Fair Value Measurements

6 Months Ended

Jun. 30, 2019

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, we utilize valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC Topic 820 establishes a three-level fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. See our 2018 Form 10-K for additional information regarding the fair value hierarchy and a description of our valuation techniques.

Financial Assets and Financial Liabilities. The table below summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy of ASC Topic 820 utilized to measure fair value.



	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2019
Securities available for sale:
U.S. Treasury	$	2,920,720	$	—	$	—	$	2,920,720
Residential mortgage-backed securities	—		2,247,712		—		2,247,712
States and political subdivisions	—		7,068,301		—		7,068,301
Other	—		42,780		—		42,780
Trading account securities:
U.S. Treasury	22,642		—		—		22,642
States and political subdivisions	—		2,840		—		2,840
Derivative assets:
Interest rate swaps, caps and floors	—		45,287		—		45,287
Commodity swaps and options	—		13,908		—		13,908
Foreign currency forward contracts	27		—		—		27
Derivative liabilities:
Interest rate swaps, caps and floors	—		21,285		—		21,285
Commodity swaps and options	—		13,490		—		13,490
Foreign currency forward contracts	14		—		—		14
December 31, 2018
Securities available for sale:
U.S. Treasury	$	3,427,689	$	—	$	—	$	3,427,689
Residential mortgage-backed securities	—		829,740		—		829,740
States and political subdivisions	—		7,087,202		—		7,087,202
Other	—		42,690		—		42,690
Trading account securities:
U.S. Treasury	21,928		—		—		21,928
States and political subdivisions	—		2,158		—		2,158
Derivative assets:
Interest rate swaps, caps and floors	—		19,806		—		19,806
Commodity swaps and options	—		26,768		—		26,768
Foreign currency forward contracts	193		—		—		193
Derivative liabilities:
Interest rate swaps, caps and floors	—		18,520		—		18,520
Commodity swaps and options	—		26,320		—		26,320
Foreign currency forward contracts	147		—		—		147

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a non-recurring basis during the reported periods include certain impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. The following table presents impaired loans that were remeasured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses based upon the fair value of the underlying collateral during the reported periods.



	Six Months Ended June 30, 2019					Six Months Ended June 30, 2018
	Level 2		Level 3			Level 2			Level 3
Carrying value of impaired loans before allocations	$	2,161	$	33,839		$	14,359		$	52,048
Specific valuation allowance (allocations) reversals of prior allocations	1,179		(3,623		)	(799		)	(1,149		)
Fair value	$	3,340	$	30,216		$	13,560		$	50,899

Non-Financial Assets and Non-Financial Liabilities. We do not have any non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Non-financial assets measured at fair value on a non-recurring basis during the reported periods include certain foreclosed assets which, upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for loan losses and certain foreclosed assets which, subsequent to their initial recognition, were remeasured at fair value through a write-down included in other non-interest expense. The following table presents foreclosed assets that were remeasured and reported at fair value during the reported periods:



	Six Months Ended June 30,
	2019			2018
Foreclosed assets remeasured at initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	616		$	2,656
Charge-offs recognized in the allowance for loan losses	(50		)	—
Fair value	$	566		$	2,656
Foreclosed assets remeasured subsequent to initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	—		$	1,823
Write-downs included in other non-interest expense	—			(473		)
Fair value	$	—		$	1,350

Financial Instruments Reported at Amortized Cost. The estimated fair values of financial instruments that are reported at amortized cost in our consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, were as follows:



	June 30, 2019				December 31, 2018
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Level 2 inputs:
Cash and cash equivalents	$	1,945,410	$	1,945,410	$	3,955,779	$	3,955,779
Securities held to maturity	1,035,299		1,061,978		1,106,057		1,116,953
Cash surrender value of life insurance policies	185,303		185,303		183,473		183,473
Accrued interest receivable	188,907		188,907		188,989		188,989
Level 3 inputs:
Loans, net	14,324,220		14,345,627		13,967,601		13,933,239
Financial liabilities:
Level 2 inputs:
Deposits	25,985,023		25,985,025		27,149,204		27,143,572
Federal funds purchased and repurchase agreements	1,319,507		1,319,507		1,367,548		1,367,548
Junior subordinated deferrable interest debentures	136,270		137,115		136,242		137,115
Subordinated notes payable and other borrowings	98,786		103,625		98,708		98,458
Accrued interest payable	10,295		10,295		7,394		7,394

Under ASC Topic 825, entities may choose to measure eligible financial instruments at fair value at specified election dates. The fair value measurement option (i) may be applied instrument by instrument, with certain exceptions, (ii) is generally irrevocable and (iii) is applied only to entire instruments and not to portions of instruments. Unrealized gains and losses on items for which the fair value measurement option has been elected must be reported in earnings at each subsequent reporting date. During the reported periods, we had no financial instruments measured at fair value under the fair value measurement option.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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