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Fair Value Of Assets And Liabilities | 3 Months Ended
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Mar. 31, 2017
Fair Value Disclosures [Abstract] |
Fair Value Of Assets And Liabilities | Note 16 – Fair Value of Assets & Liabilities FHN groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. This hierarchy requires FHN to maximize the use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are: Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets. Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models, and similar techniques. Transfers between fair value levels are recognized at the end of the fiscal quarter in which the associated change in inputs occurs.
Recurring Fair Value Measurements
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis as of March 31, 2017: |
|  |  |  | March 31, 2017 |
(Dollars in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total |
Trading securities - fixed income: |  |  |  |  |  |  |  |  |  |  |  |
| U.S. treasuries | $ | - |  | $ | 107,264 |  | $ | - |  | $ | 107,264 |
| Government agency issued MBS |  | - |  |  | 323,058 |  |  | - |  |  | 323,058 |
| Government agency issued CMO |  | - |  |  | 213,949 |  |  | - |  |  | 213,949 |
| Other U.S. government agencies |  | - |  |  | 88,613 |  |  | - |  |  | 88,613 |
| States and municipalities |  | - |  |  | 83,872 |  |  | - |  |  | 83,872 |
| Corporate and other debt |  | - |  |  | 346,743 |  |  | 5 |  |  | 346,748 |
| Equity, mutual funds, and other |  | - |  |  | 1,476 |  |  | - |  |  | 1,476 |
|  | Total trading securities - fixed income |  | - |  |  | 1,164,975 |  |  | 5 |  |  | 1,164,980 |
Trading securities - mortgage banking |  | - |  |  | - |  |  | 2,330 |  |  | 2,330 |
Loans held-for-sale |  | - |  |  | 1,224 |  |  | 21,221 |  |  | 22,445 |
Securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
| U.S. treasuries |  | - |  |  | 100 |  |  | - |  |  | 100 |
| Government agency issued MBS |  | - |  |  | 2,159,922 |  |  | - |  |  | 2,159,922 |
| Government agency issued CMO |  | - |  |  | 1,592,311 |  |  | - |  |  | 1,592,311 |
| Equity, mutual funds, and other |  | 25,221 |  |  | - |  |  | - |  |  | 25,221 |
|  | Total securities available-for-sale |  | 25,221 |  |  | 3,752,333 |  |  | - |  |  | 3,777,554 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |
| Deferred compensation assets |  | 34,109 |  |  | - |  |  | - |  |  | 34,109 |
| Derivatives, forwards and futures |  | 17,227 |  |  | - |  |  | - |  |  | 17,227 |
| Derivatives, interest rate contracts |  | - |  |  | 80,893 |  |  | - |  |  | 80,893 |
|  | Total other assets |  | 51,336 |  |  | 80,893 |  |  | - |  |  | 132,229 |
|  | Total assets | $ | 76,557 |  | $ | 4,999,425 |  | $ | 23,556 |  | $ | 5,099,538 |
Trading liabilities - fixed income: |  |  |  |  |  |  |  |  |  |  |  |
| U.S. treasuries | $ | - |  | $ | 657,059 |  | $ | - |  | $ | 657,059 |
| States and municipalities |  | - |  |  | 11,048 |  |  | - |  |  | 11,048 |
| Corporate and other debt |  | - |  |  | 180,083 |  |  | - |  |  | 180,083 |
|  | Total trading liabilities - fixed income |  | - |  |  | 848,190 |  |  | - |  |  | 848,190 |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |
| Derivatives, forwards and futures |  | 18,365 |  |  | - |  |  | - |  |  | 18,365 |
| Derivatives, interest rate contracts |  | - |  |  | 76,986 |  |  | - |  |  | 76,986 |
| Derivatives, other |  | - |  |  | 46 |  |  | 5,950 |  |  | 5,996 |
|  | Total other liabilities |  | 18,365 |  |  | 77,032 |  |  | 5,950 |  |  | 101,347 |
|  | Total liabilities | $ | 18,365 |  | $ | 925,222 |  | $ | 5,950 |  | $ | 949,537 |
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis as of December 31, 2016: |
|  |  |  | December 31, 2016 |
(Dollars in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total |
Trading securities - fixed income: |  |  |  |  |  |  |  |  |  |  |  |
| U.S. treasuries | $ | - |  | $ | 146,988 |  | $ | - |  | $ | 146,988 |
| Government agency issued MBS |  | - |  |  | 256,611 |  |  | - |  |  | 256,611 |
| Government agency issued CMO |  | - |  |  | 150,058 |  |  | - |  |  | 150,058 |
| Other U.S. government agencies |  | - |  |  | 52,314 |  |  | - |  |  | 52,314 |
| States and municipalities |  | - |  |  | 60,351 |  |  | - |  |  | 60,351 |
| Corporate and other debt |  | - |  |  | 227,934 |  |  | 5 |  |  | 227,939 |
| Equity, mutual funds, and other |  | - |  |  | 242 |  |  | - |  |  | 242 |
|  | Total trading securities - fixed income |  | - |  |  | 894,498 |  |  | 5 |  |  | 894,503 |
Trading securities - mortgage banking |  | - |  |  | - |  |  | 2,568 |  |  | 2,568 |
Loans held-for-sale |  | - |  |  | 2,345 |  |  | 21,924 |  |  | 24,269 |
Securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
| U.S. treasuries |  | - |  |  | 100 |  |  | - |  |  | 100 |
| Government agency issued MBS |  | - |  |  | 2,208,687 |  |  | - |  |  | 2,208,687 |
| Government agency issued CMO |  | - |  |  | 1,547,958 |  |  | - |  |  | 1,547,958 |
| Equity, mutual funds, and other |  | 25,249 |  |  | - |  |  | - |  |  | 25,249 |
|  | Total securities available-for-sale |  | 25,249 |  |  | 3,756,745 |  |  | - |  |  | 3,781,994 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |
| Mortgage servicing rights |  | - |  |  | - |  |  | 985 |  |  | 985 |
