Fair Value Measurements

9 Months Ended

Sep. 30, 2021

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 2020 Form 10-K for additional information regarding the fair value hierarchy and a description of our valuation techniques.

Financial Assets and Financial Liabilities. The tables below summarize financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, 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
September 30, 2021
Securities available for sale:
U.S. Treasury	$	1,685,221	$	—	$	—	$	1,685,221
Residential mortgage-backed securities	—		2,491,154		—		2,491,154
States and political subdivisions	—		7,512,489		—		7,512,489
Other	—		42,358		—		42,358
Trading account securities:
U.S. Treasury	24,087		—		—		24,087
States and political subdivisions	—		1,205		—		1,205
Derivative assets:
Interest rate swaps, caps and floors	—		53,186		—		53,186
Commodity swaps and options	—		227,527		—		227,527
Foreign currency forward contracts	4		—		—		4
Derivative liabilities:
Interest rate swaps, caps and floors	—		27,609		—		27,609
Commodity swaps and options	—		226,054		—		226,054


December 31, 2020
Securities available for sale:
U.S. Treasury	$	1,119,633	$	—	$	—	$	1,119,633
Residential mortgage-backed securities	—		1,987,679		—		1,987,679
States and political subdivisions	—		7,287,902		—		7,287,902
Other	—		42,351		—		42,351
Trading account securities:
U.S. Treasury	23,996		—		—		23,996
States and political subdivisions	—		460		—		460
Derivative assets:
Interest rate swaps, caps and floors	—		85,665		—		85,665
Commodity swaps and options	—		45,535		456		45,991

Derivative liabilities:
Interest rate swaps, caps and floors	—		35,187		—		35,187
Commodity swaps and options	—		45,099		—		45,099

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. Financial assets measured at fair value on a non-recurring basis during the reported periods include certain collateral dependent loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.

The following table presents collateral dependent loans that were remeasured and reported at fair value through a specific allocation of the allowance for credit losses on loans based upon the fair value of the underlying collateral during the reported periods.


	Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
	Level 2		Level 3		Level 2		Level 3
Carrying value before allocations	$	3,329	$	15,274	$	6,388	$	8,660
Specific (allocations) reversals of prior allocations	(336)		(4,791)		(930)		14,928
Fair value	$	2,993	$	10,483	$	5,458	$	23,588

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 may 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:


	Nine Months Ended September 30,
	2021		2020




Foreclosed assets remeasured subsequent to initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	—	$	328
Write-downs included in other non-interest expense	—		(231)
Fair value	$	—	$	97

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:


	September 30, 2021				December 31, 2020
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Level 2 inputs:
Cash and cash equivalents	$	16,253,971	$	16,253,971	$	10,288,853	$	10,288,853
Securities held to maturity	1,759,270		1,825,568		1,945,673		2,052,896
Cash surrender value of life insurance policies	189,941		189,941		189,984		189,984
Accrued interest receivable	119,232		119,232		181,432		181,432
Level 3 inputs:
Loans, net	15,582,520		15,656,269		17,218,132		17,390,683
Financial liabilities:
Level 2 inputs:
Deposits	39,612,767		39,613,343		35,015,761		35,018,185
Federal funds purchased	27,200		27,200		48,850		48,850
Repurchase agreements	2,200,029		2,200,029		2,068,147		2,068,147
Junior subordinated deferrable interest debentures	136,400		137,115		136,357		137,115
Subordinated notes	99,139		113,223		99,021		115,717
Accrued interest payable	2,126		2,126		8,127		8,127

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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