(12) Fair Value Measurements

Fair value is defined by applicable accounting guidance as the price to sell an asset or transfer a liability in an orderly transaction between market participants in the principal market for the given asset or liability at the measurement date based on market conditions at that date. Certain assets and liabilities are recorded in the Company’s financial statements at fair value. Some are recorded on a recurring basis and some on a non-recurring basis.

For some assets and liabilities, observable market transactions and market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. A hierarchy for fair value has been established which categorizes into three levels the inputs to valuation techniques used to measure fair value. The three levels are as follows:

Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) - fair value is based on unadjusted quoted prices in active markets for identical assets or liabilities.

Significant Other Observable Inputs (Level 2) - Fair value is based on significant other observable inputs which are generally determined based on a single price for each financial instrument provided to us by an applicable third-party pricing service and is based on one or more of the following:


•	Quoted prices for similar, but not identical, assets or liabilities in active markets;


•	Quoted prices for identical or similar assets or liabilities in inactive markets;


•	Inputs other than quoted prices that are observable, such as interest rate and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates;


•	Other inputs derived from or corroborated by observable market inputs.

Significant Unobservable Inputs (Level 3) - Fair value is based upon model-based valuation techniques for which at least one significant assumption is not observable in the market.

Transfers between levels are recognized as of the end of the reporting period. There were no transfers in or out of quoted prices in active markets for identical instruments to significant other observable inputs or significant unobservable inputs during the nine months ended September 30, 2014 and 2013, respectively. Transfers between significant other observable inputs and significant unobservable inputs during the three and nine months ended September 30, 2014 and 2013 are included in the summary of changes in recurring fair values measured using unobservable inputs.

The underlying methods used by the third-party pricing services are considered in determining the primary inputs used to determine fair values. Management has evaluated the methodologies employed by the third-party pricing services by comparing the price provided by the pricing service with other sources, including brokers' quotes, sales or purchases of similar instruments and discounted cash flows to establish a basis for reliance on the pricing service values. Significant differences between the pricing service provided value and other sources are discussed with the pricing service to understand the basis for their values. Based on all observable inputs, management may adjust prices obtained from third-party pricing services to more appropriately reflect the prices that would be received to sell assets or paid to transfer liabilities in orderly transactions in the current market. No significant adjustments were made to prices provided by third-party pricing services at September 30, 2014, December 31, 2013 or September 30, 2013.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of financial assets and liabilities that are measured on a recurring basis is as follows as of September 30, 2014 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:
Trading securities:
U.S. Government agency debentures	$	41,004	$	—	$	41,004	$	—
U.S. agency residential mortgage-backed securities	33,226		—		33,226		—
Municipal and other tax-exempt securities	76,884		—		76,884		—
Other trading securities	18,598		—		18,598		—
Total trading securities	169,712		—		169,712		—
Available for sale securities:
U.S. Treasury	1,015		1,015		—		—
Municipal and other tax-exempt	64,363		—		54,170		10,193
U.S. agency residential mortgage-backed securities	6,850,603		—		6,850,603		—
Privately issued residential mortgage-backed securities	171,493		—		171,493		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,141,645		—		2,141,645		—
Other debt securities	34,291		—		30,141		4,150
Perpetual preferred stock	24,358		—		24,358		—
Equity securities and mutual funds	19,118		4,789		14,329		—
Total available for sale securities	9,306,886		5,804		9,286,739		14,343
Fair value option securities:
U.S. agency residential mortgage-backed securities	175,761		—		175,761		—
Other securities	—		—		—		—
Total fair value option securities	175,761		—		175,761		—
Residential mortgage loans held for sale	373,253		—		365,877		7,376
Mortgage servicing rights¹	173,286		—		—		173,286
Derivative contracts, net of cash collateral²	360,809		10,799		350,010		—
Other assets – private equity funds	27,118		—		—		27,118
Liabilities:
Derivative contracts, net of cash collateral²	348,687		4,286		344,401		—


¹	A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 6, Mortgage Banking Activities.

See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts in asset positions that were valued based on quoted prices in active markets for identical instruments (Level 1) are primarily exchange-traded energy derivative contacts, net of cash margin. Derivative contacts in liability positions that were valued using quoted prices in active markets for identical instruments are exchange-traded interest rate and agricultural derivative contracts.