| Deferred compensation assets |  | 32,840 |  |  | - |  |  | - |  |  | 32,840 |
| Derivatives, forwards and futures |  | 33,587 |  |  | - |  |  | - |  |  | 33,587 |
| Derivatives, interest rate contracts |  | - |  |  | 88,025 |  |  | - |  |  | 88,025 |
| Derivatives, other |  | - |  |  | 42 |  |  | - |  |  | 42 |
|  | Total other assets |  | 66,427 |  |  | 88,067 |  |  | 985 |  |  | 155,479 |
|  | Total assets | $ | 91,676 |  | $ | 4,741,655 |  | $ | 25,482 |  | $ | 4,858,813 |
Trading liabilities - fixed income: |  |  |  |  |  |  |  |  |  |  |  |
| U.S. treasuries | $ | - |  | $ | 381,229 |  | $ | - |  | $ | 381,229 |
| Other U.S. government agencies |  | - |  |  | 844 |  |  | - |  |  | 844 |
| Corporate and other debt |  | - |  |  | 179,775 |  |  | - |  |  | 179,775 |
|  | Total trading liabilities - fixed income |  | - |  |  | 561,848 |  |  | - |  |  | 561,848 |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivatives, forwards and futures |  | 33,274 |  |  | - |  |  | - |  |  | 33,274 |
| Derivatives, interest rate contracts |  | - |  |  | 96,371 |  |  | - |  |  | 96,371 |
| Derivatives, other |  | - |  |  | 7 |  |  | 6,245 |  |  | 6,252 |
|  | Total other liabilities |  | 33,274 |  |  | 96,378 |  |  | 6,245 |  |  | 135,897 |
|  | Total liabilities | $ | 33,274 |  | $ | 658,226 |  | $ | 6,245 |  | $ | 697,745 |
Changes in Recurring Level 3 Fair Value Measurements |
The changes in Level 3 assets and liabilities measured at fair value for the three months ended March 31, 2017 and 2016, on a recurring basis are summarized as follows: |  |
|  |  | Three Months Ended March 31, 2017 |
|  |  | Trading |  | Loans held- |  | Net derivative |  |
(Dollars in thousands) | securities |  | for-sale |  | liabilities |  |
Balance on January 1, 2017 | $ | 2,573 |  |  | $ | 21,924 |  |  | $ | (6,245) |  |
| Total net gains/(losses) included in: |  |  |  |  |  |  |  |  |  |  |  |
|  | Net income |  | 17 |  |  |  | 922 |  |  |  | (1) |  |
| Purchases |  | - |  |  |  | 32 |  |  |  | - |  |
| Settlements |  | (255) |  |  |  | (1,574) |  |  |  | 296 |  |
| Net transfers into/(out of) Level 3 |  | - |  |  |  | (83) | (b) |  |  | - |  |
Balance on March 31, 2017 | $ | 2,335 |  |  | $ | 21,221 |  |  | $ | (5,950) |  |
Net unrealized gains/(losses) included in net income | $ | (27) | (a) |  | $ | 922 | (a) |  | $ | (1) | (c) |
|  |  | Three Months Ended March 31, 2016 |
|  |  |  |  |  |  |  |  |  | Securities |  | Mortgage |  |  |  |  |  |
|  |  | Trading |  | Loans held- |  | available- |  | servicing |  | Net derivative |  |
(Dollars in thousands) | securities |  | for-sale |  | for-sale | rights, net |  | liabilities |  |
Balance on January 1, 2016 | $ | 4,377 |  |  | $ | 27,418 |  |  | $ | 1,500 |  |  | $ | 1,841 |  |  | $ | (4,810) |  |
| Total net gains/(losses) included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Net income |  | 147 |  |  |  | 342 |  |  |  | - |  |  |  | - |  |  |  | (109) |  |
| Purchases |  | - |  |  |  | 148 |  |  |  | - |  |  |  | - |  |  |  | - |  |
| Settlements |  | (1,467) |  |  |  | (1,365) |  |  |  | - |  |  |  | (116) |  |  |  | 299 |  |
| Net transfers into/(out of) Level 3 |  | - |  |  |  | (256) | (b) |  |  | - |  |  |  | - |  |  |  | - |  |
Balance on March 31, 2016 | $ | 3,057 |  |  | $ | 26,287 |  |  | $ | 1,500 |  |  | $ | 1,725 |  |  | $ | (4,620) |  |
Net unrealized gains/(losses) included in net income | $ | (115) | (a) |  | $ | 342 | (a) |  | $ | - |  |  | $ | - |  |  | $ | (109) | (c) |
Primarily included in mortgage banking income on the Consolidated Condensed Statements of Income. Transfers out of loans held-for-sale level 3 measured on a recurring basis generally r eflect movements into real estate acquired by foreclosure (level 3 nonrecurring). Included in Other expense. Nonrecurring Fair Value Measurements From time to time, FHN may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or market (“LOCOM”) accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheet at March 31, 2017, and December 31, 2016, respectively, the following tables provide the level o f valuation assumptions used to determine each adjustment and the related carrying value.
| Carrying value at March 31, 2017 |
(Dollars in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total |
Loans held-for-sale - SBAs | $ | - |  | $ | 3,476 |  | $ | - |  | $ | 3,476 |
Loans held-for-sale - first mortgages |  | - |  |  | - |  |  | 606 |  |  | 606 |
Loans, net of unearned income (a) |  | - |  |  | - |  |  | 30,838 |  |  | 30,838 |
Real estate acquired by foreclosure (b) |  | - |  |  | - |  |  | 10,259 |  |  | 10,259 |
Other assets (c) |  | - |  |  | - |  |  | 28,667 |  |  | 28,667 |
| Carrying value at December 31, 2016 |
(Dollars in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total |
Loans held-for-sale - SBAs | $ | - |  | $ | 4,286 |  | $ | - |  | $ | 4,286 |
Loans held-for-sale - first mortgages |  | - |  |  | - |  |  | 638 |  |  | 638 |
Loans, net of unearned income (a) |  | - |  |  | - |  |  | 31,070 |  |  | 31,070 |
Real estate acquired by foreclosure (b) |  | - |  |  | - |  |  | 11,235 |  |  | 11,235 |
Other assets (c) |  | - |  |  | - |  |  | 29,609 |  |  | 29,609 |
Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages. Represents tax credit investments accounted for under the equity method.
