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Fair Value Measurements
 9 Months Ended
Sep. 30, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
FASB ASC Topic 820 establishes a fair value hierarchy for the inputs to valuation techniques used to measure assets and liabilities at fair value using the following three categories (from highest to lowest priority):

•Level 1 – Inputs that represent quoted prices for identical instruments in active markets.
•Level 2 – Inputs that represent quoted prices for similar instruments in active markets, or quoted prices for identical instruments in non-active markets. Also includes valuation techniques whose inputs are derived principally from observable market data other than quoted prices, such as interest rates or other market-corroborated means.
•Level 3 – Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.
All assets and liabilities measured at fair value on both a recurring and nonrecurring basis have been categorized into the above three levels. The following tables present assets and liabilities measured at fair value on a recurring basis and reported on the consolidated balance sheets:
 September 30, 2022
 Level 1Level 2Level 3Total
 (in thousands)
Loans held for sale$— $14,411 $— $14,411 
Available for sale investment securities:
Equity securities— — — — 
U.S. Government securities218,184 — — 218,184 
U.S. Government-sponsored agency securities— 1,006 — 1,006 
State and municipal securities— 1,038,185 — 1,038,185 
Corporate debt securities— 399,615 — 399,615 
Collateralized mortgage obligations— 142,401 — 142,401 
Residential mortgage-backed securities— 214,252 — 214,252 
Commercial mortgage-backed securities— 583,741 — 583,741 
Total available for sale investment securities218,184 2,379,200 — 2,597,384 
Other assets:
Investments held in Rabbi Trust22,933 — — 22,933 
Derivative assets1,027 179,049 — 180,076 
Total assets$242,144 $2,572,660 $— $2,814,804 
Other liabilities:
Deferred compensation liabilities$22,933 $— $— $22,933 
Derivative liabilities1,006 314,438 — 315,444 
Total liabilities$23,939 $314,438 $— $338,377 

 December 31, 2021
 Level 1Level 2Level 3Total
 (in thousands)
Loans held for sale$— $35,768 $— $35,768 
Available for sale investment securities:
U.S. Government securities127,618 — — 127,618 
State and municipal securities— 1,188,670 — 1,188,670 
Corporate debt securities— 386,133 — 386,133 
Collateralized mortgage obligations— 209,359 — 209,359 
Residential mortgage-backed securities— 229,795 — 229,795 
Commercial mortgage-backed securities— 971,148 — 971,148 
Auction rate securities— — 74,667 74,667 
Total available for sale investment securities127,618 2,985,105 74,667 3,187,390 
Other assets:
Investments held in Rabbi Trust28,619 — — 28,619 
Derivative assets298 160,945 — 161,243 
Total assets$156,535 $3,181,818 $74,667 $3,413,020 
Other liabilities:
Deferred compensation liabilities$28,619 $— $— $28,619 
Derivative liabilities291 86,110 — 86,401 
Total liabilities$28,910 $86,110 $— $115,020 
The valuation techniques used to measure fair value for the items in the preceding tables are as follows:
Loans held for sale – This category includes mortgage loans held for sale that are measured at fair value. Fair values as of September 30, 2022 and December 31, 2021 were based on the price that secondary market investors were offering for loans with similar characteristics.

Available for sale investment securities – Included in this asset category are debt securities. Level 2 investment securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing.

Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable.

•U.S. Government securities – These securities are classified as Level 1. Fair values are based on quoted prices with active markets.

•State and municipal securities/Collateralized mortgage obligations/Residential mortgage-backed securities/Commercial mortgage-backed securities – These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.

•Corporate debt securities – This category consists of subordinated debt and senior debt issued by financial institutions ($396.9 million at September 30, 2022 and $383.4 million at December 31, 2021) and other corporate debt issued by non-financial institutions ($2.8 million at September 30, 2022 and December 31, 2021).

•Level 2 investments include subordinated debt and senior debt, and other corporate debt issued by non-financial institutions at September 30, 2022 and December 31, 2021. The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.