The fair value of financial assets and liabilities that are measured on a recurring basis is as follows as of December 31, 2013 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:
Trading securities:
U.S. Government agency debentures	$	34,120	$	—	$	34,120	$	—
U.S. agency residential mortgage-backed securities	21,011		—		21,011		—
Municipal and other tax-exempt securities	27,350		—		27,350		—
Other trading securities	9,135		—		9,135		—
Total trading securities	91,616		—		91,616		—
Available for sale securities:
U.S. Treasury	1,042		1,042		—		—
Municipal and other tax-exempt	73,775		—		55,970		17,805
U.S. agency residential mortgage-backed securities	7,716,010		—		7,716,010		—
Privately issued residential mortgage-backed securities	221,099		—		221,099		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,055,804		—		2,055,804		—
Other debt securities	35,241		—		30,529		4,712
Perpetual preferred stock	22,863		—		22,863		—
Equity securities and mutual funds	21,328		—		17,121		4,207
Total available for sale securities	10,147,162		1,042		10,119,396		26,724
Fair value option securities:
U.S. agency residential mortgage-backed securities	157,431		—		157,431		—
Other securities	9,694		—		9,694		—
Total fair value option securities	167,125		—		167,125		—
Residential mortgage loans held for sale	200,546		—		200,546		—
Mortgage servicing rights¹	153,333		—		—		153,333
Derivative contracts, net of cash collateral²	265,012		2,712		262,300		—
Other assets – private equity funds	27,341		—		—		27,341
Liabilities:
Derivative contracts, net of cash collateral²	247,185		—		247,185		—


¹	A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 6, Mortgage Banking Activities.


²	See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts based on quoted prices in active markets for identical instruments (Level 1) are exchange-traded energy derivative contacts, net of cash margin.

The fair value of financial assets and liabilities that are measured on a recurring basis is as follows as of September 30, 2013 (in thousands):



	Total		Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:
Trading securities:
U.S. Government agency debentures	$	74,632	$	—	$	74,632	$	—
U.S. agency residential mortgage-backed securities	26,129		—		26,129		—
Municipal and other tax-exempt securities	37,057		—		37,057		—
Other trading securities	13,069		—		13,069		—
Total trading securities	150,887		—		150,887		—
Available for sale securities:
U.S. Treasury	1,052		1,052		—		—
Municipal and other tax-exempt	95,440		—		55,769		39,671
U.S. agency residential mortgage-backed securities	7,981,387		—		7,981,387		—
Privately issued residential mortgage-backed securities	230,900		—		230,900		—
Commercial mortgage-backed securities guaranteed by U.S. government agencies	1,946,295		—		1,946,295		—
Other debt securities	35,362		—		30,650		4,712
Perpetual preferred stock	23,680		—		23,680		—
Equity securities and mutual funds	58,787		—		54,580		4,207
Total available for sale securities	10,372,903		1,052		10,323,261		48,590
Fair value option securities:
U.S. agency residential mortgage-backed securities	163,567		—		163,567		—
Other securities	4,293		—		4,293		—
Total fair value option securities	167,860		—		167,860		—
Residential mortgage loans held for sale	230,511		—		230,511		—
Mortgage servicing rights¹	140,863		—		—		140,863
Derivative contracts, net of cash collateral²	377,325		644		376,681		—
Other assets – private equity funds	27,799		—		—		27,799
Liabilities:
Derivative contracts, net of cash collateral²	232,544		—		232,544		—


¹	A reconciliation of the beginning and ending fair value of mortgage servicing rights and disclosures of significant assumptions used to determine fair value are presented in Note 6, Mortgage Banking Activities.


²	See Note 3 for detail of fair value of derivative contracts by contract type. Derivative contracts based on quoted prices in active markets for identical instruments (Level 1) are exchange-traded energy and agricultural derivative contacts, net of cash margin.

Following is a description of the Company's valuation methodologies used for assets and liabilities measured on a recurring basis:

Securities

The fair values of trading, available for sale and fair value option securities are based on quoted prices for identical instruments in active markets, when available. If quoted prices for identical instruments are not available, fair values are based on significant other observable inputs such as quoted prices of comparable instruments or interest rates and credit spreads, yield curves, volatilities, prepayment speeds and loss severities.

