Fair Value of Financial Instruments

The carrying amounts and estimated fair values of financial instruments held by the Company, in addition to a discussion of the methods used and assumptions made in computing those estimates, are set forth below.

Loans

The fair values of loans are estimated by discounting the expected future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining terms. This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC 820 “Fair Value Measurements and Disclosures”. Future cash flows for each individual loan are modeled using current rates and all contractual features, while adjusting for optionality such as prepayments. Loans with potential optionality are modeled under a multiple-rate path process. Each loan's expected future cash flows are discounted using the LIBOR/swap curve plus an appropriate spread. For business, construction and business real estate loans, internally-developed pricing spreads based on loan type, term and credit score are utilized. The spread for personal real estate loans is generally based on newly originated loans with similar characteristics. For consumer loans, the spread is calculated at loan origination as part of the Bank's funds transfer pricing process, which is indicative of individual borrower creditworthiness. All consumer credit card loans are discounted at the same spread, depending on whether the rate is variable or fixed.

Loans Held for Sale, Investment Securities and Derivative Instruments

Detailed descriptions of the fair value measurements of these instruments are provided in Note 15 on Fair Value Measurements.

Federal Funds Purchased and Sold, Interest Earning Deposits With Banks and Cash and Due From Banks

The carrying amounts of federal funds purchased and sold, interest earning deposits with banks, and cash and due from banks approximates fair value, as these instruments are payable on demand or mature overnight.

Securities Purchased/Sold under Agreements to Resell/Repurchase

The fair values of these investments and borrowings are estimated by discounting contractual cash flows using an estimate of the current market rate for similar instruments.

Deposits

The fair value of deposits with no stated maturity is equal to the amount payable on demand. Such deposits include savings and interest and non-interest bearing demand deposits. These fair value estimates do not recognize any benefit the Company receives as a result of being able to administer, or control, the pricing of these accounts. Because they are payable on demand, they are classified as Level 1 in the fair value hierarchy. The fair value of time open and certificates of deposit is based on the discounted value of cash flows, taking early withdrawal optionality into account. Discount rates are based on the Company’s approximate cost of obtaining similar maturity funding in the market. Their fair value measurement is classified as Level 3.

Other Borrowings

The fair value of other borrowings, which consists mainly of long-term debt, is estimated by discounting contractual cash flows using an estimate of the current market rate for similar instruments.

The estimated fair values of the Company’s financial instruments are as follows:



	Fair Value Hierarchy Level	2017				2016
(In thousands)		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets
Loans:
Business	Level 3	$	4,958,554	$	4,971,401	$	4,776,365	$	4,787,469
Real estate - construction and land	Level 3	968,820		979,389		791,236		800,426
Real estate - business	Level 3	2,697,452		2,702,598		2,643,374		2,658,093
Real estate - personal	Level 3	2,062,787		2,060,443		2,010,397		2,005,227
Consumer	Level 3	2,104,487		2,074,129		1,990,801		1,974,784
Revolving home equity	Level 3	400,587		400,333		413,634		414,499
Consumer credit card	Level 3	783,864		798,093		776,465		794,856
Overdrafts	Level 3	7,123		7,123		10,464		10,464
Loans held for sale	Level 2	21,398		21,398		14,456		14,456
Investment securities:
Available for sale	Level 1	937,011		937,011		945,871		945,871
Available for sale	Level 2	7,820,253		7,820,253		8,686,650		8,686,650
Available for sale	Level 3	17,016		17,016		16,682		16,682
Trading	Level 2	18,269		18,269		22,225		22,225
Non-marketable	Level 3	100,758		100,758		99,558		99,558
Federal funds sold	Level 1	42,775		42,775		15,470		15,470
Securities purchased under agreements to resell	Level 3	700,000		695,194		725,000		728,179
Interest earning deposits with banks	Level 1	30,631		30,631		272,275		272,275
Cash and due from banks	Level 1	438,439		438,439		494,690		494,690
Derivative instruments	Level 2	7,723		7,723		13,146		13,146
Derivative instruments	Level 3	626		626		420		420
Assets held in trust for deferred compensation plan	Level 1	12,843		12,843		10,261		10,261
Financial Liabilities
Non-interest bearing deposits	Level 1	$	7,158,962	$	7,158,962	$	7,429,398	$	7,429,398
Savings, interest checking and money market deposits	Level 1	11,499,620		11,499,620		11,430,789		11,430,789
Time open and certificates of deposit	Level 3	1,766,864		1,768,780		2,240,908		2,235,218
Federal funds purchased	Level 1	202,370		202,370		52,840		52,840
Securities sold under agreements to repurchase	Level 3	1,304,768		1,305,375		1,671,065		1,671,227
Other borrowings	Level 3	1,758		1,758		102,049		104,298
Derivative instruments	Level 2	7,951		7,951		13,177		13,177
Derivative instruments	Level 3	123		123		162		162
Liabilities held in trust for deferred compensation plan	Level 1	12,843		12,843		10,261		10,261

Off-Balance Sheet Financial Instruments

The fair value of letters of credit and commitments to extend credit is based on the fees currently charged to enter into similar agreements. The aggregate of these fees is not material. These instruments are also referenced in Note 19 on Commitments, Contingencies and Guarantees.

Limitations

Fair value estimates are made at a specific point in time based on relevant market information. They do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for many of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, risk characteristics and economic conditions. These estimates are subjective, involve uncertainties and cannot be determined with precision. Changes in assumptions could significantly affect the estimates.