,120		—
Interest rate contracts	290,238		—		290,238		—
Foreign exchange contracts	28,367		—		28,367		—
Other trading assets	859		—		—		859
Total trading account assets	3,144,600		2,820,797		322,944		859
Investment securities available for sale:
U.S. Treasury and other U.S. government agencies	2,374,331		1,266,564		1,107,767		—
Mortgage-backed securities	3,763,338		—		3,763,338		—
Collateralized mortgage obligations	5,098,928		—		5,098,928		—
States and political subdivisions	8,641		—		8,641		—
Other debt securities	16,185		16,185		—		—
Equity securities (1)	380		87		—		293
Total investment securities available for sale	11,261,803		1,282,836		9,978,674		293
Loans held for sale	105,257		—		105,257		—
Derivative assets:
Interest rate contracts	46,133		—		43,709		2,424
Equity contracts	57,198		—		57,198		—
Foreign exchange contracts	3,875		—		3,875		—
Total derivative assets	107,206		—		104,782		2,424
Other assets - MSR	51,428		—		—		51,428
Other assets - SBIC	15,639		—		—		15,639
Liabilities:
Trading account liabilities:
U.S. Treasury and other U.S. government agencies	$	2,750,085	$	2,750,085	$	—	$	—
Other debt securities	2,892		—		2,892		—
Interest rate contracts	228,748		—		228,748		—
Foreign exchange contracts	26,317		—		26,317		—
Total trading account liabilities	3,008,042		2,750,085		257,957		—
Derivative liabilities:
Interest rate contracts	33,414		—		33,382		32
Equity contracts	53,044		—		53,044		—
Foreign exchange contracts	2,103		—		2,103		—
Total derivative liabilities	88,561		—		88,529		32


(1)	Excludes $403 million of FHLB and Federal Reserve stock required to be owned by the Company at December 31, 2016. These securities are carried at par.

Reconciliation of assets measured on a recurring basis using significant unobservable inputs

The following table reconciles the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended March 31,	Other Trading Assets			Equity Securities		Interest Rate Contracts, net		Other Assets - MSR			Other Assets - SBIC
	(In Thousands)
Balance, December 31, 2015	$	1,117		$	253	$	2,874	$	44,541		$	—
Transfers into Level 3	—			—		—		—			—
Transfers out of Level 3	—			—		—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	(46		)	—		822		(8,231		)	—
Included in other comprehensive income	—			—		—		—			—
Purchases, issuances, sales and settlements:
Purchases	—			—		—		—			—
Issuances	—			—		—		4,407			—
Sales	—			—		—		—			—
Settlements	—			—		—		—			—
Balance, March 31, 2016	$	1,071		$	253	$	3,696	$	40,717		$	—
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2016	$	(46	)	$	—	$	822	$	(8,231	)	$	—

Balance, December 31, 2016	$	859		$	293	$	2,392	$	51,428		$	15,639
Transfers into Level 3	—			—		—		—			—
Transfers out of Level 3	—			—		—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	(40		)	—		785		(2,670		)	550
Included in other comprehensive income	—			—		—		—			—
Purchases, issuances, sales and settlements:
Purchases	—			4		—		—			6,364
Issuances	—			—		—		2,018			—
Sales	—			—		—		—			—
Settlements	—			—		—		—			—
Balance, March 31, 2017	$	819		$	297	$	3,177	$	50,776		$	22,553
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2017	$	(40	)	$	—	$	785	$	(2,670	)	$	550


(1)	Included in noninterest income in the Unaudited Condensed Consolidated Statements of Income.

Schedule of carrying amounts and estimated fair values within the fair value hierarchy

The following tables represent those assets that were subject to fair value adjustments during the three months ended March 31, 2017 and 2016 and still held as of the end of the period, and the related gains and losses from fair value adjustments on assets sold during the period as well as assets still held as of the end of the period.