The fair value of certain available for sale municipal and other debt securities may be based on significant unobservable inputs. These significant unobservable inputs include limited observed trades, projected cash flows, current credit rating of the issuers and, when applicable, the insurers of the debt and observed trades of similar debt. Discount rates are primarily based on reference to interest rate spreads on comparable securities of similar duration and credit rating as determined by the nationally-recognized rating agencies adjusted for a lack of trading volume. Significant unobservable inputs are developed by investment securities professionals involved in the active trading of similar securities. A summary of significant inputs used to value these securities follows. A management committee composed of senior members from the Company's Capital Markets, Risk Management and Finance departments assess the appropriateness of these inputs monthly.

Derivatives

All derivative instruments are carried on the balance sheet at fair value. Fair values for exchange-traded contracts are based on quoted prices. Fair values for over-the-counter interest rate, commodity and foreign exchange contracts are based on valuations provided either by third-party dealers in the contracts, quotes provided by independent pricing services, or a third-party provided pricing model that uses significant other observable market inputs.

Credit risk is considered in determining the fair value of derivative instruments. Management determines fair value adjustments based on various risk factors including but not limited to counterparty credit rating or equivalent loan grading, derivative contract notional size, price volatility of the underlying commodity, duration of the derivative contracts and expected loss severity. Expected loss severity is based on historical losses for similarly risk graded commercial loan customers. Decreases in counterparty credit rating or grading and increases in price volatility and expected loss severity all tend to increase the credit quality adjustment which reduces the fair value of asset contracts. The reduction in fair value is recognized in earnings during the current period.

We also consider our own credit risk in determining the fair value of derivative contracts. Changes in our credit rating would affect the fair value of our derivative liabilities. In the event of a credit downgrade, the fair value of our derivative liabilities would increase. The change in the fair value would be recognized in earnings in the current period.

Residential Mortgage Loans Held for Sale

Residential mortgage loans held for sale are carried on the balance sheet at fair value. The fair values of residential mortgage loans held for sale are based upon quoted market prices of such loans sold in securitization transactions, including related unfunded loan commitments.

Other Assets - Private Equity Funds

The fair value of the portfolio investments of the Company's two private equity funds are based upon net asset value reported by the underlying funds, as adjusted by the general partner when necessary to represent the price that would be received to sell the assets. The Company's private equity funds provide customers alternative investment opportunities as limited partners of the funds. As fund of funds, the private equity funds invest in other limited partnerships or limited liability companies that invest substantially all of their assets in U.S. companies pursuing diversified investment strategies including early-stage venture capital, distressed securities and corporate or asset buy-outs. Private equity fund assets are long-term, illiquid investments. No secondary market exists for these assets. The private equity funds typically invest in funds that provide no redemption rights to investors. The fair value of the private equity investments may only be realized through cash distributions from the underlying funds.

The following represents the changes for the three months ended September 30, 2014 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Equity securities and mutual funds		Residential mortgage loans held for sale			Other assets – private equity funds
Balance, June 30, 2014	$	10,445		$	4,231		$	—	$	—		$	27,833
Transfer to Level 3 from Level 2	—			—			—		7,764			—
Purchases and capital calls	—			—			—		—			505
Redemptions and distributions	—			—			—		—			(1,994		)
Gain (loss) recognized in earnings:
Mortgage banking revenue	—			—			—		(388		)	—
Gain on other assets, net	—			—			—		—			774
Loss on available for sale securities, net	—			—			—		—			—
Charitable contributions to BOKF Foundation	—			—			—		—			—
Other comprehensive gain (loss):
Net change in unrealized gain (loss)	(252		)	(81		)	—		—			—
Balance, Sept. 30, 2014	$	10,193		$	4,150		$	—	$	7,376		$	27,118

