Fair Value Measurement and Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis

Schedule of assets (liabilities) measured at fair value on a recurring basis

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017:




($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2018
($ in thousands)	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale investment securities:
U.S. Treasury securities	$	603,926	$	603,926	$	—	$	—
U.S. government agency and U.S. government sponsored enterprise debt securities	228,656		—		228,656		—
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	365,070		—		365,070		—
Residential mortgage-backed securities	903,449		—		903,449		—
Municipal securities	72,824		—		72,824		—
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities:
Investment grade	15,926		—		15,926		—
Residential mortgage-backed securities:
Investment grade	10,362		—		10,362		—
Corporate debt securities:
Investment grade	10,942		—		10,942		—
Foreign bonds:
Investment grade	452,843		—		452,843		—
Asset-backed securities:
Investment grade	12,512		—		12,512		—
Total available-for-sale investment securities	$	2,676,510	$	603,926	$	2,072,584	$	—

Investments in tax credit and other investments:
Equity securities with readily determinable fair value ⁽¹⁾	$	30,849	$	20,373	$	10,476	$	—
Total investments in tax credit and other investments	$	30,849	$	20,373	$	10,476	$	—

Derivative assets:
Interest rate contracts	$	72,618	$	—	$	72,618	$	—
Foreign exchange contracts	11,095		—		11,095		—
Credit contracts	1		—		1		—
Equity contracts	2,409		—		1,737		672
Commodity contracts	12,980		—		12,980		—
Total derivative assets	$	99,103	$	—	$	98,431	$	672

Derivative liabilities:
Interest rate contracts	$	114,658	$	—	$	114,658	$	—
Foreign exchange contracts	11,075		—		11,075		—
Credit contracts	57		—		57		—
Commodity contracts	7,912		—		7,912		—
Total derivative liabilities	$	133,702	$	—	$	133,702	$	—


(1)	Equity securities with readily determinable fair value were comprised of mutual funds as of September 30, 2018.




($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2017
($ in thousands)	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale investment securities:
U.S. Treasury securities	$	640,280	$	640,280	$	—	$	—
U.S. government agency and U.S. government sponsored enterprise debt securities	203,392		—		203,392		—
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	318,957		—		318,957		—
Residential mortgage-backed securities	1,190,271		—		1,190,271		—
Municipal securities	99,982		—		99,982		—
Non-agency mortgage-backed securities:
Residential mortgage-backed securities:
Investment grade	9,117		—		9,117		—
Corporate debt securities:
Investment grade	37,003		—		37,003		—
Foreign bonds:
Investment grade	486,408		—		486,408		—
Other securities	31,342		20,735		10,607		—
Total available-for-sale investment securities	$	3,016,752	$	661,015	$	2,355,737	$	—

Derivative assets:
Interest rate contracts	$	58,633	$	—	$	58,633	$	—
Foreign exchange contracts	5,840		—		5,840		—
Credit contracts	1		—		1		—
Equity contracts	1,672		—		993		679
Total derivative assets	$	66,146	$	—	$	65,467	$	679

Derivative liabilities:
Interest rate contracts	$	64,757	$	—	$	64,757	$	—
Foreign exchange contracts	10,170		—		10,170		—
Credit contracts	8		—		8		—
Total derivative liabilities	$	74,935	$	—	$	74,935	$	—

Reconciliation of the beginning and ending balances for warrants measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

The following table presents a reconciliation of the beginning and ending balances of these warrants for the three and nine months ended September 30, 2018:




($ in thousands)	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Equity warrants
Beginning balance	$	648		$	679
Total (losses) gains included in earnings⁽¹⁾	(7		)	161
Issuances	31			65
Settlements	—			(233		)
Ending balance	$	672		$	672


(1)	Includes unrealized (losses) gains of $(7) thousand and $224 thousand for the three and nine months ended September 30, 2018, respectively. The realized/unrealized (losses) gains are included in Ancillary loan fees and other income on the Consolidated Statement of Income.