For assets measured on a nonrecurring basis which were still held on the consolidated balance sheet at period end, the following table provides information about the fair value adjustments recorded during the three months ended March 31, 2017 and 2016: |
| Net gains/(losses) |
| Three months ended March 31, |
(Dollars in thousands) | 2017 |  | 2016 |
Loans held-for-sale - SBAs | $ | (33) |  | $ | - |
Loans held-for-sale - first mortgages |  | 3 |  |  | 5 |
Loans, net of unearned income (a) |  | 484 |  |  | (4,672) |
Real estate acquired by foreclosure (b) |  | (445) |  |  | (536) |
Other assets (c) |  | (942) |  |  | (706) |
| $ | (933) |  | $ | (5,909) |
Write-downs on these loans are recognized as part of provision for loan losses. Represents losses of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages. Represents tax credit investments accounted for under the equity method. In first quarter 2016, FHN’s Regional Banking segment recognized $3.7 million of impairments on long-lived assets associated with efforts t o more efficiently utilize its bank branch locations. The affected branch locations represented a mixture of owned and leased sites. The fair values of owned sites were determined using estimated sales prices from appraisals less estimated costs to sell. T he fair values of leased sites were determined using a discounted cash flow approach, based on the revised estimated useful lives of the related assets. Both measurement methodologies are considered Level 3 valuations.
Level 3 Measurements |
The following tables provide information regarding the unobservable inputs utilized in determining the fair value of level 3 recurring and non-recurring measurements as of March 31, 2017 and December 31, 2016: |
(Dollars in Thousands) |  |  |  |  |  |  |  |  |
|  | Fair Value at |  |  |  |  |  |  |
Level 3 Class |  | March 31, 2017 | Valuation Techniques | Unobservable Input | Values Utilized |
Loans held-for-sale - residential real estate |  |  | 21,827 |  | Discounted cash flow |  | Prepayment speeds - First mortgage |  | 2% - 12% |
|  |  |  |  |  |  | Prepayment speeds - HELOC |  | 3% - 15% |
|  |  |  |  |  |  | Foreclosure losses |  | 50% - 70% |
|  |  |  |  |  |  | Loss severity trends - First mortgage |  | 5% - 50% of UPB |
|  |  |  |  |  |  | Loss severity trends - HELOC |  | 15% - 100% of UPB |
Derivative liabilities, other |  |  | 5,950 |  | Discounted cash flow |  | Visa covered litigation resolution amount |  | $4.4 billion - $5.2 billion |
|  |  |  |  |  |  | Probability of resolution scenarios |  | 10% - 30% |
|  |  |  |  |  |  | Time until resolution |  | 21 - 51 months |
Loans, net of unearned income (a) |  |  | 30,838 |  | Appraisals from comparable properties |  | Marketability adjustments for specific properties |  | 0% - 10% of appraisal |
|  |  |  |  | Other collateral valuations |  | Borrowing base certificates adjustment |  | 20% - 50% of gross value |
|  |  |  |  |  |  | Financial Statements/Auction values adjustment |  | 0% - 25% of reported value |
Real estate acquired by foreclosure (b) |  |  | 10,259 |  | Appraisals from comparable properties |  | Adjustment for value changes since appraisal |  | 0% - 10% of appraisal |
Other assets (c) |  |  | 28,667 |  | Discounted cash flow |  | Adjustments to current sales yields for specific properties |  | 0% - 15% adjustment to yield |
|  |  |  |  | Appraisals from comparable properties |  | Marketability adjustments for specific properties |  | 0% - 25% of appraisal |
Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for loan losses. Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages. Represents tax credit investments accounted for under the eq uity method.
(Dollars in Thousands) |  |  |  |  |  |  |  |  |
|  | Fair Value at |  |  |  |  |  |  |
Level 3 Class |  | December 31, 2016 | Valuation Techniques | Unobservable Input | Values Utilized |
Loans held-for-sale - residential real estate |  |  | 22,562 |  | Discounted cash flow |  | Prepayment speeds - First mortgage |  | 2% - 13% |
|  |  |  |  |  |  | Prepayment speeds - HELOC |  | 3% - 15% |
|  |  |  |  |  |  | Foreclosure Losses |  | 50% - 70% |
|  |  |  |  |  |  | Loss severity trends - First mortgage |  | 5% - 50% of UPB |
|  |  |  |  |  |  | Loss severity trends - HELOC |  | 15% - 100% of UPB |
Derivative liabilities, other |  |  | 6,245 |  | Discounted cash flow |  | Visa covered litigation resolution amount |  | $4.4 billion - $5.2 billion |
|  |  |  |  |  |  | Probability of resolution scenarios |  | 10% - 30% |
|  |  |  |  |  |  | Time until resolution |  | 24 - 54 months |
Loans, net of unearned income (a) |  |  | 31,070 |  | Appraisals from comparable properties |  | Marketability adjustments for specific properties |  | 0% - 10% of appraisal |
|  |  |  |  | Other collateral valuations |  | Borrowing base certificates adjustment |  | 20% - 50% of gross value |
|  |  |  |  |  |  | Financial Statements/Auction values adjustment |  | 0% - 25% of reported value |
Real estate acquired by foreclosure (b) |  |  | 11,235 |  | Appraisals from comparable properties |  | Adjustment for value changes since appraisal |  | 0% - 10% of appraisal |
Other assets (c) |  |  | 29,609 |  | Discounted cash flow |  | Adjustments to current sales yields for specific properties |  | 0% - 15% adjustment to yield |
|  |  |  |  | Appraisals from comparable properties |  | Marketability adjustments for specific properties |  | 0% - 25% of appraisal |
Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell. Write-downs on these loans are recognized as part of provision for loan losses. Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages. Represents tax credit investments accoun ted for under the equity method. Loans held-for-sale. Foreclosure losses and prepayment rates are significant unobservable inputs used in the fair value measurement of FHN’s residential real estate l oans held-for-sale. Loss severity trends are also assessed to evaluate the reasonableness of fair value estimates resulting from discounted cash flows methodologies as well as to estimate fair value for newly repurchased loans and loans that are near foreclosure. Significant increases (decreases) in any of these inputs in isolation would resul t in significantly lower (higher) fair value measurements. All observable and unobservabl e inputs are re-assessed quarterly. Fair value measurements are reviewed at least quarter ly by FHN’s Corporate Accounting Department. Derivative liabilities. In conj unction with the sales of portions of its Visa Class B shares, FHN and the purchaser entered into derivative transactions whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. FHN uses a discounted cash flow methodology in order to estimate the fair value of FHN’s derivative liabilities associated with its prior sales of Visa Class B shares. The methodology includes estimation of both the resolution amount for Visa’s Covered Litigation matters as well as the length of time until the resolution occurs. Significant increases (decreases) in either of these inputs in isolation would result in significantly higher (lower) fair value measurements for the derivative liabiliti es. Additionally, FHN performs a probability weighted multiple resolution scenario to calculate the estimated fair value of these derivative liabilities. Assignment of higher (lower) probabilities to the larger potential resolution scenarios would result i n an increase (decrease) in the estimated fair value of the derivative liabilities. Since this estimation process requires application of judgment in developing significant unobservable inputs used to determine the possible outcomes and the probability wei ghting assigned to each scenario, these derivatives have been classified within Level 3 in fair value measurements disclosures. The valuation inputs and process are discussed with senior and executive management when significant events affecting the estima te of fair value occur. Inputs are compared to information obtained from the public issuances and filings of Visa, Inc. as well as public information released by other participants in the applicable litigation matters. Loans, net of unearned income and Rea l estate acquired by foreclosure. Collateral-dependent loans and Real estate acquired by foreclosure are primarily valued using appraisals based on sales of comparable properties in the same or similar markets. Multiple appraisal firms are utilized to ensu re that estimated values are consistent between firms. This process occurs within FHN’s Credit Risk Management (commercial) and Default Servicing functions (primarily consumer). The Credit Risk Management Committee reviews dispositions and additions of foreclosed assets an nually. Back testing is performed during the year through comparison to ultimate disposition values. Other collateral (receivables, inventory, equipment, etc.) is valued through borrowing base certificates, financial statements and/or auction valuations. T hese valuations are discounted based on the quality of reporting, knowledge of the marketability/collectability of the collateral and historical disposition rates. Other a ssets – tax credit investments. The estimated fair value of tax credit investments ac counted for under the equity method is generally determined in relation to the yield (i.e., future tax credits to be received) an acquirer of these investments would expect in relation to the yields experienced on current new issue and/or secondary market transactions. Thus, as tax credits are recognized, the future yield to a market participant is reduced, resulting in consistent impairment of the individual investments. Individual investments are reviewed for impairment quarterly, which may include the co nsideration of additional marketability discounts related to specific investments which typically includes consideration of the underlying property’s appraised value. Unusual valuation adjustments and the associated triggering events are discussed with sen ior and executive management when appropriate. A portfolio review is conducted annually, with the assistance of a third party, to assess the reasonableness of current valuations. Fair Value Option FHN has elected the fair value option on a prospective basis for almost all types of mortgage loans originated for sale purposes under the Financial Instruments Topic (“ASC 825”). FHN determined that the election reduces certain timing differences and better matches changes in the value of such loans with changes in the value of derivatives and forward delivery commitments used as economic hedges for these assets at the time of election. Repurchased loans are recognized within loans held-for-sale at fair value at the time of repurchase, which includes consideration of the credit status of the loans and the estimated liquidation value. FHN has elected to continue recognition of these loans at fair value in periods subseque nt to reacquisition. Due to the credit-distressed nature of the vast majority of repurchased loans and the related loss severities experienced upon repurchase, FHN believes that the fair value election provides a more timely recognition of changes in value for these loans that occur subsequent to repurchase. Absent the fair value election, these loans would be subject to valuation at the LOCOM value, which would prevent subsequent values from exceeding the initial fair value, determined at the time of repur chase, but would require recognition of subsequent declines in value. Thus, the fair value election provides for a more timely recognition of any potential future recoveries in asset values while not affecting the requirement to recognize subsequent declin es in value.
The following tables reflect the differences between the fair value carrying amount of residential real estate loans held-for-sale measured at fair value in accordance with management’s election and the aggregate unpaid principal amount FHN is contractually entitled to receive at maturity. |
|  | March 31, 2017 |
(Dollars in thousands) | Fair value carrying amount |  | Aggregate unpaid principal |  | Fair value carrying amount less aggregate unpaid principal |
Residential real estate loans held-for-sale reported at fair value: |  |  |  |  |  |  |  |  |  |
| Total loans | $ | 22,444 |  | $ | 32,427 |  |  | $ | (9,983) |
| Nonaccrual loans |  | 6,689 |  |  | 12,305 |  |  |  | (5,616) |
| Loans 90 days or more past due and still accruing |  | 120 |  |  | 158 |  |  |  | (38) |
|  | December 31, 2016 |
(Dollars in thousands) | Fair value carrying amount |  | Aggregate unpaid principal |  | Fair value carrying amount less aggregate unpaid principal |
Residential real estate loans held-for-sale reported at fair value: |  |  |  |  |  |  |  |  |  |
| Total loans | $ | 24,269 |  | $ | 35,262 |  |  | $ | (10,993) |
| Nonaccrual loans |  | 6,775 |  |  | 12,910 |  |  |  | (6,135) |
| Loans 90 days or more past due and still accruing |  | 211 |  |  | 331 |  |  |  | (120) |
Assets and liabilities accounted for under the fair value election are initially measured at fair value with subsequent changes in fair value recognized in earnings. Such changes in the fair value of assets and liabilities for which FHN elected the fair value option are included in current period earnings with classification in the income statement line item reflected in the following table:
|  |  | Three Months Ended |
|  |  | March 31
(Dollars in thousands) | 2017 |  | 2016 |
Changes in fair value included in net income: |  |  |  |  |  |
| Mortgage banking noninterest income |  |  |  |  |  |
|  | Loans held-for-sale | $ | 922 |  | $ | 342 |
For the three months ended March 31, 2017, and 2016, the amounts for residential real estate loans held-for-sale include gains of $.2 million and $.1 million, respectively, in pretax earnings that are attributable to changes in instrument-specific credit risk. The portion of the fair value adjustments related to credit risk was determined based on estimated default rates and estimated loss severities. Interest income on resi dential real estate loans held-for-sale measured at fair value is calculated based on the note rate of the loan and is recorded in the interest income section of the Consolidated Condensed Statements of Income as interest on loans held-for-sale. Determinat ion of Fair Value In accordance with ASC 820-10-35, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following desc ribes the assumptions and methodologies used to estimate the fair value of financial instruments recorded at fair value in the Consolidated Condensed Statements of Condition and for estimating the fair value of financial instruments for which fair value is disclosed under ASC 825-10-50. Short-term financial assets. Federal funds sold, securities purchased under agreements to resell, and interest bearing deposits with other financial