The following represents the changes for the nine months ended September 30, 2014 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Equity securities and mutual funds			Residential mortgage loans held for sale			Other assets – private equity funds
Balance, December 31, 2013	$	17,805		$	4,712		$	4,207		$	—		$	27,341
Transfer to Level 3 from Level 2	—			—			—			7,764			—
Purchases and capital calls	—			—			—			—			930
Redemptions and distributions	(7,487		)	(500		)	—			—			(5,175		)
Gain (loss) recognized in earnings:
Mortgage banking revenue	—			—			—			(388		)	—
Gain on other assets, net	—			—			—			—			4,022
Loss on available for sale securities, net	(235		)	—			—			—			—
Charitable contributions to BOKF Foundation	—			—			(2,420		)	—			—
Other comprehensive gain (loss):
Net change in unrealized gain (loss)	110			(62		)	(1,787		)	—			—
Balance, Sept. 30, 2014	$	10,193		$	4,150		$	—		$	7,376		$	27,118

The following represents the changes for the three months ended September 30, 2013 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Equity securities and mutual funds		Other assets – private equity funds
Balance, June 30, 2013	$	38,847		$	5,193		$	2,247	$	28,379
Transfer to Level 3 from Level 2	—			—			—		—
Purchases, and capital calls	—			—			—		567
Redemptions and distributions	—			(500		)	—		(1,589		)
Gain (loss) recognized in earnings
Gain on other assets, net	—			—			—		442
Other-than-temporary impairment losses	(1,369		)	—			—		—
Other comprehensive gain (loss):
Net change in unrealized gain (loss)	2,193			19			1,960		—
Balance, Sept. 30, 2013	$	39,671		$	4,712		$	4,207	$	27,799

The following represents the changes for the nine months ended September 30, 2013 related to assets measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Available for Sale Securities
	Municipal and other tax-exempt			Other debt securities			Equity securities and mutual funds		Other assets – private equity funds
Balance, December 31, 2012	$	40,702		$	5,399		$	2,161	$	28,169
Transfer to Level 3 from Level 2	—			—			—		—
Purchases, and capital calls	—			—			—		1,207
Redemptions and distributions	(98		)	(500		)	—		(3,424		)
Gain (loss) recognized in earnings
Gain on other assets, net	—			—			—		1,847
Other-than-temporary impairment losses	(1,369		)	—			—		—
Other comprehensive gain (loss):
Net change in unrealized gain (loss)	436			(187		)	2,046		—
Balance, Sept. 30, 2013	$	39,671		$	4,712		$	4,207	$	27,799

A summary of quantitative information about assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2014 follows (in thousands):

Quantitative Information about Level 3 Recurring Fair Value Measurements

Par

Value

Amortized

Cost/Unpaid Principal Balance

Fair

Value

Valuation Technique(s)

Unobservable Input

Range

(Weighted Average)

Available for sale securities

Municipal and other tax-exempt securities

10,970

10,904

10,193

Discounted cash flows

Interest rate spread

4.93%-5.23% (5.19%)

92.68%-94.32% (93.13%)

Other debt securities

4,400

4,150

Discounted cash flows

Interest rate spread

5.61%-5.65% (5.65%)

⁴

92.68% - 92.99 (92.80%)

Residential mortgage loans held for sale

N/A

7,764

7,376

Quoted prices of loans sold in securitization transactions, with a liquidity discount applied

Liquidity discount applied to the market value of a mortgage loans qualifying for sale to U.S. government agencies.

N/A

Other assets - private equity funds

N/A

27,118

Net asset value reported by underlying fund

N/A


¹	Discounted cash flows developed using discount rates primarily based on reference to interest rate spreads for comparable securities of similar duration and credit rating as determined by the nationally-recognized rating agencies, adjusted for lack of trading volume.


²	Interest rate yields used to value investment grade tax-exempt securities represent a spread of 482 to 514 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value.


⁴	Interest rate yields used to value investment grade taxable securities based on comparable short-term taxable securities which are generally yielding less than 1%.

The fair value of these securities measured at fair value using significant unobservable inputs are sensitive primarily to changes in interest rate spreads. At September 30, 2014, for tax-exempt securities rated investment grade by all nationally-recognized rating agencies, a 100 basis point increase in the spreads over average yields for comparable securities would result in an additional decrease in the fair value of $147 thousand. For taxable securities rated investment grade by all nationally-recognized rating agencies, a 100 basis point increase in the spreads over average yield for comparable securities would result in an additional decrease in the fair value of $59 thousand.