Schedule of assets with fair value changes measured on a nonrecurring basis

The following tables present the carrying amounts of assets included on the Consolidated Balance Sheet that had fair value changes measured on a nonrecurring basis as of September 30, 2018 and December 31, 2017:




	Assets Measured at Fair Value on a Nonrecurring Basis as of September 30, 2018
($ in thousands)	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Non-PCI impaired loans:
Commercial lending:
Commercial and industrial (“C&I”)	$	37,453	$	—	$	—	$	37,453
Commercial real estate (“CRE”)	4,726		—		—		4,726
Consumer lending:
Single-family residential	2,567		—		—		2,567
Home equity lines of credit (“HELOCs”)	735		—		—		735
Total non-PCI impaired loans	$	45,481	$	—	$	—	$	45,481




	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2017
($ in thousands)	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Non-PCI impaired loans:
Commercial lending:
C&I	$	31,404	$	—	$	—	$	31,404
CRE	2,667		—		—		2,667
Construction and land	3,973		—		—		3,973
Consumer lending:
Single-family residential	144		—		—		144
Total non-PCI impaired loans	$	38,188	$	—	$	—	$	38,188
OREO	$	9	$	—	$	—	$	9

Schedule of fair value adjustments of financial assets measured on a nonrecurring basis recognized

The following table presents the total change in value of assets for which a fair value adjustment has been included on the Consolidated Statement of Income for the three and nine months ended September 30, 2018 and 2017 and held as of those dates:




($ in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2018			2017			2018			2017
Non-PCI impaired loans:
Commercial lending:
C&I	$	(8,508	)	$	(16,954	)	$	(7,204	)	$	(17,648	)
CRE	50			6			61			81
Multifamily residential	—			(6		)	—			(112		)
Construction and land	—			—			—			(147		)
Consumer lending:
Single-family residential	—			3			15			161
HELOCs	(188		)	—			(262		)	25
Total non-PCI impaired loans nonrecurring fair value losses	$	(8,646	)	$	(16,951	)	$	(7,390	)	$	(17,640	)
OREO nonrecurring fair value losses	$	—		$	(285	)	$	—		$	(286	)

Schedule of the carrying and fair values per the fair value hierarchy of certain financial instruments

The following tables present the fair value estimates for financial instruments as of September 30, 2018 and December 31, 2017, excluding financial instruments recorded at fair value on a recurring basis as they are included in the tables presented elsewhere in Note 4 — Fair Value Measurement and Fair Value of Financial Instruments. The carrying amounts in the following tables are recorded on the Consolidated Balance Sheet under the indicated captions, except for accrued interest receivable and mortgage servicing rights that are included in Other assets, and accrued interest payable that is included in Accrued expenses and other liabilities. These financial assets and liabilities are measured at amortized cost basis on the Company’s Consolidated Balance Sheet. During the first quarter of 2018, the Company adopted ASU 2016-01 and has updated its valuation methods as necessary to conform to an “exit price” concept as required by ASU 2016-01.




($ in thousands)	September 30, 2018
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	2,218,787	$	2,218,787	$	—	$	—	$	2,218,787
Interest-bearing deposits with banks	$	400,900	$	—	$	400,900	$	—	$	400,900
Resale agreements ⁽¹⁾	$	1,035,000	$	—	$	1,002,552	$	—	$	1,002,552
Restricted equity securities, at cost	$	73,729	$	—	$	73,729	$	—	$	73,729
Loans held-for-sale	$	3,114	$	—	$	3,114	$	—	$	3,114
Loans held-for-investment, net	$	30,900,144	$	—	$	—	$	31,003,048	$	31,003,048
Mortgage servicing rights	$	7,861	$	—	$	—	$	12,077	$	12,077
Accrued interest receivable	$	136,932	$	—	$	136,932	$	—	$	136,932
Financial liabilities:
Demand, checking, savings and money market deposits	$	24,928,338	$	—	$	24,928,338	$	—	$	24,928,338
Time deposits	$	8,700,786	$	—	$	8,730,602	$	—	$	8,730,602
Short-term borrowings	$	56,411	$	—	$	56,411	$	—	$	56,411
FHLB advances	$	325,596	$	—	$	335,800	$	—	$	335,800
Repurchase agreements ⁽¹⁾	$	50,000	$	—	$	89,106	$	—	$	89,106
Long-term debt	$	156,770	$	—	$	162,566	$	—	$	162,566
Accrued interest payable	$	21,579	$	—	$	21,579	$	—	$	21,579


(1)	Resale and repurchase agreements are reported net pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of September 30, 2018, $400.0 million out of $450.0 million of repurchase agreements were eligible for netting against resale agreements.