institutions and the Federal Reserve are carried at historical cost. The ca rrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization. Trading securities and trading liabilities. Trading securities and trading liabilities are rec ognized at fair value through current earnings. Trading inventory held for broker-dealer operations is included in trading securities and trading liabilities. Broker-dealer long positions are valued at bid price in the bid-ask spread. Short positions are v alued at the ask price. Inventory positions are valued using observable inputs including current market transactions, LIBOR and U.S. treasury curves, credit spreads, and consensus prepayment speeds. Trading loans are valued using observable inputs includin g current market transactions, swap rates, mortgage rates, and consensus prepayment speeds. Trading securities also include retained interests in prior securitizations that qualify as financial assets, which include primarily principal-only strips. FHN use s inputs including yield curves, credit spreads, and prepayment speeds to determine the fair value of principal-only strips. Securities available-for-sale. Securities available-for-sale includes the investment portfolio accounted for as available-for-sale under ASC 320-10-25, federal bank stock holdings, and short-term investments in mutual funds. Valuations of available-for-sale securities are performed using observable inputs obtained from market transactions in similar securities. Typical inputs include LIBOR and U.S. treasury curves, consensus prepayment estimates, and credit spreads. When available, broker quotes are used to support these valuations. Investments in the stock of the Federal Reserve Bank and Federal Home Loan Banks are recognized at historical cost in the Consolidated Condensed Statements of Condition which is considered to approximate fair value. Short-term investments in mutual funds are measured at the funds’ reported closing net asset values. Investments in equity securities are valued using quoted market prices when available. Cost me thod investments are valued at historical cost less any recorded impairment due to the illiquid nature of these investments. Securities held-to-maturity. Securities held-to-maturity reflects debt securities for which management has the positive intent and ability to hold to maturity. To the extent possible, valuations of held-to-maturity securities are performed using observable inputs obtained from market transactions in similar securities. Typical inputs include LIBOR and U.S. treasury curves and credit s preads. Debt securities with limited trading activity are valued using a discounted cash flow model that incorporates a combination of observable and unobservable inputs. Primary observable inputs include contractual cash flows, the treasury curve and cred it spreads from similar instruments. Significant unobservable inputs include estimated credit spreads for individual issuers and instruments as well as prepayment speeds, as applicable. Loans held-for-sale. Residential real estate loans held-for-sale are v alued using current transaction prices and/or values on similar assets when available, including committed bids for specific loans or loan portfolios. Uncommitted bids may be adjusted based on other available market information. For all other loans FHN det ermines the fair value of residential real estate loans held-for-sale using a discounted cash flow model which incorporates both observable and unobservable inputs. Inputs include current mortgage rates for similar products, estimated prepayment rates, for eclosure losses, and various loan performance measures (delinquency, LTV, credit score). Adjustments for delinquency and other differences in loan characteristics are typically reflected in the model’s discount rates. Loss severity trends and the value of underlying collateral are also considered in assessing the appropriate fair value for severely delinquent loans and loans in foreclosure. The valuation of HELOCs also incorporates esti mated cancellation rates for loans expected to become delinquent. Loans held-for-sale also include loans made by the Small Business Administration (“SBA”), which are accounted for at LOCOM. The fair value of SBA loans is determined using an expected cash f low model that utilizes observable inputs such as the spread between LIBOR and prime rates, consensus prepayment speeds, and the treasury curve. The fair value of other non-residential real estate loans held-for-sale is approximated by their carrying value s based on current transaction values. Loans, net of unearned income. Loans, net of unearned income are recognized at the amount of funds advanced, less charge-offs and an estimation of credit risk represented by the allowance for loan losses. The fair val ue estimates for disclosure purposes differentiate loans based on their financial characteristics, such as product classification, vintage, loan category, pricing features, and remaining maturity. The fair value of floating rate loans is estimated through comparison to recent market activity in loans of similar product types, with adjustments made for differences in loan characteristics. In situations where market pricing inputs are not available, fair value is considered to approximate book value due to th e monthly repricing for commercial and consumer loans, with the exception of floating rate 1-4 family residential mortgage loans which reprice annually and will lag movements in market rates. The fair value for floating rate 1-4 family mortgage loans is ca lculated by discounting future cash flows to their present value. Future cash flows are discounted to their present value by using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans have been applied to the floating rate 1-4 family residential mortgage portfolio. The fair value of fixed rate loans is estimated through comparison to rece nt market activity in loans of similar product types, with adjustments made for differences in loan characteristics. In situations where market pricing inputs are not available, fair value is estimated by discounting future cash flows to their present valu e. Future cash flows are discounted to their present value by using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds a nd industry speeds for similar loans have been applied to the fixed rate mortgage and installment loan portfolios. For all loan portfolio classes, adjustments are made to reflect liquidity or illiquidity of the market. Such adjustments reflect discounts th at FHN believes are consistent with what a market participant would consider in determining fair value given current market conditions. Individually impaired loans are measured using either a discounted cash flow methodology or the estimated fair value of the underlying collateral less costs to sell, if the loan is considered collateral-dependent. In accordance with accounting standards, the discounted cash flow analysis utilizes the loan’s effective interest rate for discounting expected cash flow amounts. Thus, this analysis is not considered a fair value measurement in accordance with ASC 820. However, the results of this methodology are considered to approximate fair value for the applicable loans. Expected cash flows are derived from internally-develop ed inputs primarily reflecting expected default rates on contractual cash flows. For loans measured using