Fair Value Measurements

6 Months Ended

Jun. 30, 2022

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 2021 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 June 30, 2022 and December 31, 2021, 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, 2022
Securities available for sale:
U.S. Treasury	$	4,416,299	$	—	$	—	$	4,416,299
Residential mortgage-backed securities	—		5,335,725		—		5,335,725
States and political subdivisions	—		6,987,296		—		6,987,296
Other	—		42,365		—		42,365
Trading account securities:
U.S. Treasury	24,615		—		—		24,615
States and political subdivisions	—		65		—		65
Derivative assets:
Interest rate swaps, caps and floors	—		41,485		—		41,485
Commodity swaps and options	—		245,218		—		245,218
Foreign currency forward contracts	199		—		—		199
Derivative liabilities:
Interest rate swaps, caps and floors	—		58,240		—		58,240
Commodity swaps and options	—		243,638		—		243,638
Foreign currency forward contracts	195		—		—		195
December 31, 2021
Securities available for sale:
U.S. Treasury	$	2,179,433	$	—	$	—	$	2,179,433
Residential mortgage-backed securities	—		4,066,265		—		4,066,265
States and political subdivisions	—		7,636,571		—		7,636,571
Other	—		42,359		—		42,359
Trading account securities:
U.S. Treasury	24,237		—		—		24,237
States and political subdivisions	—		925		—		925
Derivative assets:
Interest rate swaps, caps and floors	—		44,310		—		44,310
Commodity swaps and options	—		114,757		—		114,757
Foreign currency forward contracts	33		—		—		33
Derivative liabilities:
Interest rate swaps, caps and floors	—		25,261		—		25,261
Commodity swaps and options	—		113,261		—		113,261
Foreign currency forward contracts	55		—		—		55

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.


	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Level 2		Level 3		Level 2		Level 3
Carrying value before allocations	$	5,454	$	3,614	$	3,399	$	19,423
Specific (allocations) reversals of prior allocations	(1,327)		6,877		(336)		(3,273)
Fair value	$	4,127	$	10,491	$	3,063	$	16,150

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. From time to time, non-financial assets measured at fair value on a non-recurring basis 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. There were no such fair value measurements during the reported periods.

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, 2022				December 31, 2021
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Level 2 inputs:
Cash and cash equivalents	$	13,658,585	$	13,658,585	$	16,583,000	$	16,583,000
Securities held to maturity	1,946,428		1,828,515		1,749,179		1,809,143
Cash surrender value of life insurance policies	189,823		189,823		190,139		190,139
Accrued interest receivable	194,049		194,049		179,111		179,111
Level 3 inputs:
Loans, net	16,496,394		16,126,497		16,087,731		16,079,454
Financial liabilities:
Level 2 inputs:
Deposits	45,601,765		45,584,113		42,695,696		41,343,426
Federal funds purchased	43,200		43,200		25,925		25,925
Repurchase agreements	1,664,685		1,664,685		2,740,799		2,740,799
Junior subordinated deferrable interest debentures	123,040		123,712		123,011		123,712
Subordinated notes	99,256		99,626		99,178		111,430
Accrued interest payable	6,059		6,059		3,026		3,026

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.

+ References + Details