($ in thousands)	December 31, 2017
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	2,174,592	$	2,174,592	$	—	$	—	$	2,174,592
Interest-bearing deposits with banks	$	398,422	$	—	$	398,422	$	—	$	398,422
Resale agreements ⁽¹⁾	$	1,050,000	$	—	$	1,035,158	$	—	$	1,035,158
Restricted equity securities, at cost	$	73,521	$	—	$	73,521	$	—	$	73,521
Loans held-for-sale	$	85	$	—	$	85	$	—	$	85
Loans held-for-investment, net	$	28,688,590	$	—	$	—	$	28,956,349	$	28,956,349
Branch assets held-for-sale	$	91,318	$	5,143	$	10,970	$	78,132	$	94,245
Mortgage servicing rights	$	7,771	$	—	$	—	$	11,324	$	11,324
Accrued interest receivable	$	121,719	$	—	$	121,719	$	—	$	121,719
Financial liabilities:
Demand, checking, savings and money market deposits	$	25,974,314	$	—	$	25,974,314	$	—	$	25,974,314
Time deposits	$	5,640,749	$	—	$	5,626,855	$	—	$	5,626,855
Branch liability held-for-sale	$	605,111	$	—	$	—	$	643,937	$	643,937
FHLB advances	$	323,891	$	—	$	335,901	$	—	$	335,901
Repurchase agreements ⁽¹⁾	$	50,000	$	—	$	104,830	$	—	$	104,830
Long-term debt	$	171,577	$	—	$	171,673	$	—	$	171,673
Accrued interest payable	$	10,724	$	—	$	10,724	$	—	$	10,724


(1)	Resale and repurchase agreements are reported net pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of December 31, 2017, $400.0 million out of $450.0 million of repurchase agreements were eligible for netting against resale agreements.

Fair Value, Measurements, Recurring

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis

Schedule of quantitative information about significant unobservable inputs used in the valuation of assets classified as Level 3

The following table presents quantitative information about the significant unobservable inputs used in the valuation of assets measured on a recurring basis classified as Level 3 as of September 30, 2018. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.




($ in thousands)	Fair Value Measurements (Level 3)		Valuation Technique	Unobservable Input(s)	Weighted- Average
Derivative assets:
Equity warrants	$	672	Black-Scholes option pricing model	Volatility	48%
				Liquidity discount	47%

Fair Value, Measurements, Nonrecurring

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis

Schedule of quantitative information about significant unobservable inputs used in the valuation of assets classified as Level 3

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of assets measured on a nonrecurring basis classified as Level 3 as of September 30, 2018 and December 31, 2017:




($ in thousands)	Fair Value Measurements (Level 3)		Valuation Technique(s)	Unobservable Input(s)	Range(s) of Input(s)	Weighted- Average
September 30, 2018
Non-PCI impaired loans	$	19,814	Discounted cash flows	Discount	4% — 7%	6%
	$	4,453	Fair value of property	Selling cost	8%	8%
	$	2,132	Fair value of collateral	Discount	100%	100%
	$	19,082	Fair value of collateral	Contract value	NM	NM
December 31, 2017
Non-PCI impaired loans	$	22,802	Discounted cash flows	Discount	4% — 10%	6%
	$	9,773	Fair value of property	Selling cost	8%	8%
	$	3,207	Fair value of collateral	Discount	20% — 32%	29%
	$	2,406	Fair value of collateral	Contract value	NM	NM
OREO	$	9	Fair value of property	Selling cost	8%	8%

NM — Not meaningful.