•Auction rate securities – Due to their illiquidity, ARCs are classified as Level 3 investment securities and are valued through the use of an expected cash flows model prepared by a third-party valuation expert. The assumptions used in preparing the expected cash flows model include estimates for coupon rates, time to maturity and market rates of return. In the first quarter of 2022, the Corporation sold all of its investment in ARCs.

Investments held in Rabbi Trust – This category consists of mutual funds that are held in trust for employee deferred compensation plans that the Corporation has elected to measure at fair value. Shares of mutual funds are valued based on net asset value, which represent quoted market prices for the underlying shares held in the mutual funds, and as such, are classified as Level 1.

Derivative assets – Fair value of foreign currency exchange contracts are classified as Level 1 assets ($1.0 million at September 30, 2022 and $0.3 million at December 31, 2021). The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.

Level 2 assets, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($2.8 million at September 30, 2022 and $2.4 million at December 31, 2021) and the fair value of interest rate swaps ($176.3 million at September 30, 2022 and $158.6 million at December 31, 2021). The fair values of the interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See "Note 7 - Derivative Financial Instruments," for additional information.

Deferred compensation liabilities – Fair value of amounts due to employees under deferred compensation plans, classified as Level 1 liabilities and are included in other liabilities on the consolidated balance sheets. The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Investments held in Rabbi Trust" above.

Derivative liabilities – Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($1.0 million at September 30, 2022 and $0.3 million at December 31, 2021).
Level 2 liabilities, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($0.7 million at September 30, 2022 and $0.0 million at December 31, 2021) and the fair value of interest rate swaps ($313.7 million at September 30, 2022 and $86.1 million at December 31, 2021).

The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Derivative assets" above.

The following table presents the changes in the Corporation's available for sale investment securities measured at fair value on a recurring basis using unobservable inputs (Level 3):
ARCs
Three months ended September 30, 2022(in thousands)
Balance at June 30, 2022$— 
Sales — 
Unrealized adjustment to fair value (1)
— 
Balance at September 30, 2022$— 
Three months ended September 30, 2021
Balance at June 30, 2021$74,834 
Unrealized adjustment to fair value (1)
299 
Balance at September 30, 2021$75,133 
Nine months ended September 30, 2022
Balance at December 31, 2021$74,667 
Sales(74,823)
Unrealized adjustment to fair value (1)
156 
Balance at September 30, 2022$— 
Nine months ended September 30, 2021
Balance at December 31, 2020$98,206 
Sales(24,619)
Unrealized adjustment to fair value (1)
1,546 
Balance at September 30, 2021$75,133 
(1) ARCs are classified as available for sale investment securities. As such, the unrealized adjustment to fair value was recorded as an unrealized holding gain (loss) and included as a component of "AFS at estimated fair value" on the consolidated balance sheets.

Certain financial instruments are not measured at fair value on an ongoing basis, but are subject to fair value measurement in certain circumstances, such as upon their acquisition or when there is evidence of impairment. The following table presents Level 3 financial assets measured at fair value on a nonrecurring basis:
 September 30, 2022December 31, 2021
 (in thousands)
Loans, net$140,763 $118,458 
OREO5,877 1,817 
MSRs (1)
51,072 35,393 
Total assets$197,712 $155,668 
(1) Amounts shown are estimated fair value. MSRs are recorded on the Corporation's consolidated balance sheets at the lower of amortized cost or fair value. See "Note 6 - Mortgage Servicing Rights" for additional information.
The valuation techniques used to measure fair value for the items in the table above are as follows:

•Loans, net – This category consists of loans that were individually evaluated for impairment and have been classified as Level 3 assets. The amount shown is the balance of non-accrual loans, net of related ACL. See "Note 5 - Loans and Allowance for Credit Losses," for additional details.

•OREO – This category consists of OREO classified as Level 3 assets, for which the fair values were based on estimated selling prices less estimated selling costs for similar assets in active markets.

•MSRs - This category consists of MSRs, which were initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors, and subsequently carried at the lower of amortized cost or fair value. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified by product type and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the September 30, 2022 valuation were 7.8% and 9.0%, respectively. Management reviews the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See "Note 6 - Mortgage Servicing Rights," for additional information.