			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)
	March 31, 2017		(Level 1)		(Level 2)		(Level 3)		Three Months Ended March 31, 2017
	(In Thousands)
Nonrecurring fair value measurements
Assets:
Investment securities held to maturity	$	2,013	$	—	$	—	$	2,013	$	(242	)
Impaired loans (1)	3,510		—		—		3,510		15,921
OREO	25,113		—		—		25,113		(1,723		)

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)
	March 31, 2016		(Level 1)		(Level 2)		(Level 3)		Three Months Ended March 31, 2016
	(In Thousands)
Nonrecurring fair value measurements
Assets:
Impaired loans (1)	$	69,032	$	—	$	—	$	69,032	$	(15,408	)
OREO	17,877		—		—		17,877		(699		)


(1)	Total gains (losses) represent charge-offs on impaired loans for which adjustments are based on the appraised value of the collateral.

Schedule of fair value measurement inputs

The table below presents quantitative information about the significant unobservable inputs for material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring and nonrecurring basis.



			Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Unobservable Inputs
	March 31, 2017		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Other trading assets	$	819	Discounted cash flow	Default rate	10.2%
				Prepayment rate	5.8% - 11.0% (8.0%)
Interest rate contracts	3,177		Discounted cash flow	Closing ratios (pull-through)	18.6% - 99.1% (65.6%)
				Cap grids	0.2% - 2.2% (1.1%)
Other assets - MSRs	50,776		Discounted cash flow	Option adjusted spread	6.6% - 19.2% (8.7%)
				Constant prepayment rate or life speed	0.8% - 33.5% (6.6%)
				Cost to service	$65 - $4,000 ($76)
Other assets - SBIC investments	22,553		Transaction price	Transaction price	N/A
Nonrecurring fair value measurements:
Investment securities held to maturity	$	2,013	Discounted cash flow	Prepayment rate	5.1%
				Default rate	4.8%
				Loss severity	70.6%
Impaired loans	3,510		Appraised value	Appraised value	0.0% - 80.0% (26.7%)
OREO	25,113		Appraised value	Appraised value	8.0% (1)


(1)	Represents discount to appraised value for estimated costs to sell.

Schedule of fair value by balance sheet location

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments, excluding financial instruments measured at fair value on a recurring basis, are as follows:



	March 31, 2017
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	3,959,932	$	3,959,932	$	3,959,932	$	—	$	—
Investment securities held to maturity	1,158,785		1,142,694		—		—		1,142,694
Loans, net	58,871,661		56,219,932		—		—		56,219,932
Liabilities:
Deposits	$	67,529,638	$	67,603,537	$	—	$	67,603,537	$	—
FHLB and other borrowings	2,993,222		3,037,339		—		3,037,339		—
Federal funds purchased and securities sold under agreements to repurchase	71,559		71,559		—		71,559		—
Other short-term borrowings	50,000		50,000		—		50,000		—



	December 31, 2016
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	3,251,786	$	3,251,786	$	3,251,786	$	—	$	—
Investment securities held to maturity	1,203,217		1,182,009		—		—		1,182,009
Loans, net	59,222,970		56,283,761		—		—		56,283,761
Liabilities:
Deposits	$	67,279,533	$	67,359,299	$	—	$	67,359,299	$	—
FHLB and other borrowings	3,001,551		3,001,836		—		3,001,836		—
Federal funds purchased and securities sold under agreements to repurchase	39,052		39,052		—		39,052		—
Other short-term borrowings	50,000		50,000		—		50,000		—

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) the reasons for electing a fair value option for each eligible item or group of similar eligible items and (b) if the fair value option is elected for some but not all eligible items within a group of similar eligible items: (i) a description of those similar items and the reasons for partial election and (ii) information of how the group of similar items relates to individual balance sheet line items; (c) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, information of how each line item in the statement of financial position relates to major categories of assets and liabilities presented in accordance with other fair value disclosures; (2) for items included in the income statement: (a) a description of how interest and dividends are measured and where they are reported in the income statement; (b) how the gains or losses attributable to changes in instrument-specific credit risk were determined; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk: (i) qualitative information about the reasons for the changes and (ii) how the gains and losses attributable to changes in instrument-specific credit risk were determined; and (3) certain other disclosures as required or determined to be provided.

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