A summary of quantitative information about Recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of December 31, 2013 follows (in thousands):

Quantitative Information about Level 3 Recurring Fair Value Measurements

Par

Value

Amortized

Cost

Fair

Value

Valuation Technique(s)

Unobservable Input

Range

(Weighted Average)

Available for sale securities

Municipal and other tax-exempt securities

18,695

18,624

17,805

Discounted cash flows

Interest rate spread

4.97%-5.27% (5.16%)

95.02%-95.50% (95.24%)

Other debt securities

4,900

4,712

Discounted cash flows

Interest rate spread

5.67% (5.67%)

⁴

96.16% (96.16%)

Equity securities and mutual funds

N/A

2,420

4,207

Publicly announced preliminary purchase price information from acquirer

Discount for settlement uncertainty

N/A

⁵

Other assets - private equity funds

N/A

27,341

Net asset value reported by underlying fund

N/A


¹	Discounted cash flows developed using discount rates primarily based on reference to interest rate spreads for comparable securities of similar duration and credit rating as determined by the nationally-recognized rating agencies, adjusted for lack of trading volume.


²	Interest rate yields used to value investment grade tax-exempt securities represent a spread of 467 to 518 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value.


⁴	Interest rate yields used to value investment grade taxable securities based on comparable short-term taxable securities which are generally yielding less than 1%.


⁵	Fair value of shares of a smaller privately-held financial institution were valued using preliminary announced purchase information by a publicly-traded acquirer.

A summary of quantitative information about Recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 2013 follows (in thousands):

Quantitative Information about Level 3 Recurring Fair Value Measurements

Par

Value

Amortized

Cost⁶

Fair

Value

Valuation Technique(s)

Unobservable Input

Range

(Weighted Average)

Available for sale securities

Municipal and other tax-exempt securities

Investment grade

21,545

21,467

20,531

Discounted cash flows

Interest rate spread

4.98%-5.28% (5.15%)

95.02%-95.55% (95.29%)

Below investment grade

23,925

17,924

19,140

Proposed settlement agreement

Discount for settlement uncertainty

⁴

80.00%-80.00% (80.00%)

Total municipal and other tax-exempt securities

45,470

39,391

39,671

Other debt securities

4,900

4,712

Discounted cash flows

Interest rate spread

5.60%-5.68% (5.67%)

⁵

96.16% - 96.16 (96.16%)

Equity securities and mutual funds

N/A

2,420

4,207

Publicly announced preliminary purchase price information from acquirer.

Discount for settlement uncertainty

N/A

⁷

Other assets - private equity funds

N/A

27,799

Net asset value reported by underlying fund

N/A


¹	Discounted cash flows developed using discount rates primarily based on reference to interest rate spreads for comparable securities of similar duration and credit rating as determined by the nationally-recognized rating agencies, adjusted for lack of trading volume.


²	Interest rate yields used to value investment grade tax-exempt securities represent a spread of 462 to 517 basis points over average yields for comparable tax-exempt securities.


³	Represents fair value as a percentage of par value.


⁴	Fair value based on proposed settlement agreement between bond holders and issuer.


⁵	Interest rate yields used to value investment grade taxable securities based on comparable short-term taxable securities which are generally yielding less than 1%.


⁶	Amortized cost reduced by other-than-temporary impairments recorded in earnings. See Note 2 for additional discussion.


⁷	Fair value of shares of a smaller privately-held financial institution were valued using preliminary announced purchase information by a publicly-traded acquirer.

Fair Value of Assets and Liabilities Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis include collateral for certain impaired loans and real property and other assets acquired to satisfy loans, which are based primarily on comparisons to completed sales of similar assets.

The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets with a balance at September 30, 2014 for which the fair value was adjusted during the nine months ended September 30, 2014:



							Fair Value Adjustments for the
	Carrying Value at Sept. 30, 2014						Three Months Ended Sept. 30, 2014 Recognized in:				Nine Months Ended Sept. 30, 2014 Recognized in:
	Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	6,585	$	681	$	809	$	—	$	2,263	$	—
Real estate and other repossessed assets	—		16,870		495		—		4,139		—		5,515

The following represents the carrying value of assets measured at fair value on a non-recurring basis (and related losses) during the period. The carrying value represents only those assets with a balance at September 30, 2013 for which the fair value was adjusted during the nine months ended September 30, 2013:



