Fair Value of Measurements (Tables)

9 Months Ended

Sep. 30, 2020

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
	September 30, 2020		(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	$	177,180	$	177,180	$	—	$	—
Interest rate contracts	711,389		—		711,389		—
Foreign exchange contracts	37,928		—		37,928		—
Total trading account assets	926,497		177,180		749,317		—
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	2,191,009		1,725,371		465,638		—
Mortgage-backed securities	969,922		—		969,922		—
Collateralized mortgage obligations	2,866,505		—		2,866,505		—
States and political subdivisions	636		—		636		—
Total debt securities available for sale	6,028,072		1,725,371		4,302,701		—
Loans held for sale	253,454		—		253,454		—
Derivative assets:
Interest rate contracts	29,351		—		13,046		16,305
Equity contracts	774		—		774		—
Foreign exchange contracts	2,678		—		2,678		—
Total derivative assets	32,803		—		16,498		16,305
Other assets:
Equity securities	28,035		28,035		—		—
MSR	28,731		—		—		28,731
SBIC	164,362		—		—		164,362
Liabilities:
Trading account liabilities:
Interest rate contracts	$	155,542	$	—	$	155,542	$	—
Foreign exchange contracts	35,640		—		35,640		—
Total trading account liabilities	191,182		—		191,182		—
Derivative liabilities:
Interest rate contracts	5,830		—		5,830		—
Equity contracts	625		—		625		—
Foreign exchange contracts	1,971		—		1,971		—
Total derivative liabilities	8,426		—		8,426		—



			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, 2019		(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	$	137,637	$	137,637	$	—	$	—
Interest rate contracts	313,573		—		313,573		—
Foreign exchange contracts	22,766		—		22,766		—
Total trading account assets	473,976		137,637		336,339		—
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	3,127,525		2,598,471		529,054		—
Mortgage-backed securities	1,325,857		—		1,325,857		—
Collateralized mortgage obligations	2,781,125		—		2,781,125		—
States and political subdivisions	798		—		798		—
Total debt securities available for sale	7,235,305		2,598,471		4,636,834		—
Loans held for sale	112,058		—		112,058		—
Derivative assets:
Interest rate contracts	13,907		38		10,781		3,088
Equity contracts	4,460		—		4,460		—
Foreign exchange contracts	276		—		276		—
Total derivative assets	18,643		38		15,517		3,088
Other assets:
Equity securities	19,038		19,038		—		—
MSR	42,022		—		—		42,022
SBIC	119,475		—		—		119,475
Liabilities:
Trading account liabilities:
Interest rate contracts	$	97,881	$	—	$	97,881	$	—
Foreign exchange contracts	20,678		—		20,678		—
Total trading account liabilities	118,559		—		118,559		—
Derivative liabilities:
Interest rate contracts	3,732		—		3,732		—
Equity contracts	3,765		—		3,765		—
Foreign exchange contracts	3,940		—		3,940		—
Total derivative liabilities	11,437		—		11,437		—

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

The following tables reconcile 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 September 30,	Interest Rate Contracts, net			Other Assets - MSR			Other Assets - SBIC
	(In Thousands)
Balance, June 30, 2019	$	3,847		$	41,966		$	102,065
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	191			(6,301		)	10,239
Included in other comprehensive income	—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			7,944
Issuances	—			1,600			—
Sales	—			—			—
Settlements	—			—			—
Balance, September 30, 2019	$	4,038		$	37,265		$	120,248
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2019	$	191		$	(6,301	)	$	10,239

Balance, June 30, 2020	$	20,743		$	29,035		$	152,784
Transfers into Level 3	—			—			—
Transfers out of Level 3	—			—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	(4,438		)	(3,548		)	7,846
Included in other comprehensive income	—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			3,732
Issuances	—			3,244			—
Sales	—			—			—
Settlements	—			—			—
Balance, September 30, 2020	$	16,305		$	28,731		$	164,362
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2020	$	(4,438	)	$	(3,548	)	$	7,846


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



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Nine Months Ended September 30,	Interest Rate Contracts, net		Other Assets - MSR			Other Assets - SBIC
	(In Thousands)
Balance, December 31, 2018	$	2,012	$	51,539		$	80,074
Transfers into Level 3	—		—			—
Transfers out of Level 3	—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	2,026		(18,579		)	24,310
Included in other comprehensive income	—		—			—
Purchases, issuances, sales and settlements:
Purchases	—		—			15,864
Issuances	—		4,305			—
Sales	—		—			—
Settlements	—		—			—
Balance, September 30, 2019	$	4,038	$	37,265		$	120,248
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2019	$	2,026	$	(18,579	)	$	24,310