the estimated fair value of collateral less costs to sell, fair value is estimated using appraisals of the collateral. Collateral values are monitored and additional write-downs are recognized if it is determined that the estimated collateral values have declined further. Estimated costs to sell are based on current amounts of disposal costs for similar assets. Carrying value is considered to reflect fa ir value for these loans. Derivative assets and liabilities. The fair value for forwards and futures contracts is based on current transactions involving identical securities. Futures contracts are exchange-traded and thus have no credit risk factor assigned as the risk of non-performance is limited to the clearinghouse used. Valuations of other derivatives (primarily interest rate related swaps) are based on inputs observed in active markets for similar instruments. Typical inputs include the LIBOR curve, Overnight Indexed Swap ("OIS") curve, option volatility, and option skew. In measuring the fair value of these derivative assets and liabilities, FHN has elected to consider credit r isk based on the net exposure to individual counterparties. Credit risk is mitigated for these instruments through the use of mutual margining and master netting agreements as well as collateral posting requirements. For derivative contracts with daily cash margin requirements that are considered settlements, the daily margin amount is netted within derivative assets or liabilities. Any remaining credit risk related to in terest rate derivatives is considered in determining fair value through evaluation of additional factors such as customer loan grades and debt ratings. Foreign currency related derivatives also utilize observable exchange rates in the determination of fair value. The determination of fair value for FHN’s derivative liabilities associated with its prio r sales of Visa Class B shares are classified within Level 3 in the fair value measur ements disclosure as previously discussed in the unobservable inputs discu ssion. Real estate acquired by foreclosure. Real estate acquired by foreclosure primarily consists of properties that have been acquired in satisfaction of debt. These properties are carried at the lower of the outstanding loan amount or estimated fair val ue less estimated costs to sell the real estate. Estimated fair value is determined using appraised values with subsequent adjustments for deterioration in values that are not reflected in the most recent appraisal. Nonearning assets. For disclosure purpo ses, nonearning financial assets include cash and due from banks, accrued interest receivable, and fixed income receivables. Due to the short-term nature of cash and due from banks, accrued interest receivable, and fixed income receivables, the fair value is approximated by the book value. Other assets. For disclosure purposes, other assets consist of tax credit investments and deferred compensation assets that are considered financial assets. Tax credit investments accounted for under the equity method are written down to estimated fair value quarterly based on the estimated value of the associated tax credits which incorporates estimates of required yield for hypothetical investors. The fair value of all other tax credit investments is estimated using rece nt transaction information with adjustments for differences in individual investments. Deferred compensation assets are recognized at fair value, which is based on quoted prices in active markets. Defined maturity deposits. The fair value of these deposit s is estimated by discounting future cash flows to their present value. Future cash flows are discounted by using the current market rates of similar instruments applicable to the remaining maturity. For disclosure purposes, defined maturity deposits inclu de all time deposits. Undefined maturity deposits. In accordance with ASC 825, the fair value of these deposits is approximated by the book value. For the purpose of this disclosure, undefined maturity deposits include demand deposits, checking interest ac counts, savings accounts, and money market accounts. Short-term financial liabilities. The fair value of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings are approximated by the book value. The carryin g amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization. Term borrowings. The fair value of term borrowings is based on quoted market prices or dealer quote s for the identical liability when traded as an asset. When pricing information for the identical liability is not available, relevant prices for similar debt instruments are used with adjustments being made to the prices obtained for differences in charac teristics of the debt instruments. If no relevant pricing information is available, the fair value is approximated by the present value of the contractual cash flows discounted by the investor’s yield which considers FHN’s and FTBNA’s debt ratings. Other n oninterest-bearing liabilities. For disclosure purposes, other noninterest-bearing financial liabilities include accrued interest payable and fixed income payables. Due to the short-term nature of these liabilities, the book value is considered to approxim ate fair value. Loan commitments. Fair values of these commitments are based on fees charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties’ credit standing. Other commitments. Fair values of these commitments are based on fees charged to enter into similar agreements. The following fair value estimates are determined as of a specific point in time utilizing various assumptions and estimates. The use of assumptions and various v aluation techniques, as well as the absence of secondary markets for certain financial instruments, reduces the comparability of fair value disclosures between financial institutions. Due to market illiquidity, the fair values for loans, net of unearned in come, loans held-for-sale, and term borrowings as of March 31, 2017 and December 31, 2016, involve the use of significant internally-developed pricing assumptions for certain components of these line items. The assumptions and valuations utilized for this disclosure are considered to reflect inputs that market participants would use in transactions involving these instruments as of the measurement date. The valuations of legacy assets, particularly consumer loans within the non-strategic segment and T RUP loans, are influenced by changes in economic conditions since origination and risk perceptions of the financial sector. These considerations affect the estimate of a potential acquirer’s cost of capital and cash flow volatility assumptions from these assets and the resulting fair value measurements may depart significantly from FHN’s internal estimates of the intrinsic value of these assets. Assets and liabilities that are not financial instruments have not been included in the following table such as the value of long-term relationships with deposit and trust customers, premises and equipment, goodwill and other intangibles, deferred taxes, and certain other assets and other liabilities. Additionally, these measurements are solely for financial instrum ents as of the measurement date and do not consider the earnings potential of our various business lines. Accordingly, the total of the fair value amounts does not represent, and should not be construed to represent, the underlying value of FHN.