The following tables detail the book values and the estimated fair values of the Corporation's financial instruments as of September 30, 2022 and December 31, 2021.
 September 30, 2022
Estimated Fair Value
Carrying AmountLevel 1Level 2Level 3Total
(in thousands)
FINANCIAL ASSETS
Cash and cash equivalents$528,715 $528,715 $— $— $528,715 
FRB and FHLB stock81,914 — 81,914 — 81,914 
Loans held for sale 14,411 — 14,411 — 14,411 
AFS securities 2,597,384 218,184 2,379,200 — 2,597,384 
HTM securities1,339,310 — 1,141,710 — 1,141,710 
Loans, net19,428,361 — — 18,817,452 18,817,452 
Accrued interest receivable72,821 72,821 — — 72,821 
Other assets 653,358 417,360 179,049 56,949 653,358 
FINANCIAL LIABILITIES  
Demand and savings deposits$19,612,499 $19,612,499 $— $— $19,612,499 
Brokered deposits226,883 206,883 26,216 — 233,099 
Time deposits1,537,172 — 1,521,484 — 1,521,484 
Accrued interest payable5,739 5,739 — — 5,739 
Federal funds purchased136,000 136,000 — — 136,000 
Federal Home Loan Bank advances265,500 265,500 — — 265,500 
Senior debt and subordinated debt539,461 — 455,833 — 455,833 
Other borrowings483,720 482,449 1,263 — 483,712 
Other liabilities 500,827 170,315 314,438 16,074 500,827 
December 31, 2021
Estimated Fair Value
Carrying AmountLevel 1Level 2Level 3Total
(in thousands)
FINANCIAL ASSETS
Cash and cash equivalents$1,638,614 $1,638,614 $— $— $1,638,614 
FRB and FHLB stock57,635 — 57,635 — 57,635 
Loans held for sale35,768 — 35,768 — 35,768 
AFS securities3,187,390 127,618 2,985,105 74,667 3,187,390 
HTM securities980,384 — 965,867 — 965,867 
Loans, net18,076,349 — — 17,519,497 17,519,497 
Accrued interest receivable57,451 57,451 — — 57,451 
Other assets565,491 367,336 160,945 37,210 565,491 
FINANCIAL LIABILITIES
Demand and savings deposits$19,594,497 $19,594,497 $— $— $19,594,497 
Brokered deposits251,526 231,526 20,603 — 252,129 
Time deposits1,727,476 — 1,730,673 — 1,730,673 
Accrued interest payable7,000 7,000 — — 7,000 
Senior debt and subordinated debt620,406 — 604,780 — 604,780 
Other borrowings417,703 416,764 939 — 417,703 
Other liabilities288,862 188,219 86,110 14,533 288,862 

Fair values of financial instruments are significantly affected by the assumptions used, principally the timing of future cash flows and discount rates. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument. The aggregate fair value amounts presented do not necessarily represent management’s estimate of the underlying value of the Corporation.

For short-term financial instruments, defined as those with remaining maturities of 90 days or less, and excluding those recorded at fair value on the Corporation's consolidated balance sheets, book value was considered to be a reasonable estimate of fair value.

The following instruments are predominantly short-term:
Assets  Liabilities
Cash and cash equivalents  Demand and savings deposits
Accrued interest receivable  Other borrowings
  Accrued interest payable

FRB and FHLB stock represent restricted investments and are carried at cost on the consolidated balance sheets, which is a reasonable estimate of fair value.

As of September 30, 2022, fair values for loans and time deposits were estimated by discounting future cash flows using the current rates, as adjusted for liquidity considerations, at which similar loans would be made to borrowers and similar deposits would be issued to customers for the same remaining maturities. Fair values of loans also include estimated credit losses that would be assumed in a market transaction, which represents estimated exit prices.

Brokered deposits consist of demand and saving deposits, which are classified as Level 1, and time deposits, which are classified as Level 2. The fair value of these deposits are determined in a manner consistent with the respective type of deposits discussed above.