							Fair Value Adjustments for the
	Carrying Value at Sept. 30, 2013						Three Months Ended Sept. 30, 2013 Recognized in:				Nine Months Ended Sept. 30, 2013 Recognized in:
	Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net		Gross charge-offs against allowance for loan losses		Net losses and expenses of repossessed assets, net
Impaired loans	$	—	$	10,607	$	4,787	$	660	$	—	$	6,900	$	—
Real estate and other repossessed assets	—		14,901		170		—		1,767		—		2,560

The fair value of collateral-dependent impaired loans and real estate and other repossessed assets and the related fair value adjustments are generally based on unadjusted third-party appraisals. Our appraisal review policies require appraised values to be supported by observed inputs derived principally from or corroborated by observable market data. Appraisals that are not based on observable inputs or that require significant adjustments or fair value measurements that are not based on third-party appraisals are considered to be based on significant unobservable inputs. Non-recurring fair value measurements of collateral-dependent impaired loans and real estate and other repossessed assets based on significant unobservable inputs are generally due to estimates of current fair values between appraisal dates. Significant unobservable inputs include listing prices for the same or comparable assets, uncorroborated expert opinions or management's knowledge of the collateral or industry. These inputs are developed by asset management and workout professionals and approved by senior Credit Administration executives.

A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 2014 follows (in thousands):



Quantitative Information about Level 3 Non-recurring Fair Value Measurements
	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Impaired loans	$	681	Appraised value, as adjusted	Broker quotes and management's knowledge of industry and collateral.	N/A
Real estate and other repossessed assets	495		Appraised value, as adjusted	Marketability adjustment off appraised value¹ or limited observable sales with similar development restrictions	N/A


¹	Marketability adjustments include consideration of estimated costs to sell, which is approximately 10% of fair value.

A summary of quantitative information about Non-recurring Fair Value Measurements based on Significant Unobservable Inputs (Level 3) as of September 30, 2013 follows (in thousands):



Quantitative Information about Level 3 Non-recurring Fair Value Measurements
	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Impaired loans	$	4,787	Appraised value, as adjusted	Broker quotes and management's knowledge of industry and collateral.	N/A
Real estate and other repossessed assets	170		Appraised value, as adjusted	Marketability adjustments off appraised value	82%-85% (83%)¹


¹	Marketability adjustments include consideration of estimated costs to sell, which is approximately 15% of fair value.

Fair Value of Financial Instruments

The following table presents the carrying values and estimated fair values of all financial instruments, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis as of September 30, 2014 (dollars in thousands):



	Carrying Value			Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate		Estimated Fair Value
Cash and due from banks	$	557,658						$	557,658
Interest-bearing cash and cash equivalents	2,007,901							2,007,901
Trading securities:
U.S. Government agency debentures	41,004							41,004
U.S. agency residential mortgage-backed securities	33,226							33,226
Municipal and other tax-exempt securities	76,884							76,884
Other trading securities	18,598							18,598
Total trading securities	169,712							169,712
Investment securities:
Municipal and other tax-exempt	410,595							415,233
U.S. agency residential mortgage-backed securities	38,585							40,259
Other debt securities	205,911							220,953
Total investment securities	655,091							676,445
Available for sale securities:
U.S. Treasury	1,015							1,015
Municipal and other tax-exempt	64,363							64,363
U.S. agency residential mortgage-backed securities	6,850,603							6,850,603
Privately issued residential mortgage-backed securities	171,493							171,493
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,141,645							2,141,645
Other debt securities	34,291							34,291
Perpetual preferred stock	24,358							24,358
Equity securities and mutual funds	19,118							19,118
Total available for sale securities	9,306,886							9,306,886
Fair value option securities:
U.S. agency residential mortgage-backed securities	175,761							175,761
Other securities	—							—
Total fair value option securities	175,761							175,761
Residential mortgage loans held for sale	373,253							373,253
Loans:
Commercial	8,572,038			0.25% - 30.00%	0.60	0.53% - 4.30%		8,441,120
Commercial real estate	2,724,199			0.38% - 18.00%	0.80	1.13% - 3.66%		2,702,389
Residential mortgage	1,979,663			1.20% - 18.00%	2.42	0.57% - 4.21%		2,009,619
Consumer	407,839			0.38% - 21.00%	0.46	1.07% - 3.88%		401,986
Total loans	13,683,739							13,555,114
Allowance for loan losses	(191,244		)					—
Loans, net of allowance	13,492,495							13,555,114
Mortgage servicing rights	173,286							173,286
Derivative instruments with positive fair value, net of cash margin	360,809							360,809
Other assets – private equity funds	27,118							27,118
Deposits with no stated maturity	17,624,476							17,624,476
Time deposits	2,664,580			0.02% - 9.64%	2.02	0.74% - 1.31%		2,670,657
Other borrowed funds	4,595,631			0.21% - 6.68%	0.46	0.07% - 2.62%		4,555,307
Subordinated debentures	347,936			0.92% - 5.00%	2.00	2.17	%	344,764
Derivative instruments with negative fair value, net of cash margin	348,687							348,687