The following table summarizes the book value and estimated fair value of financial instruments recorded in the Consolidated Condensed Statements of Condition as of March 31, 2017: |
|  |  |  | March 31, 2017 |
|  |  |  | Book |  | Fair Value |
(Dollars in thousands) | Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans, net of unearned income and allowance for loan losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Commercial, financial and industrial | $ | 11,610,889 |  | $ | - |  | $ | - |  | $ | 11,520,970 |  | $ | 11,520,970 |
|  | Commercial real estate |  | 2,142,423 |  |  | - |  |  | - |  |  | 2,112,591 |  |  | 2,112,591 |
| Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Consumer real estate |  | 4,407,131 |  |  | - |  |  | - |  |  | 4,325,035 |  |  | 4,325,035 |
|  | Permanent mortgage |  | 393,342 |  |  | - |  |  | - |  |  | 393,859 |  |  | 393,859 |
|  | Credit card & other |  | 334,321 |  |  | - |  |  | - |  |  | 334,868 |  |  | 334,868 |
Total loans, net of unearned income and allowance for loan losses |  | 18,888,106 |  |  | - |  |  | - |  |  | 18,687,323 |  |  | 18,687,323 |
Short-term financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Interest-bearing cash |  | 2,106,597 |  |  | 2,106,597 |  |  | - |  |  | - |  |  | 2,106,597 |
| Federal funds sold |  | 31,495 |  |  | - |  |  | 31,495 |  |  | - |  |  | 31,495 |
| Securities purchased under agreements to resell |  | 835,222 |  |  | - |  |  | 835,222 |  |  | - |  |  | 835,222 |
Total short-term financial assets |  | 2,973,314 |  |  | 2,106,597 |  |  | 866,717 |  |  | - |  |  | 2,973,314 |
Trading securities (a) |  | 1,167,310 |  |  | - |  |  | 1,164,975 |  |  | 2,335 |  |  | 1,167,310 |
Loans held-for-sale |  | 105,456 |  |  | - |  |  | 4,700 |  |  | 100,756 |  |  | 105,456 |
Securities available-for-sale (a) (b) |  | 3,939,278 |  |  | 25,221 |  |  | 3,752,333 |  |  | 161,724 |  |  | 3,939,278 |
Securities held-to-maturity |  | 14,354 |  |  | - |  |  | - |  |  | 14,803 |  |  | 14,803 |
Derivative assets (a) |  | 98,120 |  |  | 17,227 |  |  | 80,893 |  |  | - |  |  | 98,120 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Tax credit investments |  | 96,824 |  |  | - |  |  | - |  |  | 94,884 |  |  | 94,884 |
| Deferred compensation assets |  | 34,109 |  |  | 34,109 |  |  | - |  |  | - |  |  | 34,109 |
Total other assets |  | 130,933 |  |  | 34,109 |  |  | - |  |  | 94,884 |  |  | 128,993 |
Nonearning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash & due from banks |  | 369,290 |  |  | 369,290 |  |  | - |  |  | - |  |  | 369,290 |
| Fixed income receivables |  | 168,315 |  |  | - |  |  | 168,315 |  |  | - |  |  | 168,315 |
| Accrued interest receivable |  | 61,832 |  |  | - |  |  | 61,832 |  |  | - |  |  | 61,832 |
Total nonearning assets |  | 599,437 |  |  | 369,290 |  |  | 230,147 |  |  | - |  |  | 599,437 |
Total assets | $ | 27,916,308 |  | $ | 2,552,444 |  | $ | 6,099,765 |  | $ | 19,061,825 |  | $ | 27,714,034 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Defined maturity | $ | 1,385,818 |  | $ | - |  | $ | 1,391,170 |  | $ | - |  | $ | 1,391,170 |
| Undefined maturity |  | 22,094,023 |  |  | - |  |  | 22,094,023 |  |  | - |  |  | 22,094,023 |
Total deposits |  | 23,479,841 |  |  | - |  |  | 23,485,193 |  |  | - |  |  | 23,485,193 |
Trading liabilities (a) |  | 848,190 |  |  | - |  |  | 848,190 |  |  | - |  |  | 848,190 |
Short-term financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Federal funds purchased |  | 504,805 |  |  | - |  |  | 504,805 |  |  | - |  |  | 504,805 |
| Securities sold under agreements to repurchase |  | 406,354 |  |  | - |  |  | 406,354 |  |  | - |  |  | 406,354 |
| Other short-term borrowings |  | 79,454 |  |  | - |  |  | 79,454 |  |  | - |  |  | 79,454 |
Total short-term financial liabilities |  | 990,613 |  |  | - |  |  | 990,613 |  |  | - |  |  | 990,613 |
Term borrowings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Real estate investment trust-preferred |  | 46,049 |  |  | - |  |  | - |  |  | 49,350 |  |  | 49,350 |
| Term borrowings - new market tax credit investment |  | 18,000 |  |  | - |  |  | - |  |  | 17,934 |  |  | 17,934 |
| Borrowings secured by residential real estate |  | 19,819 |  |  | - |  |  | - |  |  | 18,828 |  |  | 18,828 |
| Other long term borrowings |  | 951,168 |  |  | - |  |  | 967,792 |  |  | - |  |  | 967,792 |
Total term borrowings |  | 1,035,036 |  |  | - |  |  | 967,792 |  |  | 86,112 |  |  | 1,053,904 |
Derivative liabilities (a) |  | 101,347 |  |  | 18,365 |  |  | 77,032 |  |  | 5,950 |  |  | 101,347 |
Other noninterest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed income payables |  | 21,116 |  |  | - |  |  | 21,116 |  |  | - |  |  | 21,116 |
| Accrued interest payable |  | 17,696 |  |  | - |  |  | 17,696 |  |  | - |  |  | 17,696 |
Total other noninterest-bearing liabilities |  | 38,812 |  |  | - |  |  | 38,812 |  |  | - |  |  | 38,812 |
Total liabilities | $ | 26,493,839 |  | $ | 18,365 |  | $ | 26,407,632 |  | $ | 92,062 |  | $ | 26,518,059 |
Classes are detailed in the recurring and nonrecurring measurement tables. Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million.