Balance, December 31, 2019	$	3,088	$	42,022		$	119,475
Transfers into Level 3	—		—			—
Transfers out of Level 3	—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	13,217		(20,945		)	30,388
Included in other comprehensive income	—		—			—
Purchases, issuances, sales and settlements:
Purchases	—		—			14,499
Issuances	—		7,654			—
Sales	—		—			—
Settlements	—		—			—
Balance, September 30, 2020	$	16,305	$	28,731		$	164,362
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2020	$	13,217	$	(20,945	)	$	30,388


(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 and nine months ended September 30, 2020 and 2019, 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)
	September 30, 2020		(Level 1)		(Level 2)		(Level 3)		Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
	(In Thousands)
Nonrecurring fair value measurements
Assets:
OREO	$	15,051	$	—	$	—	$	15,051	$	(5	)	$	(913	)

			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)
	September 30, 2019		(Level 1)		(Level 2)		(Level 3)		Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
	(In Thousands)
Nonrecurring fair value measurements
Assets:
Debt securities held to maturity	$	1,036	$	—	$	—	$	1,036	$	—		$	(113	)
Impaired loans (1)	6,270		—		—		6,270		(69,615		)	(113,140		)
OREO	18,931		$	—	—		18,931		(1,169		)	(3,928		)


(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 tables below present 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
	September 30, 2020		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Interest rate contracts, net	$	16,305	Discounted cash flow	Closing ratios (pull-through)	1.6% - 100.0% (51.7%)
				Cap grids	0.1% - 2.7% (0.9%)
Other assets - MSRs	28,731		Discounted cash flow	Option adjusted spread	6.0% - 8.3% (6.2%)
				Constant prepayment rate or life speed	3.5% - 90.3% (19.9%)
				Cost to service	$65 - $4,000 ($94)
Other assets - SBIC investments	164,362		Transaction price	Transaction price	N/A
Nonrecurring fair value measurements:
OREO	15,051		Appraised value	Appraised value	8.0% (1)


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



			Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Unobservable Inputs
	December 31, 2019		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Interest rate contracts, net	$	3,088	Discounted cash flow	Closing ratios (pull-through)	16.8% - 100.0% (60.1%)
				Cap grids	0.5% - 2.5% (0.9%)
Other assets - MSRs	42,022		Discounted cash flow	Option adjusted spread	6.0% - 9.0% (6.4%)
				Constant prepayment rate or life speed	0.0% - 80.0% (14.6%)
				Cost to service	$65 - $4,000 ($90)
Other assets - SBIC investments	119,475		Transaction price	Transaction price	N/A
Nonrecurring fair value measurements:
Debt securities held to maturity	$	2,177	Discounted cash flow	Prepayment rate	13.7% - 14.7% (14.2%)
				Default rate	3.1% - 4.9% (4.0%)
				Loss severity	50.3% - 61.9% (56.1%)
Impaired loans	484		Appraised value	Appraised value	0.0% - 70.0% (9.7%)
OREO	21,583		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:



	September 30, 2020
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	15,076,845	$	15,076,845	$	15,076,845	$	—	$	—
Debt securities held to maturity	9,444,036		9,779,195		1,412,275		7,838,912		528,008
Loans	66,180,612		65,384,443		—		—		65,384,443
Liabilities:
Deposits	$	86,371,032	$	86,400,715	$	—	$	86,400,715	$	—
FHLB and other borrowings	3,560,973		3,444,859		—		3,444,859		—
Federal funds purchased and securities sold under agreements to repurchase	189,474		189,474		—		189,474		—



	December 31, 2019
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	6,938,698	$	6,938,698	$	6,938,698	$	—	$	—
Debt securities held to maturity	6,797,046		6,921,158		1,340,448		4,912,399		668,311
Loans	63,946,857		60,869,662		—		—		60,869,662
Liabilities:
Deposits	$	74,985,283	$	75,024,350	$	—	$	75,024,350	$	—
FHLB and other borrowings	3,690,044		3,721,949		—		3,721,949		—
Federal funds purchased and securities sold under agreements to repurchase	173,028		173,028		—		173,028		—

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)
September 30, 2020
Residential mortgage loans held for sale	$	253,454	$	240,518	$	12,936
December 31, 2019
Residential mortgage loans held for sale	$	112,058	$	108,345	$	3,713

- 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