Fair Value Measurements

9 Months Ended

Sep. 30, 2023

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 2022 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, 2023 and December 31, 2022, 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, 2023
Securities available for sale:
U.S. Treasury	$	5,043,152	$	—	$	—	$	5,043,152
Residential mortgage-backed securities	—		6,306,634		—		6,306,634
States and political subdivisions	—		4,724,633		—		4,724,633
Other	—		42,670		—		42,670
Trading account securities:
U.S. Treasury	29,065		—		—		29,065
States and political subdivisions	—		276		—		276
Derivative assets:
Interest rate swaps, caps, and floors	—		110,097		—		110,097
Commodity swaps and options	—		76,019		—		76,019

Derivative liabilities:
Interest rate swaps, caps, and floors	—		110,097		—		110,097
Commodity swaps and options	—		74,607		—		74,607

December 31, 2022
Securities available for sale:
U.S. Treasury	$	5,051,587	$	—	$	—	$	5,051,587
Residential mortgage-backed securities	—		6,376,236		—		6,376,236
States and political subdivisions	—		6,773,355		—		6,773,355
Other	—		42,427		—		42,427
Trading account securities:
U.S. Treasury	25,879		—		—		25,879
States and political subdivisions	—		2,166		—		2,166
Derivative assets:
Interest rate swaps, caps, and floors	—		86,793		—		86,793
Commodity swaps and options	—		106,685		—		106,685
Foreign currency forward contracts	11		—		—		11
Derivative liabilities:
Interest rate swaps, caps, and floors	—		95,533		—		95,533
Commodity swaps and options	—		105,392		—		105,392
Foreign currency forward contracts	11		—		—		11

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, 2023				Nine Months Ended September 30, 2022
	Level 2		Level 3		Level 2		Level 3
Carrying value before allocations	$	20,051	$	24,921	$	7,999	$	2,087
Specific (allocations) reversals of prior allocations	(1,452)		(4,849)		(1,742)		4,881
Fair value	$	18,599	$	20,072	$	6,257	$	6,968

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:


	September 30, 2023				December 31, 2022
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Level 2 inputs:
Cash and cash equivalents	$	7,618,083	$	7,618,083	$	12,028,132	$	12,028,132
Securities held to maturity	3,628,123		3,231,691		2,639,083		2,467,865
Accrued interest receivable	199,344		199,344		243,682		243,682
Level 3 inputs:
Loans, net	18,157,024		17,496,332		16,927,348		16,343,417
Financial liabilities:
Level 2 inputs:
Deposits	40,992,235		40,971,688		43,954,196		43,920,741
Federal funds purchased	25,950		25,950		51,650		51,650
Repurchase agreements	3,722,245		3,722,245		4,660,641		4,660,641
Junior subordinated deferrable interest debentures	123,112		123,712		123,069		123,712
Subordinated notes	99,452		94,311		99,335		97,014
Accrued interest payable	51,468		51,468		18,444		18,444

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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