	Carrying Value			Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate		Estimated Fair Value
Cash and due from banks	$	512,931						$	512,931
Interest-bearing cash and cash equivalents	574,282							574,282
Trading securities:
U.S. Government agency debentures	34,120							34,120
U.S. agency residential mortgage-backed securities	21,011							21,011
Municipal and other tax-exempt securities	27,350							27,350
Other trading securities	9,135							9,135
Total trading securities	91,616							91,616
Investment securities:
Municipal and other tax-exempt	440,187							439,870
U.S. agency residential mortgage-backed securities	50,182							51,864
Other debt securities	187,509							195,393
Total investment securities	677,878							687,127
Available for sale securities:
U.S. Treasury	1,042							1,042
Municipal and other tax-exempt	73,775							73,775
U.S. agency residential mortgage-backed securities	7,716,010							7,716,010
Privately issued residential mortgage-backed securities	221,099							221,099
Commercial mortgage-backed securities guaranteed by U.S. government agencies	2,055,804							2,055,804
Other debt securities	35,241							35,241
Perpetual preferred stock	22,863							22,863
Equity securities and mutual funds	21,328							21,328
Total available for sale securities	10,147,162							10,147,162
Fair value option securities:
U.S. agency residential mortgage-backed securities	157,431							157,431
Other securities	9,694							9,694
Total fair value option securities	167,125							167,125
Residential mortgage loans held for sale	200,546							200,546
Loans:
Commercial	7,943,221			0.04% - 30.00%	0.49	0.48% - 4.33%		7,835,325
Commercial real estate	2,415,353			0.38% - 18.00%	0.78	1.21% - 3.49%		2,394,443
Residential mortgage	2,052,026			0.38% - 18.00%	2.63	0.59% - 4.73%		2,068,690
Consumer	381,664			0.38% - 21.00%	0.55	1.22% - 3.75%		375,962
Total loans	12,792,264							12,674,420
Allowance for loan losses	(185,396		)					—
Loans, net of allowance	12,606,868							12,674,420
Mortgage servicing rights	153,333							153,333
Derivative instruments with positive fair value, net of cash margin	265,012							265,012
Other assets – private equity funds	27,341							27,341
Deposits with no stated maturity	17,573,334							17,573,334
Time deposits	2,695,993			0.01% - 9.64%	2.12	0.75% - 1.33%		2,697,290
Other borrowed funds	2,721,888			0.25% - 4.78%	0.03	0.08% - 2.64%		2,693,788
Subordinated debentures	347,802			0.95% - 5.00%	2.63	2.22	%	344,783
Derivative instruments with negative fair value, net of cash margin	247,185							247,185