The following table summarizes the book value and estimated fair value of financial instruments recorded in the Consolidated Statements of Condition as of December 31, 2016: |
|  |  |  | December 31, 2016 |
|  |  |  | Book |  | Fair Value |
(Dollars in thousands) | Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans, net of unearned income and allowance for loan losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Commercial, financial and industrial | $ | 12,058,689 |  | $ | - |  | $ | - |  | $ | 11,918,374 |  | $ | 11,918,374 |
|  | Commercial real estate |  | 2,101,671 |  |  | - |  |  | - |  |  | 2,078,306 |  |  | 2,078,306 |
| Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Consumer real estate |  | 4,473,395 |  |  | - |  |  | - |  |  | 4,385,669 |  |  | 4,385,669 |
|  | Permanent mortgage |  | 406,836 |  |  | - |  |  | - |  |  | 404,930 |  |  | 404,930 |
|  | Credit card & other |  | 346,861 |  |  | - |  |  | - |  |  | 347,577 |  |  | 347,577 |
Total loans, net of unearned income and allowance for loan losses |  | 19,387,452 |  |  | - |  |  | - |  |  | 19,134,856 |  |  | 19,134,856 |
Short-term financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Interest-bearing cash |  | 1,060,034 |  |  | 1,060,034 |  |  | - |  |  | - |  |  | 1,060,034 |
| Federal funds sold |  | 50,838 |  |  | - |  |  | 50,838 |  |  | - |  |  | 50,838 |
| Securities purchased under agreements to resell |  | 613,682 |  |  | - |  |  | 613,682 |  |  | - |  |  | 613,682 |
Total short-term financial assets |  | 1,724,554 |  |  | 1,060,034 |  |  | 664,520 |  |  | - |  |  | 1,724,554 |
Trading securities (a) |  | 897,071 |  |  | - |  |  | 894,498 |  |  | 2,573 |  |  | 897,071 |
Loans held-for-sale |  | 111,248 |  |  | - |  |  | 6,631 |  |  | 104,617 |  |  | 111,248 |
Securities available-for-sale (a) (b) |  | 3,943,499 |  |  | 25,249 |  |  | 3,756,745 |  |  | 161,505 |  |  | 3,943,499 |
Securities held-to-maturity |  | 14,347 |  |  | - |  |  | - |  |  | 14,773 |  |  | 14,773 |
Derivative assets (a) |  | 121,654 |  |  | 33,587 |  |  | 88,067 |  |  | - |  |  | 121,654 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Tax credit investments |  | 100,105 |  |  | - |  |  | - |  |  | 98,400 |  |  | 98,400 |
| Deferred compensation assets |  | 32,840 |  |  | 32,840 |  |  | - |  |  | - |  |  | 32,840 |
Total other assets |  | 132,945 |  |  | 32,840 |  |  | - |  |  | 98,400 |  |  | 131,240 |
Nonearning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash & due from banks |  | 373,274 |  |  | 373,274 |  |  | - |  |  | - |  |  | 373,274 |
| Fixed income receivables |  | 57,411 |  |  | - |  |  | 57,411 |  |  | - |  |  | 57,411 |
| Accrued interest receivable |  | 62,887 |  |  | - |  |  | 62,887 |  |  | - |  |  | 62,887 |
Total nonearning assets |  | 493,572 |  |  | 373,274 |  |  | 120,298 |  |  | - |  |  | 493,572 |
Total assets | $ | 26,826,342 |  | $ | 1,524,984 |  | $ | 5,530,759 |  | $ | 19,516,724 |  | $ | 26,572,467 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Defined maturity | $ | 1,355,133 |  | $ | - |  | $ | 1,361,104 |  | $ | - |  | $ | 1,361,104 |
| Undefined maturity |  | 21,317,230 |  |  | - |  |  | 21,317,230 |  |  | - |  |  | 21,317,230 |
Total deposits |  | 22,672,363 |  |  | - |  |  | 22,678,334 |  |  | - |  |  | 22,678,334 |
Trading liabilities (a) |  | 561,848 |  |  | - |  |  | 561,848 |  |  | - |  |  | 561,848 |
Short-term financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Federal funds purchased |  | 414,207 |  |  | - |  |  | 414,207 |  |  | - |  |  | 414,207 |
| Securities sold under agreements to repurchase |  | 453,053 |  |  | - |  |  | 453,053 |  |  | - |  |  | 453,053 |
| Other short-term borrowings |  | 83,177 |  |  | - |  |  | 83,177 |  |  | - |  |  | 83,177 |
Total short-term financial liabilities |  | 950,437 |  |  | - |  |  | 950,437 |  |  | - |  |  | 950,437 |
Term borrowings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Real estate investment trust-preferred |  | 46,032 |  |  | - |  |  | - |  |  | 49,350 |  |  | 49,350 |
| Term borrowings - new market tax credit investment |  | 18,000 |  |  | - |  |  | - |  |  | 17,918 |  |  | 17,918 |
| Borrowings secured by residential real estate |  | 23,126 |  |  | - |  |  | - |  |  | 21,969 |  |  | 21,969 |
| Other long term borrowings |  | 953,498 |  |  | - |  |  | 965,066 |  |  | - |  |  | 965,066 |
Total term borrowings |  | 1,040,656 |  |  | - |  |  | 965,066 |  |  | 89,237 |  |  | 1,054,303 |
Derivative liabilities (a) |  | 135,897 |  |  | 33,274 |  |  | 96,378 |  |  | 6,245 |  |  | 135,897 |
Other noninterest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed income payables |  | 21,002 |  |  | - |  |  | 21,002 |  |  | - |  |  | 21,002 |
| Accrued interest payable |  | 10,336 |  |  | - |  |  | 10,336 |  |  | - |  |  | 10,336 |
Total other noninterest-bearing liabilities |  | 31,338 |  |  | - |  |  | 31,338 |  |  | - |  |  | 31,338 |
Total liabilities | $ | 25,392,539 |  | $ | 33,274 |  | $ | 25,283,401 |  | $ | 95,482 |  | $ | 25,412,157 |
Certain previously reported amounts have been reclassified to agree with current presentation. Classes are detailed in the recurring and nonrecurring measur ement tables. Level 3 includes restricted investments in FHLB-Cincinnati stock of $87.9 million and FRB stock of $68.6 million.
The following table presents the contractual amount and fair value of unfunded loan commitments and standby and other commitments as of March 31, 2017 and December 31, 2016: |
| Contractual Amount |  | Fair Value |
(Dollars in thousands) | March 31, 2017 |  | December 31, 2016 |  | March 31, 2017 |  | December 31, 2016 |
Unfunded Commitments: |  |  |  |  |  |  |  |  |  |  |  |
Loan commitments | $ | 9,430,508 |  | $ | 8,744,649 |  | $ | 2,612 |  | $ | 2,924 |
Standby and other commitments |  | 273,029 |  |  | 277,549 |  |  | 4,230 |  |  | 4,037 |

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