	Carrying Value			Range of Contractual Yields	Average Re-pricing (in years)	Discount Rate		Estimated Fair Value
Cash and due from banks	$	625,671						$	625,671
Interest-bearing cash and cash equivalents	535,313							535,313
Trading securities:
U.S. Government agency debentures	74,632							74,632
U.S. agency residential mortgage-backed securities	26,129							26,129
Municipal and other tax-exempt securities	37,057							37,057
Other trading securities	13,069							13,069
Total trading securities	150,887							150,887
Investment securities:
Municipal and other tax-exempt	409,542							407,562
U.S. agency residential mortgage-backed securities	56,182							58,442
Other debt securities	178,501							188,475
Total investment securities	644,225							654,479
Available for sale securities:
U.S. Treasury	1,052							1,052
Municipal and other tax-exempt	95,440							95,440
U.S. agency residential mortgage-backed securities	7,981,387							7,981,387
Privately issued residential mortgage-backed securities	230,900							230,900
Commercial mortgage-backed securities guaranteed by U.S. government agencies	1,946,295							1,946,295
Other debt securities	35,362							35,362
Perpetual preferred stock	23,680							23,680
Equity securities and mutual funds	58,787							58,787
Total available for sale securities	10,372,903							10,372,903
Fair value option securities:
U.S. agency residential mortgage-backed securities	163,567							163,567
Other securities	4,293							4,293
Total fair value option securities	167,860							167,860
Residential mortgage loans held for sale	230,511							230,511
Loans:
Commercial	7,571,075			0.25% - 30.00%	0.46	0.50% - 4.19%		7,493,143
Commercial real estate	2,349,229			0.38% - 18.00%	0.79	1.20% - 3.42%		2,326,908
Residential mortgage	2,034,765			0.38% - 18.00%	2.56	0.64% - 4.40%		2,056,072
Consumer	395,031			0.38% - 21.00%	0.55	1.24% - 3.71%		388,490
Total loans	12,350,100							12,264,613
Allowance for loan losses	(194,325		)					—
Loans, net of allowance	12,155,775							12,264,613
Mortgage servicing rights	140,863							140,863
Derivative instruments with positive fair value, net of cash margin	377,325							377,325
Other assets – private equity funds	27,799							27,799
Deposits with no stated maturity	16,771,635							16,771,635
Time deposits	2,720,020			0.01% - 9.64%	2.08	0.75% - 1.28%		2,739,764
Other borrowed funds	3,611,944			0.25% - 4.78%	—	0.06% - 2.65%		3,570,228
Subordinated debentures	347,758			0.97% - 5.00%	2.87	2.22	%	344,854
Derivative instruments with negative fair value, net of cash margin	232,544							232,544

Because no market exists for certain of these financial instruments and management does not intend to sell these financial instruments, the fair values shown in the tables above may not represent values at which the respective financial instruments could be sold individually or in the aggregate at the given reporting date.

The following methods and assumptions were used in estimating the fair value of these financial instruments:

Cash and Cash Equivalents

The book value reported in the consolidated balance sheets for cash and short-term instruments approximates those assets’ fair values.

Securities

The fair values of securities are generally based on Significant Other Observable Inputs such as quoted prices for comparable instruments or interest rates and credit spreads, yield curves, volatilities, prepayment speeds and loss severities.

Loans

The fair value of loans, excluding loans held for sale, are based on discounted cash flow analyses using interest rates and credit and liquidity spreads currently being offered for loans with similar remaining terms to maturity and risk, adjusted for the impact of interest rate floors and ceilings which are classified as Significant Unobservable Inputs. The fair values of loans were estimated to approximate their discounted cash flows less loan loss allowances allocated to these loans of $163 million at September 30, 2014, $157 million at December 31, 2013 and $153 million at September 30, 2013.

Deposits

The fair values of time deposits are based on discounted cash flow analyses using interest rates currently being offered on similar transactions which are considered Significant Unobservable Inputs. Estimated fair value of deposits with no stated maturity, which includes demand deposits, transaction deposits, money market deposits and savings accounts, is equal to the amount payable on demand. Although market premiums paid reflect an additional value for these low cost deposits, adjusting fair value for the expected benefit of these deposits is prohibited. Accordingly, the positive effect of such deposits is not included in the tables above.

Other Borrowings and Subordinated Debentures

The fair values of these instruments are based upon discounted cash flow analyses using interest rates currently being offered on similar instruments which are considered Significant Unobservable Inputs.

Off-Balance Sheet Instruments

The fair values of commercial loan commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of these off-balance sheet instruments were not significant at September 30, 2014, December 31, 2013 or September 30, 2013.

Fair Value Election

As more fully disclosed in Note 2 and Note 6 to the Consolidated Financial Statements, the Company has elected to carry all residential mortgage-backed securities which have been designated as economic hedges against changes in the fair value of mortgage servicing rights, certain corporate debt securities economically hedged by derivative contracts to manage interest rate risk and all residential mortgage loans originated for sale at fair value. Changes in the fair value of these financial instruments are recognized in earnings.